US Debt Ceiling Debate and the Alternatives

On 2 August, a few hours before the deadline for the US government to raise its debt ceiling or face default, President Barack Obama signed into law the Budget Control Act, after Congress passed it by wide margins. This debt ceiling agreement calls for over $2 trillion ($900 billion now and $1.2 trillion by the end of the year) in fiscal spending cuts spread over 10 years. These cuts are expected to only reduce GDP (gross domestic product) growth in 2012 by 0.1 per cent. However, if an agreement is not reached on the $1.2 trillion spending cuts, the debt deal contains automatic spending cuts which some estimates suggest could reduce GDP growth by 0.8 per cent in 2013. Note that current 2013 GDP growth forecast is 3 per cent. The combined impact of reduced government procurement spending, reduced government support for personal incomes and continued high levels of unemployment seems to indicate a two-year period of lower levels of GDP growth, consumption as a percentage of GDP and subsequently total non-oil imports relative to their respective levels prior to America’s financial crisis.

This kind of deficit reduction that spares the wealthy from higher taxes and protects the bloated military budget from cuts is an assault on the ordinary citizen who depends on government programmes as social safety nets.

This week, I heard extended discussions on the mainstream media about the positive aspects of socialism. One popular progressive TV anchor, Keith Olbermann, charged ordinary folks to rise up against the assault on social safety nets. Usually, such discussions on socialism are carried out by small groups of the left, away from the mainstream media. Now however it is clear from the depth of the multiple crises that people are now thinking out clearly about alternatives. Keith Olbermann called on the people to rise up. In a passionate commentary, Olbermann called for a new movement to rise up and build a protest movement against the Budget Control Act. Olbermann stated on his show:

‘Where is the outrage to come from?’ 

‘From you! It will do no good to wait for the politicians to suddenly atone for their sins … it will do no good to wait for the media to suddenly remember its origins as the “free press” … it will do no good to wait for the apolitical public to get a clue.’

Without a protest movement, the ‘tide’ that had brought the debt deal ‘will crush us, because those who created it are organized and unified and hell-bent. And the only response is to be organized and unified and hell-bent in return.’

Olbermann was calling for self-organisation and self-mobilisation to meet the challenges of the financial–military complex.

Drawing inspiration from the anti-war and anti-racist struggles of the past generation, Olbermann called on the US population to ‘find again the energy and the purpose of the 1960s and early 1970s and we must protest this deal and all the goddamn deals to come, in the streets.’

This is a call to non-violent arms. It was the most explicit call from the progressive side. Olbermann’s call for organisation was a far cry from those who were looking to Obama for answers or those who called the deal a defeat for progressives. The reality is that progressives have not yet begun to fully organise. They have allowed the conservative forces to dominate the debate about the debt, the dollar and the budget for war and oppression.


On 3 August 2011, the editorial of the New York Times commented that this Budget Control Act: 

‘is as contrived as the artificial crisis that spawned it. The bill, like a tired opera production, is full of clumsy staging and failed gimmicks left over from previous decades. It is not only bad policy in its goals of cutting spending too much, but it is bad procedure. It allows members of Congress to avoid responsibility for their actions through a cutout committee, a spending limit and the pretense that this Congress can tell the next one what to do.’ 

This paper did not however explain to the readers the fact that this bad procedure was serving a clear purpose, that of ensuring the dominance of a small 2 per cent of the population. The outrage in the society from all sides had been too great, so this platform for the liberal wing of the ruling class came out with these words. While it is true that the mainstream media has been carrying the talking points and spin of the two dominant parties, there can be no hiding from the fact that millions are now paying attention to the realities of the economic crisis in the United States. 

For two and a half years the Tea Party forces had seized the public political space. Loud and aggressive, these Tea Party forces of populist conservatism reproduce the values of white supremacy and militarism. It is now well documented that the financial supporters of the Tea Party are some of the crudest billionaires from the financial services sector. 

These politicians thrive on progressive people’s political apathy, but the drama had been running for too long so people want the details. They want to know what it means that the Budget Control Act grants a $400 billion increase in the government's debt ceiling to stave off the threat of default, with an additional $500 billion increase available from February to be effective on the president's authority. There will be a further increase of $1.2 trillion to $1.5 trillion that will become available only if a balanced budget amendment is considered by Congress by the end of the year.

