Society » Anomalous phenomena
Author`s name Timothy Bancroft-Hinchey

America's working class at the crossroads

From Obama's stalemate and the debt of America to Trump's deadlock

In his first days of the American presidency Trump moved quickly from the principle of "America first" to "American military first": because in his 2018 budget (pdf) Trump increased by 10% or about $54 billion annually US's expansionist-defense spending. These savings are being squeezed from social programs (environmental protection, Amtrak etc.). As such, they are not the result of the economic policies of Trump. Unless the "squeezed social programs" are being called "economics".

Ylli Përmeti

However, it is clear now that with this shift Trump will pass through Obama's stalemate: from shutting-down the American government, once again, and increasing the American debt and, as we shall see here in particular, to the perpetuation of the misery of the working class in America. The shut-down of the American government in the first days of October 2013, for example, was simply inevitable: because Obama asked to improve the health system through an Act that was modeled in 2006 in Massachusetts by its governor of that time Mitt Romney of the Republican Party. This Act was characterized even by Marin Wolf as a criminal act and as a form of slavery for the employees: because most of the employees get their health insurance through their employers. However, Obama asked to freeze the debt ceiling at the time when republicans did not vote it. Obama-care program has been supported also by Krugman, for which he opposes the republicans by calling them "the enemies of the poor" on the reason that it 'boosts incentives of demand, because the subsidies of families receiving health care gradually disappear for those with higher income, instead of disappearing for everyone being too rich to have Medicaid. By boosting the demand means that government spending must be more, not less, in the insurance network, and the taxes on the rich must be raised in order to pay for these spending. To boost his argument, Krugman, in another analysis quotes that "the increase of inequality carries an economic cost: fixed salaries, despite the increasing production, debt increase that makes us more vulnerable in financial crisis. Inequality carries also human and social costs.

Irrefutable facts

There are, for example, irrefutable facts that huge inequality leads to deteriorating health and higher mortality... extreme inequality, therefore, creates a class of people detached from reality - and at the same time these people create a frightening ever increasing power, so much so we today risk a plutocratic paranoia and megalomania like that of Hitler. While on the issue of inequality Krugman is right and "Trumpcare" is being predicted by the "Congressional Budget Office" to deteriorate the life of millions of American people, particularly of the lower social stratum, he espouses the idea that America has no fiscal issues, nor has she had debt problems, since, contrary to other countries, it borrows in its own currency and therefore it cannot go bankrupt!

However, the Congress passed an agreement and the debt ceiling was raised for a very short time: until Feb. 2014. But, as Chossudovksy points out, following the Congress Budget Office predictions and many other systemic aspects: America will adopt deflationist measures (economic shock therapy). The objective is, according to the analysis, that Wall Street to continue controlling the monetary policies of the FED to the interest of lobbies and of private trusts, while other national sectors are being privatized (Medicaid, Medicare, social security etc.). And indeed the Institute for International Financing (IIF), partaker of which is the largest banking conglomerate (JPMorgan Chase, Deutsche Bank, and BNP Paribas) exerted pressure upon congressmen -through panic- that if the Congress does not raise the ceiling, the consequences will be catastrophic.

The strategy of this conglomerate, as Chossudovski analyzes, is that the information remains on their side, to create insecurity through unilateral rapports and the information be used by stock speculators advising their clients on "secured investments" - a conglomerate which controls not only the mass media, but also the agencies like Moody's, Standard and Poor. The four main Wall Street institutions (JP Morgan Chase, City Group, Bank of America, and Goldman Sachs) account for more than 90% of exposed derivatives. And precisely, in spite of this exposure, they exert organized influence on monetary policy, including the debates within the Congress and the debt ceiling. The pressure, consequently, on Obama, and the promises he made, is doubled: one was from the bank conglomerates and the other from the republicans, who were not supporting investments on the public sector.

