On Saturday, president Joe Biden rushed to sign off the deal reached with the Republican Party to suspend the $31.4 trillion US debt ceiling until January 2025.
Failure to suspend the ceiling would have meant the US being unable to increase its massive debt, leading it to end Federal spending on wages, pensions and benefits leading to the situation where the country would be forced to default on its debt repayments with catastrophic effects on the entire capitalist world economic system.
The US debt underpins the entire global financial system, and a default would have sent it crashing into a global recession. It will now be up to the US Congress to determine how much money the government can borrow for the next two years.
What has so far emerged from this bitterly fought over deal, is that the American working class and youth are being made to pay while the door is left wide open for unlimited spending on war against Russia and China.
On paper, the deal caps US national security spending at $886 billion for 2024, a sum denounced as inadequate’ by Republicans with Senator Lindsey Graham telling reporters: ‘There will be a day before too long where we’ll have to deal with the Ukrainian situation. And that will create an opportunity for me and others to fill in the deficiencies that exist from this budget deal.’
In fact, the supposed cap was agreed in the full knowledge that it no way prevents an emergency bill to provide Ukraine with all the money and weapons it needs to carry on the imperialist war on Russia.
It was these ‘special war accounts’ that poured money into the US invasions of Iraq and Afghanistan despite strict spending caps in force at the time.
This was underlined by Republican senator Doug Lamborn, chair of the armed services panel that oversees nuclear weapons, who said: ‘We have many troubled areas of the world right now. And not just Ukraine, but China remains a growing threat. I fully expect there will be more defence spending through the rest of the fiscal year.’
Paying for the billions being demanded to wage war will be the American working class.
Changes made under this debt deal will force hundreds of thousands of older Americans off Federal food aid while other applicants will be overwhelmed by the bureaucratic mountain of paperwork imposed on them by new rules.
These rules impose work requirements to get food benefits to adults aged 50 to 54, a group previously exempt, a change affecting over 750,000 people, while younger people and the homeless will face insurmountable problems collecting the proper documentation to prove their exemptions and obtain food aid.
Despite the last minute deal, Fitch (one of the three major international ratings companies) announced that it is keeping the US ‘on watch’ for a credit downgrade. In a statement on Friday, the company said: ‘Fitch believes that repeated political standoffs around the debt-limit and last minute suspensions before the X-date (when the Treasury’s cash position and extraordinary measures are exhausted) lowers confidence in governance on fiscal and debt matters.’
The statement damned the US political governance for a ‘steady deterioration’ over the last 15 years citing ‘brinkmanship’ over the debt limit and a failure to tackle ‘fiscal challenges from growing mandatory spending’.
In other words, Fitch is warning that unless the US government stops all this destabilising wrangling and gets on with the job of inflicting an all-out war against the American working class, then it is putting the world capitalist system at risk.
Fitch is demanding a government that will go much further to cut the debt by slashing spending on social security, health provisions and benefits for workers.
A war to smash the powerful US working class and war to reconquer the world is the only way for capitalism to survive. For the US and the working class of the world there is only one way out of this crisis.
This is to build sections of the International Committee of the Fourth International in every country to put an end to capitalist crisis by organising the victory of the World Socialist Revolution to replace bankrupt capitalism with a socialist planned economy.
