From Worker’s World: http://www.workers.org/2011/us/budget_0728/
Wall Street, the rich get what they want
By Fred Goldstein
Published Jul 20, 2011 5:20 PM
Even the most rabid budget cutters on Wall Street are now pushing for an increase in the debt ceiling. The bankers and bosses were happy to see the Republican extreme right wing play chicken with default in order to get cuts in Social Security, Medicare and Medicaid. They have already gotten President Barack Obama to agree to put cutting Social Security and other entitlements on the bargaining table.
But as the Aug. 2 deadline for default comes closer, the bankers and financiers want the game of chicken to come to an end. They want the borrowing power of the capitalist government to be expanded beyond the $14.3 trillion it is now.
Why? Because, in the first place, the Treasury has to borrow $500 billion on Aug. 2 to refinance debts to bondholders. Two days later, $87 billion in Treasury bills have to be paid off. (Treasury Secretary Timothy Geithner, CNBC Squawk Box, July 18) That is the bread and butter of the billionaire Wall Street super loan sharks. They thrive and grow even richer from collecting interest on the government debt.
Default would threaten payments to the merchants of death in the military-industrial complex who get hundreds of billions of dollars to supply wars in Afghanistan, Pakistan and Libya, as well as the occupation in Iraq. They also equip reactionary regimes all over the world, from the death squad government in Colombia and the feudal monarchy in Saudi Arabia to the south Korean puppet government.
Second, a default would trigger payments by banks, insurance companies and behind-the-scenes financiers, who would be obligated to pay out huge sums because they insured the government bonds that would not be paid off. This could precipitate a major financial crisis. No one knows what would happen in the global financial markets.
Third, the bankers fear a social revolt of the population if millions of government checks for Social Security, Medicare, Medicaid, disability, unemployment insurance, food stamps, Temporary Assistance for Needy Families, the Women, Infants and Children nutrition program and other programs don’t go out on time.
So they have sent messages to Republican Senate leader Mitch McConnell and to Republican House Speaker John Boehner, as well as to President Obama and the Democratic Party leadership, to find a way out of the deadlock. McConnell has offered a complicated way out that would ultimately allow Obama to borrow $2.5 trillion more. McConnell is negotiating the terms with Democratic Senate leader Harry Reid.
What the outcome will be remains to be seen. But workers should remember the power exerted by Wall Street when right-wing Republicans voted against the $700 billion bank bailout in 2008. The legislators were forced to humiliate themselves and change their vote the next day. Wall Street usually gets its way.
Capitalism cannot rid itself of this crisis
Whatever happens in the struggle over the debt ceiling, however, nothing can erase the underlying fact that both the U.S. and Europe, the principal centers of world capitalism along with Japan, cannot rid themselves of growing and unsustainable debt. Unsustainable debt is the precursor to financial crisis, bankruptcy and default.
The debt-ceiling crisis and the European debt crisis grow out of the general crisis of world capitalism. European leaders will be meeting on July 21 to once again take up the Greek crisis. The European bankers forced the Greek government to pass austerity measures attacking the Greek working class by promising a bailout of $150 billion. Yet the bankers cannot agree on the bailout. They have been struggling with this problem since February of 2010.
They were supposed to meet about bailing out Greece. But now the economies of Spain and Italy are descending deeper into economic and financial crisis. Italy and Spain are the third- and fourth-largest economies in the euro zone. Together they represent 28 percent of the zone’s economy. Add in Portugal and Greece and one-third of the European economy is now in a state of financial crisis.
What does this show? During the financial and economic crisis of 2007 to 2009, the U.S. government, through its Treasury and Federal Reserve, plus the European banks handed over more than $14 trillion to the banks and corporations. That was before the Greek bailout and before Ben Bernanke, head of the U.S. Federal Reserve, bought $600 billion worth of Treasury bills to shore up the U.S. economy.
Still, the system cannot rid itself of crisis.
