THE US economy, the largest and most powerful capitalist economy in the world, is in the grip of a crisis that will plunge America into a massive recession as the Democrats and Republicans are engaged in a drawn out struggle over increasing the country’s debt ceiling.
The deadlock is over increasing the US debt ceiling from the current limit of $31.4 trillion (£25.1tn) with the Republicans holding up passing any increase unless Biden agrees to cuts in government spending for the next ten years.
The Republicans are demanding savage cuts to welfare spending and Medicare, along with increased attacks on the pay of Federal employees, demands that the Democrats fear will inflame US workers who are already on the march demanding increased pay and improved conditions.
Biden is insisting on an increase in the national debt ceiling with no strings attached.
At the heart of this stand-off is disagreement about how best to inflict the debt crisis onto the working class, with the Republicans opting for an all-out war while Biden is more cautious and fears that the powerful US working class will erupt in fury.
Both sides agree the working class must pay the price.
The reality is that if no agreement can be reached then the US government will simply run out of money in a matter of weeks.
On Monday, the US Treasury Secretary, Janet Yellen warned that the entire US government will run out of money and default on all its massive debt repayments on June 1st.
On Wednesday, Yellen went further, spelling out exactly the perilous state of the US economy in a letter to Republican House speaker Kevin McCarthy, stating bluntly:
‘We have learnt from past debt limits impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States.
‘If Congress fails to increase the debt limit, it will cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests.’
Backing up Yellen’s dire warnings, the White House Council of Economic Advisers warned that a prolonged debt default would wipe out over 8 million US jobs and cause America’s stock market to crash, losing half its value in the process.
They wrote: ‘A protracted default would likely lead to severe damage to the economy, with job growth swinging from its current pace of robust gains to losses numbering in the millions.’
They insist that even if default was avoided by last minute deals, 200,000 jobs would be wiped out, while even a short default, while an emergency deal was cobbled together, would see half a million jobs lost. The worst-case scenario of a ‘protracted’ default would wipe out 8.3 million jobs and cause the US stock market to crash.
A crash on Wall Street would immediately bring down the stock markets of the world and precipitate a massive financial crash, plunging the entire world capitalist system into recession and economic depression.
It will not be 8.1 million jobs in the US wiped out but tens of millions of jobs in the UK, Europe and across the globe as national economies collapse overnight.
The working class in the US and across the world are expected to pay the cost of this historic crisis, and accept being driven into mass unemployment and poverty by a capitalist system that is bankrupt and beyond repair.
No matter how many times the reformist labour and trade union leaders tell the working class that capitalism can be ‘fixed’ by getting round the table, the reality is that capitalism is in its death agony and the only ‘fix’ is to put it out of its misery by the working class taking power, replacing bankrupt capitalism with a socialist planned economy.
This requires the building of sections of the International Committee of the Fourth International in every country to organise putting an end to crisis-ridden capitalism with the victory of the world socialist revolution.
There is no time to lose.
