The political posturing around the debt ceiling “crisis” was mostly a distraction from the hard issues. The hardest of those – underlying US economic decline – keeps resurfacing to display costs, pains and injustices that threaten to dissolve society. Its causes – two long-term trends over the last 30 years – help also to explain the political failures that now compound the social costs of economic decline.
The first trend is the attack on jobs, wages and benefits, and the second is the attack on the federal government's budget. The first trend enables the second. A capitalist economy suffering high unemployment with all its costly consequences shapes a bizarre, disconnected politics. The two major parties ignore unemployment and the system that keeps reproducing it. They argue instead over how much to cut social programs for the people while they agree that such cutting is the major way to fix the government's broken budget.
The first trend amounts to looting the US working class (the media softens that to “disappearing middle class”). Since the 1970s, real wages have been flat to declining, while productivity per worker has risen steadily. What employers give workers (wages) has remained the same while what workers produce for their employers (profits) rose. Workers and their families responded by working ever more hours and borrowing ever more money to get or keep the “American dream.” By 2007, they were physically exhausted, families emotionally stressed and deeply anxious about the debts that their flat real wages could no longer sustain. When the system crashed, zooming unemployment, further wage and benefit reductions and home foreclosures made everything still worse for most Americans.
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The second trend was looting the government. This happened because exhausted and stressed workers turned away from participation or even political interests after the 1970s. In contrast, employers used the profits made possible by flat wages and rising productivity to buy politicians, parties and policies. More than ever before, businesses and top executives grabbed the levers of political power. They made government serve their interests. Starting in the 1980s, Washington lowered business taxes, deregulated businesses, cut taxes on executives' and other high incomes, increased spending on the military-industrial and medical-insurance complexes, provided more opportunities and freedom for financial speculation, and so on. To distract people from recognizing, debating, or opposing this political shift, more was also spent on social programs and supports.
Washington was thus deprived of tax revenues (chiefly on corporations and the richest individuals) while spending more on defense, business supports and social programs. As this gap between revenues and expenditures rose, Washington kept borrowing ever more. Rising annual budget deficits added to the national debt. When the private capitalist system crashed in 2007, business and the rich made sure the government spent vast sums to bail out banks, insurance companies and large corporations and to revive the stock market. Accordingly, government deficits and debts zoomed upward.
Business and the rich made trillions from both trends. By keeping workers' wages flat, profits soared as employers alone kept the full fruits of rising worker productivity. Employers and the rich profited further by getting Washington to lower their taxes. They then lent at interest to the government what they no longer needed to pay in taxes. After all, the government needed to borrow precisely because it had stopped taxing corporations and the rich at the rates of the 1940s, 1950s and 1960s. Business and the rich happily financed a political system that converted their tax obligations into secure, well-rewarded loans to the government instead.
Looting the working class and the state widened the gap between rich and poor in the US to what it was a century ago. Now the corporations and the rich want the state, whose budget they looted, to cut back social supports and services for the working class whose wages and productivity they also looted.
Republicans yell “class warfare” against advocates of a return to the 1940s tax rates on business profits, and the 1950s and 1960s rates on high-income individuals. Both were far higher than they are today. “Class warfare” better describes government policies since the 1970s. Business and the rich made sure those policies shifted the burden of federal taxation from business to individuals and from rich individuals to everyone else.
Despite this double looting of working people and the state, many victims direct their anger at the government instead of those who control the government. Unemployed millions fired by private capitalist employers (or suffering wage and benefits cuts imposed by them) blame the government, not their employers. Millions foreclosed out of their homes by private capitalist banks blame the government. They want the government punished, made smaller and weaker, and they are desperate to avoid further taxes. Republicans promise to do all that. Those who fear that a smaller, tax-starved government will do even less for them hear Democrats promising to cut less than Republicans. This is politics disconnected from economic realities (for example, high unemployment) and twisted into a contest between more and less government spending cuts imposed on a working class already reeling from economic crisis.
Neither party dares to return taxes on corporations and the rich to what they were. Neither party dares to advocate that government hire the unemployed to rebuild the US, to spend their government-job wages on maintaining their mortgages (reviving the housing industry) and thereby stimulate the whole economy from the bottom up. Above all, neither party dares admit that so long as production remains in the hands of tiny groups of rich shareholders and boards of directors, they will keep looting the system.
Can the US do better than this capitalist system's performance? We need to debate honestly and decide whether and how we can do better. We should have had the courage to debate that over the last 50 years. The cold war – and the priorities of corporations and the rich – prevented that. Now it's long overdue. We need new political organizations mobilizing people to demand and engage that debate, theoretically and also in practical, political struggles.