Crisis has, in recent years, become an indispensable part of the American political vocabulary. Looking around the country and the world, it is not hard to see why. Countries around the world are erupting in riots and revolutions, and the economic situation seems to be getting worse by the day.
The latest crisis, as reported by the media, was the tension over raising the debt ceiling. The media narrative took two similar forms, varying according to which wing of capital (left or right) one identifies with. For the right, it was a bold stand in order to force a limit on our out-of-control national debt and government spending. For the left, it was a stunt that jeopardized our economy for political gain. For both, the deal reached was an unpleasant compromise that was a lesser evil than the possibility of a US default on our loans.
The debt ceiling agreement supposedly means that disaster has been averted. However, a closer look at the agreement shows that the crisis was an entirely manufactured, political crisis. What this crisis concealed was essentially an austerity plan which serves to deepen the economic crisis that affects those without access to the levers of power or capital. Functionally, the agreement serves as a restructuring of the US economy, similar to austerity plans being implemented across Europe.
In order to understand the impact of this austerity plan, it is important to first understand what the debt ceiling is and what the debt ceiling agreement contains. The debt ceiling is the limit set by Congress on how much money the US can borrow. If the total US debt hits this limit, then the federal government cannot borrow any more money, leaving it unable to meet its many financial obligations.
Raising the debt ceiling is usually a routine procedure. However, this time was different, as right-wing members of Congress demanded spending cuts to reduce the budget deficit. Negotiations were held, and at the last minute an agreement was reached.
The agreement raises the debt ceiling by $2.1 trillion in exchange for deficit reductions of $2.1 to 2.4 trillion over the next 10 years, although most cuts will not kick in until 2013.
Given the right-wing opposition to tax increases, it is safe to assume that most of this reduction will be through spending cuts. $917 billion of these cuts will be in discretionary spending, which is basically everything except for entitlement programs (Social Security, Medicare, and Medicaid). The other $1.2-1.5 trillion in deficit reduction will be determined by a super-committee consisting of six Senators (including Washington’s own Patty Murray) and six Representatives, split evenly between Republicans and Democrats.
This committee will look at everything from raising revenue by closing tax loopholes or raising taxes to reducing spending on entitlement programs. Once this committee makes a proposal, it will not be negotiated or changed by Congress as a whole, making it easier to pass. If a deal is not passed for at least $1.2 trillion in reductions, then there will be automatic cuts of $1.2 trillion, split equally between military spending and domestic spending (although entitlement recipients would be spared) over the next 10 years.
The severity of these cuts and their main targets are evidence of the fundamental shift in the government’s economic policy in response to the current crisis of capitalism gripping the world.
Since the end of the Great Depression, government spending on both social services and national defense has been a main part of economic policy. These two categories have been placed in competition before, with defense usually winning at the expense of social services, but never have they both been subject to the level of cuts that are currently aimed at them.
On a more practical level, what these cuts mean is an amplified version of the same budget cutting that has been occurring over the past couple of years on the state and federal levels. What is different about this agreement is that these are long-term, structural changes. The fact that historically protected entitlement programs such as Social Security and Medicare/Medicaid are on the discussion table for savings is unprecedented. These programs, along with military spending, have come under attack before, but virtually guaranteed cuts are unprecedented.
To be clear: the passage of the debt ceiling agreement is a sign that those in power seek to protect their own interests and the interests of capital at the expense of everyone else. Hiding this austerity plan behind a particularly dramatic political ploy shows that they recognize growing discontent and are trying to divert it.
They want to protect capitalism, so that class society can emerge from the present crisis intact. Those in power fear that the waves of discontent and rebellion sweeping the world will land here at their doorsteps.
The first signs have already arrived, in the form of prison resistance, anti-police actions, and anti-austerity demonstrations occurring across the country. As was written on a wall during the student revolts in France 1968: Their nightmares are our dreams.