Government debt is the number one excuse for cutting spending on essential goods, services and infrastructure. The recent political manipulation of public opinion over increasing the U.S. government debt ceiling had a calculated conclusion. All the squabbling politicians – whether Democrat or Republican – are in total agreement about protecting the interests of their wealthy corporate patrons.
Both parties agreed to continue the tax breaks benefiting the wealthy; no serious consideration was given to minimal increases in tax rates on the financial elite that would have brought in enough income to offset the federal deficit. Both parties agreed that the only acceptable solution was to cut federal spending on jobs, essential services and infrastructure.
Debt today is used as a weapon employed by government and Wall Street to foreclose on the public and reconfigure the government “of, by, and for ” corporations.
Federal and State Debt
The 2008 bank bailout was the largest transfer of public wealth into private hands in world history. This Great Give Away put roughly 20 trillion dollars in the hands of the largest banks, multinational corporations, and financial institutions worldwide.
In what constitutes a watershed in American economic and political history, the government took on toxic assets and paid for them dollar for dollar. Full control of the banks, corporations and financial institutions remained in the hands of the very same people who caused the crisis.
To finance this Great Give Away, Washington borrowed from the very banks they were bailing out. The recipients of the bailout are also the brokers and underwriters of federal debt. The laws in every country in global capitalism protect the creditor at the expense of the debtor. Increasingly the banks call the shots in budget crises at the federal and state level.
Having created the huge federal deficit – by their refusal to tax the super wealthy, by the financing of endless wars and the bank bailout – the politicians and the corporate media then turn to the public and raise the alarm about the size of government debt, inciting calls for “smaller government,” and balancing budgets “like your household has to.”
Unlike households, the federal government has the unique ability to issue the national currency. Washington can create trillions of dollars at will through the Federal Reserve – a joint government/private entity dominated by giant Wall Street banks – the way they financed the Great Give Away.
The economic crisis of declining revenue and increasing debt literally shackles state and local governments. Unlike the federal government, they cannot create money and by law their budgets must be balanced. Like their colleagues at the federal level, state politicians in service of their wealthy patrons refuse to raise taxes on the super rich. States have been slashing expenditures on public education, health care services and other essential programs serving the very young and elderly, students, and the most impoverished and vulnerable. Here humanity suffers the greatest harm. Here at the state and local level is the sharpest point of conflict, the emerging battlefield of political class struggle.
Very Real Crisis: Underlying Causes
The underlying cause of the current debt crisis is found in a major shift in the economy that began over forty years ago as computerization and robotics began replacing workers in industrial production. Wages declined as the market was flooded with unemployed workers seeking jobs in competition with wageless robots. Allen Sinai, chief global economist at the research firm Decision Economics succinctly expressed the corporate view: “You basically don’t want workers. You hire less, and you try to find capital equipment to replace them.” (New York Times, Feb. 20, 2010)
Wall Street has been the greatest money making sector of the U.S. economy since 2000. In 1973, financial returns were 16% of total corporate profits; by 2007, they reached 41%, coming mostly from the vast expansion of indebtedness.
From 1990 to 2010 the cost of living increased 67%, while wages stagnated and declined. Debt filled the gap. Total personal debt is now over $16 trillion. Consumer debt is $2.5 trillion. Credit card debt is $805 billion and student debt now exceeds $1 trillion.
The dominance of global financial institutions and Wall Street banks is both consequence and cause of the exorbitant amount of debt in our economy. Massive corporate, consumer and government debt make possible the unproductive speculation that is prominently paraded as economic growth.
As robotic electronic means of production replace workers, and the value of labor and profit rates fall, speculation – making money from money – increasingly becomes the means by which the owners of capital continue to accumulate and concentrate income and wealth. Debt and speculation go hand in hand, each one relying on and fueling the other.
Computerization of financial institutions and transactions greatly facilitates the “making money from money” economy by developing an array of instruments such as securitization and credit default swaps. The credit default swap market was $45 trillion in 2007, larger than the country’s entire gross domestic product. A form of “insurance” having nothing to do with actual commodity production, it is a speculative bet; casino speculation like this increasingly drives the stock market and the real economy.
Ruling Class Political “Solution
The economic side of the crisis is profoundly real. The political “solution” imposed by Washington and Wall Street is no solution at all. By ignoring the real needs of the public and further concentrating and consolidating power in the hands of the corporations and banks, the State itself is becoming the cause of more intense crises and instability.
Greece demonstrates the direction of this political solution. In order to raise the revenue to pay off bank loans that keep the country “solvent,” Greece is being compelled to sell off and privatize government-owned property like roads, beaches, ports, public utilities and the post office. The government of Greece has, ironically, now opened a new Office of Privatization!
This solution is increasingly being imposed across the United States. From Greece to Michigan, with its Emergency Financial Manager law, powers of the public are being privatized and eliminated in order to extend corporate private property.
Working Class Political Solution
Humanity produces trillions of dollars in wealth every year, seized by corporations as their private property. The much smaller proportion of overall wealth in the hands of the working class is heavily taxed. Yet corporations today demand an ever-greater share of public resources.
The State supports corporations by providing public roads, ports and infrastructure, airports, the military budget, R & D from public universities and by educating their workforce in public schools. Not only do corporations exploit workers at the point of production, but working class taxes are siphoned off to fuel corporate profits. Now corporate domination of the State is destroying society – with debt as a class weapon in the hands of the State. Either the public must take over the corporations, or the corporations take over and destroy society!
Historical End of Private Property
Twice before the United States has reached this nexus where forms of private property strangle the public. In 1776 the property of the King of England and corporations like the Massachusetts Bay Corporation predominated. The American Revolution abolished these forms of property and established democratic rights and public ownership.
Before the Civil War the slave-owners controlled Congress, the Presidency and the Supreme Court. Human slaves were considered private property. During the1850s, the Fugitive Slave Act extended private property rights in human slaves even further. The Emancipation Proclamation and the North’s victory in the Civil War abolished private property in slaves..
Once again the U.S. has reached a revolutionary moment where conflict between the development of labor and technology in production on the one hand and private property on the other requires a transformation of private property. With the merger of the State and corporations, government is controlled by private property, and hostile to the working class.
Each of the historical revolutionary moments resulted in the transformation of private property in the particular form that was possible at that historical time. Now, in this revolutionary moment, it is possible to abolish all forms of private ownership of society’s technology and means of production. Individual personal property – the things that individuals use personally everyday – remains untouched.
Historically, when society reaches the limits of its development, and, like capitalism now, can no longer expand, the ruling class uses its control over private property and the State to siphon the last drop of social wealth into its hands.
Polarity between wealth and poverty stretches to the breaking point. The ties that bind are torn asunder. Two antagonistic classes face off and fight it out until the revolutionary class succeeds in abolishing all private property strangling society.
October/December 2011.Vol21.Ed5
This article originated in Rally, Comrades!
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