THE deal pushed through Washington late Wednesday night to raise the US debt ceiling – at present standing at a massive $16.7 trillion – thus allowing the government to borrow more up to 7th February 2014, was met with very little enthusiasm by the capitalist financial markets, despite it temporarily avoiding the immediate prospect of the US defaulting on its debts and plunging the entire world economy into immediate collapse.
The reason the response was so ‘underwhelming’ is that it simply delays the huge debt crisis by a few months at best, while further building up the explosive debt pressure even more and ensuring an even greater financial explosion when the day of reckoning arrives.
Thus far, Christine Lagarde, the head of the IMF, has been reduced to begging the US to ‘sort out’ its finances, while Fitch, one of the main international credit agencies, weighed in by announcing that it was on the brink of downgrading the country’s coveted AAA status as a result of the debt crisis.
This has seen the Federal government virtually closed down for 16 days, 800,000 Federal employees laid off without pay and an estimated £1.5 billion a day lost to the US economy.
What has left the pundits of the bourgeois press gasping for air is the determination of the extreme right-wing of the Republican Party to push the issue, which ostensibly revolved around Obama’s Affordable Care Act, to the brink of the economic destruction of the USA and the capitalist world economy.
Behind these right-wing Republicans stand highly organised groups of bankers, financiers and industrialists, like the Koch brothers who have founded and funded the Tea party and the Heritage Foundation which spent tens of billions of dollars on the campaign to stop the debt ceiling being raised and to bring on the crisis.
These hard-headed capitalists are not ‘crazies’; they represent a distinct faction of the capitalist class that has decided that, in order to survive, capitalism must immediately set about ending the debt mountain and smashing the power of the organised working class.
In the past few weeks, these Republican have admitted that the issue is not ‘Obamacare’, it is fundamentally about cutting all social expenditure by the state.
Everything from Medicare to federal pensions has to be stopped, wages cut and unions outlawed. By urging a US default and bringing the crisis to a head, this section of the capitalist class also wanted to bring on an economic war against their capitalist rivals abroad.
By defaulting on its debts, the US would at a stroke collapse the world capitalist economy, with countries that had become major creditors of the US suddenly waking up to discover that the billions of dollars they hold had become worthless overnight.
The calculation being made is that out of this financial Armageddon only the strongest would survive, the strongest being the US capitalist economy. The rest of the world would sink into bankruptcy and barbarism and would be easy meat for US imperialism to re-swallow.
The stand-off has all the hallmarks not of brinkmanship but of testing the waters, designed to see just how far they could go and rallying around them the forces to take on the working class.
What caused them to pull back at the last minute was not the intransigence of Obama – who is in total agreement on the need for Federal expenditure to be cut to the bone in order to service the massive debts caused by bailing out the banks – but fear of the American working class whose mood has been characterised by the demonstrations in Washington against both Democratic and Republican parties.
Nothing has been solved, the crisis is now continuing at an accelerated pace as US capitalism piles up even greater amounts of unrepayable debt.
The urgent task of the hour is to demand that the US trade unions break with the Democrats – whose only disagreement with the Republicans is over how to make the working class pay for the capitalist crisis – and form a Labour Party.
Alongside this must be the fight to build a section of the Fourth International to lead the coming American socialist revolution.