Reduction in public sector investments

In fact, the public sector investments have been reduced below the levels they used to be after the world war two: form 5% to 3.6% of the American GDP. Whereas the pressure on the infrastructure budget has grown since the Great Depression 2008-'09, the public investment have been weak since 1960. The public investments have been the highest between 1950-1960, during the social-democrat consensus, but low from 1970-1980, a period during which America, together with other Western countries, especially Great Britain, began to orient their economies towards the new paradigm of modernity: the neoliberal globalization. But, the public sector investments have dropped more after the year 2000 - when the NWO was formalized by the Anglo-American foreign policy. At the time when offshore investments generally hurt the economy of the origin and is less than half the growth created outside of it. Because when the economic activity is being increased abroad, the growth inside the country is less than half of the growth created out of it. As a result, the expansion of the TNCs (Transnational Corporations) out of the country will weaken the job creation, investments, R7D, and exports, rather than strengthening or increasing the domestic economic activity. It would not be a surprise that business initiatives are in crisis, industries are being concentrated in fewer hands and universities finance the best speculators. As an analysis points out:

...a host of indicators suggest large tracts of America have lost some of the entrepreneurial verve that made the country the biggest economic success story of the past century. Half of the growth in business establishments from 2010-14 occurred in just 20 counties...The patchy performance in business formation comes amid broader signs that the US is not the start-up nation it once was. Despite headline-grabbing tales of tech unicorns in Silicon Valley, the portion of the US workforce employed in young companies has been shrinking, as has the pace at which new employer-owned businesses are created. In another sign of depressed dynamism, Americans change jobs and move between geographies less frequently...the share of companies that are start-ups employing at least one person was at the second-lowest level on record in 2013, and 20 per cent below its pre-recession levels... Companies are growing older, competition is less fierce and market power is consolidating in the hands of a few large companies in many industries. In three-quarters of US sectors, the 50 biggest companies boosted their revenue share between 1997 and 2007...Industries from retail and finance to transportation became increasingly concentrated. Without question there is less fluidity in the US economy, whether it comes to workers moving between jobs or firms entering and exiting... Indexes that show the ease of doing business and global entrepreneurship put the US at or near the top of the rankings. In world-beating, technology-rich areas such as San Francisco and Silicon Valley, business is booming and effervescent activity can be found in plenty of other niches... Around a quarter of new entrepreneurs are aged 20-34, down from 34 per cent in the mid-1990s. That slower start-up activity comes despite an explosion in the number of entrepreneurship classes and diplomas on offer at colleges and universities, with courses growing approximately 20-fold between 1985 and 2008. In a bid to boost business start-ups, a growing number of universities are taking things into their own hands - providing funding to promising students, on top of academic instruction.

Obama, on the other hand, could have unilaterally passed off the ceiling, but would have broken the law or bypass the Congress's power and be suspected. The debt limit was $16.699 trillion (May 2013) because at the time when this letters are being written it passed off the ceiling. Namely, the debt has reached $17tn, whereas the debt to GDP is 73%, double of what it was at the end of 2007.  On the world scale, the American debt is ninth, at 106.5%. The overall American national debt in relation to GDP is almost equal to its annual product, while Krugman argues that "debt is good" (...) while a proverb in our country says "it's better to go to sleep without dinner and waking up without debt"...indeed, it began to grow when America began to abandon the policies of social-democratic consensus and adopted the neoliberal policies, last century, catapulting it every decade: thus, in 1980, the debt was $0.9 trillion (33% of the GDP); in 1990 $3.2 trillion (55,9%); on the eve of the new millennium of the year 2000, $5.6 trillion (58%); and in 2010, the debt passed off $13.8 trillion (96.5% of GDP).

 

The national debt is divided into marketable debt, designated as treasury bonds, sold in the market (comprising of $13.7 trillion, or 72% of the total) and nonmarketable debt, which belongs to the non-budgetary funds and budgetary organizations and through them, to the state itself. The largest fund is that of Social Security. The biggest owner of the "marketable debt", packaged on treasury bonds, is the Federal Reserve with 28%. Foreign governments own about 1/3 of the total. In short, the American debt, corporate, family and government is at 244%, the highest among the developed economies.