Overproduction and the debt
Underneath the debt crises is the crisis of capitalist overproduction. The capitalist governments are broke because their revenues have crashed during the crisis. And the crisis is caused by the fact that capitalist production has grown so much that it has far outstripped the ability of the masses of people to buy what is produced. So factories, malls, stores and offices are shut down. Workers are laid off or lose their jobs altogether. This capitalist “solution” only increases the crisis.
The capitalist governments have spent trillions of the people’s money to keep the capitalist class afloat. And the bosses have taken every nickel and dime from the government that they could lay their hands on. In addition they have slashed wages, speeded up the workers, put in new technology to eliminate jobs and outsourced the work to low-wage countries.
But the bosses have not created jobs with all the money they have gotten from the government. And they will not create jobs.
They have not invested to create jobs because they know that the workers are either just getting by or are flat broke and cannot buy the commodities that would be created by increased production. The capitalists are destroying their own market.
In fact, according to economics journalist David Leonhardt, the auto industry in the U.S. is on pace to sell 28 percent fewer cars than it did 10 years ago — when there was a recession. Furthermore, although the population has increased since then, sales of ovens and stoves are also declining and home sales have plunged to their lowest point since the crisis began. (New York Times, July 16)
Services, including restaurant meals, entertainment, education and even insurance have declined by 7 percent, more than double any previous decline. Retail sales are down. Bourgeois economists are lowering their projections for economic growth once again.
In all this the non-financial capitalists in the U.S. are sitting on $2 trillion in cash — a record amount. The top 1,000 non-financial companies in the world are sitting on $3.4 trillion.
What are they doing with this cash?
According to federal Flow of Funds reports, they are mostly using it to speculate in foreign currency. (Josh Dwyer, Common Dreams web site, July 18) Yet the bosses claim they need tax breaks to create jobs. The truth is that they will not create jobs. This is the profit system. Jobs will only be created by private enterprise if goods or services can be sold at a profit. Not only are the bosses not creating jobs, but they are stuffing their bank accounts.
Another use of their profits is to give themselves higher pay. In 2010 the S&P 500 company CEOs paid themselves an average of $11.4 million each — a 23 percent increase over the prior year. Meanwhile, workers’ wages are declining. Unemployment is rising. Hunger and homelessness are increasing.
The capitalist classes in Europe and the U.S. are all at an impasse. The system cannot move forward. The crisis of the capitalists becomes the crisis of the workers. It is our crisis because the bosses’ system no longer works. It is beginning to drag all of society backwards into an abyss.
They want the workers to pay their debts. If there is no default, it is our tax money that will be used to pay that $500 billion to the bondholders on Aug. 2 and that $87 billion on Aug. 4.
That is money that could and should be used to create a massive jobs program to put the millions of unemployed back to work.
Half a million government workers have been laid off in the last two years. And as government aid to the states dries up, more public workers will face layoffs or cutbacks or both. Extended unemployment insurance is scheduled to run out this year. More and more workers have hit their 99-week limit and have no further means of staying afloat.
In the face of all these working-class hardships, the White House, Congress and all the economic pundits are debating about how many trillions of dollars should be cut from social services and entitlements over the next decade — cuts that will only lead to less spending and fewer jobs.
But our class, the working class, should not be responsible for debts payable to millionaires and billionaires who benefit from government bailouts and live by profiting off the workers through capitalist exploitation. The money was borrowed in the first place to pay for their wars, for tax breaks for the oil companies and other corporate giants, and to pay interest to the bankers for previous loans.
The workers’ tax money was squandered on the rich instead of being used for socially useful needs like providing free quality health care and education for all, decent jobs with full retirement benefits, affordable housing, parks, playgrounds, libraries, community centers, clinics, etc.
The working class must separate itself from the ruling-class debate over how much to cut from our lives. We need to figure out how to stop this crisis from falling on our shoulders and how to put it back onto the capitalists, who caused it in the first place.
Articles copyright 1995-2011 Workers World. Verbatim copying and distribution of this entire article is permitted in any medium without royalty provided this notice is preserved.