Thursday, March 05, 2009

Obama Tries Reform But Economic Chaos Hits Workers

Obama tries reform but

Economic chaos hits workers

By Fred Goldstein
Published Mar 4, 2009 4:02 PM

The aim of the $3.5 trillion budget submitted by President Barack Obama is to slow down the massive income inequality in the country and deal with multiple crises which have accumulated for years and are now in the acute stage, such as health care, global warming and education.

The budget is a reversal of a 30-year trend in which the capitalist budget was used as a blunt instrument to carry out blatant transfers of wealth from the masses to the rich, while cutting back on every form of social spending. Its aim is to carry out long-term reforms of a progressive but limited character that include, among other things, taxing the rich, cutting taxes on the workers and the middle class, aiding students, establishing a fund to improve the health-care system and taxing polluters.

Just days after the administration presented the budget, the capitalist economic crisis showed in various ways that it is deepening dramatically. The giant insurance company AIG announced the biggest quarterly loss in corporate history: $61.7 billion. Washington had to come up with another $30 billion in bailout money for AIG, bringing the total to $180 billion. The world’s biggest insurer, AIG is in crisis because it insured so much of the bad mortgages and other bad debt floating around the globe.

A few days prior to the AIG announcement, General Motors announced it had lost $30.9 billion in 2008. The Big Three auto bosses went into negotiations with the White House to get $20 billion more in bailout money. Together, GM, Ford and Chrysler lost $53.4 billion in 2008. Meanwhile, U.S. demand for vehicles fell to its lowest level in 25 years.

Citigroup, the largest private bank in the U.S., had to come to Washington for its third bailout. This time the government had to buy a 36 percent stake in the bank to keep it afloat.

Profits and production swoon

On March 2, the Dow Jones average on the stock market hit its lowest point since 1997, dropping below 6,800. This drop directly reflected the economic situation. Profits are sinking. Profits in the fourth quarter of 2008 fell 37 percent at the 457 companies in the S&P 500 that have reported quarterly results. The 74 financial companies reporting lost a combined $50.5 billion. Business investment in equipment and software fell 28 percent in the fourth quarter and exports declined. Manufacturing declined for the 13th month in a row in February.

The government also revised its estimate of how steep the downturn was in the fourth quarter of 2008. It now estimates that the gross domestic product (GDP) dropped 6.2 percent, rather than the 3.8 percent originally stated. This was the biggest drop in any quarter since the fall of 1982, when a drastic downturn saw unemployment rise to more than 10 percent.

Although the total number of jobless for February has not yet been announced, there was a sharp rise in weekly unemployment claims to 600,000 new claims each week. This indicates that the overall figure will rise by even more than the half-million-plus jobless added in each of the previous three months. (Wall Street Journal, Feb. 28)

The U.S. numbers were in synch with the global picture. The big capitalist powers in Europe and Japan are all in crisis and their economic decline is steeper than that of the U.S. To make the crisis of the European capitalists even worse, their governments cannot agree on measures to fight the downturn.

The capitalist economy worldwide is clearly out of control, not only of the bosses but of all their financial officials and government institutions. It is no wonder that the word “depression” is creeping into the descriptive terminology more and more.

Obstacles to even limited reform

The Obama reform plan, limited as it is, is up against the economic crisis, which threatens to overwhelm it. But it is also up against the right-wing opposition led by Rush Limbaugh and Newt Gingrich, which is openly trying to sink the Obama program. Sections of the Republican Party have called it “class warfare,” which means instead of giving every nickel to the rich while trying to get the capitalist economy back on its feet, it contains programs that may reduce some misery for the workers.

The budget calls for a rise in taxes for those making over $250,000 a year—the top 5 percent of the population. The Bush tax cuts for the wealthy would be allowed to expire next year. The plan would raise taxes on the super-rich who run the private equity funds and hedge funds. Right now much of their profit is taxed at 15 percent, which is lower than the tax rates for their employees.

