THE American economy contracted by 6.2 per cent in the last three months of last year, as consumer spending dropped by 4.3 per cent and exports collapsed by an annual rate of 23.6 per cent, according to official figures published in the United States yesterday.
Retail sales fell at the sharpest rate for 28 years and during the whole of 2008 the economy recorded meagre growth of only 1.1 per cent.
The extent of the current collapse in the US economy was revealed a day after President Barack Obama unveiled his $3.6 trillion (£2.5tn) budget proposals for 2010.
The White House budget plans predicted that the Federal budget deficit will be $1.75tn, which amounts to 12.3 per cent of US Gross Domestic Product (GDP) and is the biggest budget debt since World War II. The budget deficit this year is expected to be $2,561bn, four times that in 2007.
On top of the bank rescue funding already in place, the Obama administration is calling on Congress to approve another $750bn as a standby fund to deal with future financial meltdowns and $250bn is written into the 2010 budget plan.
Obama is to fund the Pentagon to the tune of $533.7bn, plus another $75.5bn this year for the imperialist wars in Iraq and Afghanistan, taking this year’s total to $140bn, and $130bn is earmarked for these wars in 2010.
The budget plans are based on a decline in GDP of 1.2 per cent this year and 3.2 per cent growth in 2010, figures which have no basis in reality.
With more than 46 million Americans without healthcare insurance, Obama is proposing to provide only $634bn over 10 years. This works out at $64bn a year!
Only half of the $634bn, that is $348bn, is accounted for by increased revenues from taxes on the very rich – the raising of the tax rate from 33 per cent to 36 per cent for those earning over $250,000 a year.
The other $316bn is projected to come from private insurance companies cutting their rates as a result of competition under the Medicare Advantage scheme!
In addition, there has been no plan for how the healthcare reform will be carried out. The White House is saying these will only be unveiled in April.
So Obama has declared that next year there will be $533.7bn for the Pentagon and $130bn for the wars in Afghanistan and Iraq, but only about $64bn for healthcare reforms. More than 17,000 more troops are to be sent to Afghanistan, taking US forces to 50,000. About 50,000 American troops will remain in Iraq after August 2010.
So the priorities of the Obama White House are clear. Despite this, union leaders expressed enthusiastic uncritical support for Obama’s budget plans.
The AFL-CIO trade unions President John Sweeney said: ‘President Obama’s proposed budget takes us in the right direction towards creating an economy that works for everyone . . . Specifically, the budget provides something we have needed for many years: guaranteed, affordable, quality care for all.’
More than 12 million workers are unemployed, and this is rising by about 600,000 a month and is heading towards eight per cent of the workforce. With the job losses hundreds of thousands of working class families are losing their health insurance cover.
As the economy moves from recession to a full-scale slump, rather than leading a fight to defend jobs, homes and living standards, the leaders of the AFL-CIO and Change to Win union groups are providing a free public relations service for the Obama White House.
Workers must demand their unions break with the Democratic Party and union leaders who refuse to fight to defend the working class must be replaced.
The Obama White House is bailing out Wall Street, organising imperialist wars in Afghanistan and Iraq, and, in the days ahead, will oppose the right to a job, a home, universal free healthcare and free education.
Workers must get rid of leaders that will not fight and must build a Labor Party that will represent the interests of the working class.
American workers need a revolutionary leadership, a section of the International Committee of the Fourth International, to lead the working class in the struggle to overthrow collapsing US capitalism and go forward to a workers’ government that will implement socialist policies.