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Budget deficit:
boondoggle for the rich
President George Bush's stunning July announcement that fiscal year
2003
would register the largest budget deficit in U.S. history, $455
billion, to
be followed by an even larger deficit of some $475 billion in 2004,
brought
home the reality of the depth of the economic crisis facing
American capitalism.
The administration was compelled to predict that budget deficits would
continue to 2008. The previous president's economic crystalballers
promised
surpluses, not deficits, until at least 2010!
According to the government's Office of Management and Budget, the
present
deficits are due to "a weak economy that reduces the government's
tax revenues, a costly war in Iraq, and the administration's tax cut
packages recently approved by Congress."
These, of course, are the end result of the "weak" economy, not the
cause.The latter stems from the functioning of the profit-driven
competitive
capitalist system itself. Never-ending pressures for technological
improvements in the productive process inevitably result in massive
overproduction and a consequent saturation and then shrinking of world
and
domestic markets.
Inseparable from these phenomeon is a decline in the average rate of
profit
as human labor power, the source of all profit, is more and more
eliminated
from the productive process.
Modern day capitalists have learned to their horror and from their
red-ink
corporate balance sheets showing reduced profits and rates of profit,
not to
mention losses, that despite the initial financial gains achieved by
the
introduction of competition-beating technology, machines don't produce
value.
Faced with glutted markets and increasingly negative earnings,
corporations
are compelled to resort to plant closures and/or shifting production to
low-wage countries, massive layoffs, reduced wages and living
standards, and
imperialist war.
Official deficit is understated
In truth Bush's projected deficits are tremendously understated; they
exclude the costs of the Iraq war, the government's looting
("borrowing") of
Social Security funds, and the future costs of the already approved tax
cuts. The addition of these costs increases the deficit by hundreds of
billions.
As a result, U.S. capitalism has progressed from a claimed
trillion-dollar
surplus under the Clinton administration (used to justify the $1.3
trillion
tax cut in 2000) to an actual trillion-dollar deficit today.
The magnitude of these figures as well as their manipulation is
astounding.
They demonstrate the extreme volatility of a crisis-stricken economy.
They are a harbinger of the related social upheavals that must
inevitably
follow as the ruling rich sink deeper into the quagmire and seek to
make
working people pay the price.
The projected surplus for the year 2000 was a lie from the beginning, a
product of the Clinton administration's cooked bookkeeping to justify
the
outright trillion dollar gift to corporate America. Even with the lie
exposed, the Bush team continued with a second and then a third round
of tax
cuts for the rich, officially totaling an additional $1 trillion but
actually more.
The budget deficits, largely stemming from massive corporate welfare,
are
designed to keep the flagging system afloat. They represent a return to
Keynsian pump-priming of the first order wherein the government
dramatically
increases the national debt by borrowing money from banks that it
doesn't
have and literally turns it over to its corporate masters.
The decades of posturing wherein Republicans appeared as balanced
budget
proponents and advocates of strict spending limits now stand exposed.
Behind
the rhetoric the essential class nature of their policies is now widely
understood.
"Robin Hood in reverse" has always been the Republican credo—steal from
the
poor and give to the rich! Their partners in crime, the Democrats,
including
former President Clinton, who engineered more cuts in social welfare
and
services than the combined cuts of the three previous Republican
administrations, are no different.
In addition to the massive federal deficit, at least 40 of the 50
states
have recorded spectacular shortfalls that "necessitate"
corresponding cutbacks in every arena of public life. In California
students
at the university level will be charged an additional $1000 yearly in
tuition increases while massive across-the-board cuts will be imposed
everywhere to satisfy the unprecedented $38 billion state budget
deficit.
As with the deficit/surplus manipulation of figures, all other
statistical
measures of economic growth or regression are regularly cooked to
camouflage
reality. The July unemployment rate, for example, fell from 6.4 percent
to
6.2 percent, indicating progress in this area. But a net 44,000 jobs
were
lost in the same period, an apparent contradiction.
The answer to the riddle? Government unemployment figures only include
people actively looking for jobs and who are receiving unemployment
insurance. When a worker is no longer eligible for this insurance,
having
exceeded the maximum 26 weeks, or 52 if there is an extension, they are
no
longer counted as unemployed.
That is, you don't have a job, but according to the government
head-counters, you're not considered unemployed. Inclusion of this
category
of unemployed would almost double the official government figure.
The hoopla associated with Federal Reserve Chair Alan Greenspan's 14th
consecutive decision to reduce interest rates to stimulate borrowing
for new
capital investment has done little to mitigate the fundamental
problems.
Monetary regulation deals with symptoms, not the underlying
contradictions
of the system itself. That is, you can reduce interest rates and
thereby
make the cost of borrowing money even cheaper, but if profit rates are
at
record lows, with no turnaround in sight, no corporation will entertain
significant capital investments if it represents throwing good money
after
bad.
U.S. Steel Corporation, for example, incapable of competing on world
markets, accepted government subsidies but spent the money on building
more
profitable shopping malls rather than steel plants.
International capitalist competition
A measure of the depth of U.S. capitalism's dilemma is in the July
figures
for auto sales. For the third month this year, foreign cars accounted
for
more than 40 percent of all cars sold. The figure was less than 30
percent
a year or two ago.
The decline in U.S. auto sales is compounded by the fact that
American automakers on average spent $3516 per vehicle in incentives,
including zero interest rates and rebates. To stay in the competitive
rat
race the price of largely inferior U.S. cars must be further reduced.
European manufacturers spent about half that amount to keep pace; the
Japanese spent less than one-third, or about $1030 per car.
The Big Three U.S. automakers averaged $2813 in incentives the previous
year. This year the going is even tougher. General Motor's chief sales
analyst, Paul Ballew, told reporters on Aug. 2 that he didn't foresee
any
reductions in GM incentives with respect to the 2004 models. "We expect
to
retain our competitive position," said Ballew, with a hope and a
prayer.
Competition in the world's auto industry is ruthless, with the major
manufactures fighting over every one-tenth of a percentage point of
market
share. When U.S. manufacturers lose a full 10 percent, even in just
three
months of the year, corporate board rooms look for the panic button.
Within
a short time of the introduction of new technology into the car
manufacturing process, the average rate of profit for the entire
industry
declines.
Under capitalism, technological progress also means unemployment, plant
closures, union-busting, attacks on pension plans and all the rest.The
system's profit-driven nature spells disaster for workers across the
globe,
who stand witness to their state-of-the-art plant being closed down as
it
fails to keep pace with newer plants built to make all others obsolete.
General Motors and most all U.S. auto manufacturers are compelled to
admit
that profits are down, even though they too cook the books to
demonstrate
otherwise. If the cash that GM borrowed from its workers' pension funds
is
added to corporate balance sheets, its figures would be even further in
the
red.
We are witness to government-aided corporate theft, disguised as law,
as
never before recorded. Enron's banker assistants, J.P. Morgan Chase and
Citicorp, were just fined $125 million and $135 million respectively in
a
"settlement" for their role in helping to disguise Enron's losses as
gains.
With a stroke of the government investigator's pen, the billions
looted
were forgiven with what amounts to a slap on the wrist.
Billions were stolen in exchange for millions returned. And to whom is
the
money "retrieved" from Citicorp and J.P. Morgan to be paid? To Enron
employees who lost their jobs and pensions? No chance! First priority,
under
the law, goes to Enron's corporate creditors.
In capitalist America the rich get paid first and last! Unless they
fight
the boss class every inch of the way, on the job and with their own
workers’
party, working people win nothing.
The article above was written by Jeff Mackler and first appeared in the August 2003 issue of Socialist Action newspaper.
