The once mighty US economy is set to take another irrevocable step to bankruptcy tomorrow with the news that the ‘super’ congressional committee charged with finding $1.2 trillion in cuts by Wednesday is set to fail dismally.
This committee, composed of Republican and Democrat members of Congress, was cobbled together as a last minute deal between the two bourgeois parties last August as a short-term measure to avoid the immediate threat of bankruptcy after the failure to agree to raise the US debt ceiling – the amount the government is allowed to borrow from the financial markets to cover its expenditure – from $14.3 trillion.
This deal narrowly averted the US from being in default of its national debt and being declared officially bankrupt, in short, it enabled the Federal government to actually pay its bills mainly for military pay, the interest on government loans and social welfare programmes like Medicare.
It was not enough, however, to prevent one of the main ratings agencies, Standard and Poor’s, from downgrading the previous cast-iron triple A rating of the US.
At the heart of the deal was the commitment that this committee would agree to find the $1.2 trillion cuts in federal expenditure acceptable to both parties.
These cuts have focused on cuts to entitlement programmes, medical aid for the poor and social security payments to the unemployed and pensioners (Medicare and Medicaid).
Whilst these savage cuts have been entirely acceptable to the Democrats the sticking point has been the issue of tax cuts for the wealthy, with them insisting that these cuts take place alongside increased taxation for the billionaire bankers and bosses.
Failure by the committee to reach agreement by tomorrow will trigger an automatic cut in defence and welfare spending equal to $1.2 trillion.
Even these cuts pale into insignificance alongside the huge US national debt which has gone above $15 trillion and will by the end of the year, if it doesn’t already, overtake the country’s GDP – the total amount of goods and services produced by the US.
The refusal of the Democrats to agree with the Republican demand of no increases in taxes for the rich owes nothing to any great feeling towards the working and middle class of America who are suffering unemployment levels of over 9.1% in an economy that has seen zero job creation since the year 2000.
They are quite willing to see the millions of US workers take the full brunt of the crisis through savage cuts in welfare and health, unemployment and house repossession.
What is frightening them is the fear of the gigantic anti-capitalist movement, led by young people, that is sweeping America personified by the Occupy Wall Street movement, a movement that is winning overwhelming support from the organised working class and its trade unions, inspiring and galvanising them into open confrontation with the banks and bosses who dictate to both parties.
As the crisis deepens and US capitalism faces state bankruptcy (putting it on a par with Greece and Italy) it is driving the American working class and youth down the road to revolution.
It opens up the immediate prospect of the unions breaking with the Democratic party and forming their own Labour Party that must fight on a platform of socialist demands of no cuts to benefits, an end to the mass homelessness caused by house repossessions, and an end to the wage cutting and sackings.
Such a break with the two bourgeois parties will be an enormous step forward, but above all, the crisis demands that the most advanced sections of the youth and working class establish a section of the International Committee of the Fourth International to lead the American socialist revolution.