The budget, if passed as is, would wipe out $4 billion in subsidies to banks that give student loans. These funds instead would go to bolster Pell grants for students. In addition, Pell grants would be indexed for inflation and the maximum would be raised on July 1 to $5,350.

There would be increased money to detect, prevent and treat HIV-AIDS. There is $4 billion to expand health care for Native people and for the Indigenous of Alaska. There are also funds to provide food stamps to low-income elderly, to rehabilitate low-income housing, to increase allocations for Head Start and Early Head Start, and to improve health care in rural communities. (New York Times, Feb. 27)

Restores family planning funds

This budget would restore money for family planning for low-income women through Medicaid, which was removed from the stimulus package earlier under right-wing pressure.

Health-care reform is predicated on savings and on squeezing money out of the medical-industrial complex—the HMOs, insurance companies and hospitals—to create a $634 billion fund over 10 years to finance various measures. It envisages savings based on improved preventive care and a number of other measures, such as common computerized data bases for medical records.

Obama’s attack on global warming is based on forcing polluters to pay for permits giving them permission to pollute up to a given amount. These payments would fund weatherizing housing, green construction and many other projects.

But the budget, despite its reversal of the Reagan-Clinton-Bush emphasis on taking from the masses, is cautious and minimal, given the magnitude of the problems it seeks to address.

The working class, especially its most oppressed sections, and the middle class need universal, affordable, quality health care now. The trillions going to the banks in bailouts instead could be used to fund the system. The cost could be drastically reduced by cutting out the pharmaceutical industry, the insurance industry, the for-profit hospitals, the HMOs, and all the parasites that use health care as a way to line their pockets.

Setting up a 10-year fund or convening a health-care council that leaves the private capitalists in place guarantees that the health-care crisis will drag on and will result in a rotten compromise. Health care for all should be a right.

There are millions of homeless people, millions more who must live crowded together, often two or three generations in one unit, and millions who are in danger of losing their homes. To overcome this housing crisis requires the investment of hundreds of billions of dollars to insure everyone’s basic right to a livable, affordable space for themselves and their families. Housing should be a right.

Gives more money to Pentagon

One outright reactionary provision of the budget is a 4 percent increase in the Pentagon budget with new emphasis on weapons to counteract resistance movements. The military budget would rise to $534 billion from $513 billion. That would be enough to put millions of workers back to work, millions of people back in their homes, or to serve as the beginning of a national health plan.

In the midst of this terrible economic crisis, Washington is planning to keep 50,000 troops in Iraq while it escalates the war in Afghanistan and spreads it to Pakistan.

But most telling about the Obama budget are its projections regarding the tax increases for the rich and its economic predictions. The tax cuts for the rich are not scheduled to go into effect until 2011. The reason, according to the administration, is that this is when the economy will recover.

The two-year wait is bad enough. But even more important is the definition of “recovery” in the budget. It projects that the capitalist economy will grow by 3.4 percent in 2010. Most experts consider this a wildly optimistic estimate. But even if that were to come true, the budget forecasts that after the recovery there will still be 7.9 percent unemployment–higher unemployment than during the present crisis.

No recovery foreseen for workers

In short, the budget is looking to bring about a recovery for the capitalist class. It expects an increase in production and in profits, but leaves the working class with massive unemployment, which is especially severe in the Black, Latin/o, Asian and Native communities. Right now a total of 24 million people are either unemployed or underemployed, according to the Center for Labor Market Studies and Northeastern University. Official unemployment was 7.6 percent as January ended, and is expected to reach 8 percent at the next announcement. So this budget means that a “recovery” of the capitalist economy in terms of economic growth could leave more than 20 million workers unemployed or underemployed.

This is a recovery strictly for the bosses. The multinational working class should take a look at these projections and see what the government and the financial experts have in store. The only way to get a working class recovery is to open up a mass struggle for jobs—not in 2010 or 2011, but right now.

Goldstein is author of “Low-Wage Capitalism.” For information, see or contact
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