From the stalemate of US's presidents to the unavoidable depression and misery of the working class 

Although the American economy is exposed primarily at home rather than abroad, erasing the debt from the balance sheet does not change the overall outstanding balance of the economy: the American government, in other words, will continue to cover the debt with money borrowed either from the Federal Reserve or national and foreign investors alike. The axiom of the orthodox economists, Carmen Reinhart and Kenneth Rogoff, for countries with debt over 90%, lower the percentage of economic growth at least by 1% per year, consequently, can be applied to the American economy, as well. And if it keeps with the current policies, the American debt will exceed $25trillion in 2025. All these, at a time when America is in a continuous fall of the general economic level. For example, while in 2012, it controlled about 25% of the global wealth, in 1948 it controlled 50% of it. America is the most unequal of all western nations: its "Gini" (inequality) index is 85.1, in line with Chile's 81.4, India's 81.3, Indonesia's 82.8, and Kazakhstan's 86.7. The top 20% of households own over 84% of the wealth; the bottom 40% own 0.3%. 

So, America is not going, as Krugman points out, back to a "patrimonial capitalism" in which, according to him, the commanding heights of the economy are dominated not simply by wealth, but by hereditary wealth, and in which birth has more importance than effort and talent...dominance of income from capital, which can be inherited, over salaries - the dominance of wealth over work...but to "corporate capitalism" both at the national and transnational level, which, in turn, dictates national and transnational policies and concentrate even more economic, political and social power in few "selected" hands! It would not be a surprise then that most of Americans not only do not own any business, but the revenues from business and the capital in general, are increasingly concentrating at the hands of few. In 1970 the top of 1% of the families collected 17% of the revenues from businesses, in 2007, the same group got 43% of income from the business, and 75% of earnings from the capital. This small elite still receives all the affection from the GDP, and the greatest attention for its policies. Huge wealth buys huge political influence - and not only through election campaign contributions. Many conservatives live inside an intellectual bubble of think tankers and seized media, ultimately paid by a few mega donators. At no surprise, those inside the bubble hypothesize, instinctively, that what is good for the oligarchs is good for America, too....The important point to keep in mind, however, is that people inside the bubble have much power, which they keep on behalf of their patrons. In fact, this is part of the truth, because neoliberal globalization and the two-party system, namely, the so called center parties, which differ mainly in the management of taxes, have caused another division of social strata and a series of crisis across America:

Conservative "red states" are poorer and have more teenage mothers, more divorce, worse health, more obesity, more trauma-related deaths, more low-birth-weight babies, and lower school enrolment. On average, people in red states die five years earlier than people in liberal "blue states". Indeed, the gap in life expectancy between Louisiana (75.7) and Connecticut (80.8) is the same as that between Nicaragua and the United States. Red states suffer more in another important but little-known way, one that speaks to the very biological self-interest in health and life: industrial pollution...During the depression of the 1930s, Americans turned to the federal government for aid in their economic recovery. But in response to the great recession of 2008, the majority turned away from it. As the political divide widens and opinions harden, the stakes have grown vastly higher. Neither ordinary citizens nor leaders are talking much "across the aisle", damaging the surprisingly delicate process of governance itself... when people move today, it is more often to live near others who share their views.  People are segregating themselves into different emotionally toned enclaves - anger here, hopefulness and trust there. And the more people who confine themselves to like-minded company, the more extreme their views become. According to a 2014 Pew study of more than 10,000 Americans, the most politically engaged on each side see those in the "other party" not just as wrong, but as "so misguided that they threaten the nation's wellbeing". Compared with the past, each side also increasingly gets its news from its own television channel - the right from Fox News, the left from MSNBC. And so the divide widens... Oil was highly automated and accounted for some 15% of jobs - and even some of those were going to foreign workers at lower pay. The state had made huge cuts to local jobs and social services in order to bring in companies and, instead of money trickling down, a substantial amount was leaking out. To some degree, the community had become the site of local production without being the site of local producers...Giant companies have grown vastly larger, more automated, more global, and more powerful. For them, productivity is increasingly based on cheap labour in plants abroad, cheap imported labour at home, and automation, and less on American labour. The more powerful they have become, the less resistance they have encountered from unions and government. Thus, they have felt more free to allocate more profits to top executives and stockholders, and less to workers.

Photo: By Photographer not credited - This media is available in the holdings of the National Archives and Records Administration, cataloged under the National Archives Identifier (NAID) 541925.

 

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