After the cuts of $900 billion, from November a special joint committee of 12 people from the House of Representatives and the Senate will come back with recommendations for up to $1.5 trillion in deficit-reduction actions. These cuts are to be identified by a bipartisan super committee. Under the law this super committee can consider tax or revenue increases. If it fails to produce a plan acceptable to Congress, the deal triggers steep, automatic cuts in spending of a similar size. The trigger is designed to encourage the committee to produce meaningful ways to cut the deficit. The strong possibility that the automatic cuts in spending will be mainly on social safety nets such as Medicare, Medicaid and other programmes worries the ordinary citizens who are already disproportionately bearing the brunt of the economic woes caused by the financial oligarchs. 

The fiddling and back and forth that is going on cannot bring about the recovery of US capitalism. From 1945, the US consumers were primed to spend beyond their means while the fossil fuel economy was subsidised with the projection of military power. The budget ceiling debates were a dramatic wake-up call to the rest of the world as to the realities of the political and economic health of the United States. 

In a society where the working peoples are more organised to defend their rights as citizens instead of planned deficits, there should have been a plan to put millions of people to work so that the sufferings of the people are alleviated. 

All of the details of the budget control law are predicated on the idea that the top 2 per cent of America’s wealthiest folks make no sacrifice while the poor of the US and other societies subsidise this small ruling class in the USA. The question is whether it is just and sustainable for the US elites and the US military to go about business-as-usual while the US government drastically reduces its budget spending on the back of ordinary folks. This protracted capitalist crisis in the US and elsewhere calls for clarity on the question of whether the problem is merely one of taxation of the rich rather than a structural alternative to the entire capitalist system.


Among progressives there has been clarity that the military–industrial complex serves the interests of big capital even while wrapping itself up in patriotic language. This week there was another report on the extent of the US global military deployment when Nick Turse wrote that the special forces of the military were deployed in more than 120 countries. These special forces represent a section of the military within the military. Turse wrote:

‘Karen DeYoung and Greg Jaffe of the Washington Post reported that U.S. Special Operations forces were deployed in 75 countries, up from 60 at the end of the Bush presidency. By the end of this year, U.S. Special Operations Command spokesman Colonel Tim Nye told me, that number will likely reach 120. “We do a lot of traveling — a lot more than Afghanistan or Iraq,” he said recently. This global presence — in about 60% of the world’s nations and far larger than previously acknowledged — provides striking new evidence of a rising clandestine Pentagon power elite waging a secret war in all corners of the world.’

What Nick Turse did not do was to connect this global presence of the US military to the crisis of capitalism. How can a country in such deep economic crisis project such military power? In the past, the ruling class used war and military aggression to divert the attention of the rank and file from such a stagnant economy. Truth be told, the debt itself increased considerably from the unfunded wars of the Bush administration. It was significant that for the congressional representatives who voted for this bill, two questions were off the table, that of taxing the rich and cutting the military budget. William Pfaff in his 2010 Foreign Affairs article entitled ‘Manufacturing insecurity’ reinforced the huge burden that US militarism puts on its citizens. According to Pfaff,
‘[Alfred] Vagts wrote that militarism has meant “the imposition of heavy burdens on a people for military purposes, to the neglect of welfare and culture.…” It exists, he notes, as “a civilian as well as a military phenomenon….”

‘The defence and securities industries are today the most important components of the U.S. manufacturing economy, and their corporate interests now are in a position to dominate Congress, as well as an inexperienced administration. Without excessive exaggeration, one might say of the United States today what once was said of Prussia — that it is a state owned by its army.’

What Pfaff did not ask is who owns the military? Whose interest does the military serve? Who is the military protecting in the 120 countries that it is deployed? It is now clearer to sections of the US working class that this military is not there to serve them.

Our reference to socialism in the beginning of this intervention refers not only to the discussion of a socialist alternative but the reality that US society is now a brand of socialism for the top 1 per cent of the population. And the inequality associated with this elite socialism has had devastating effects on not just the working class but the entire society.

Sacredness of the military budget stands out in budget control law, just as it did in the debt ceiling debate. Because the political legitimacy of the system rests on the military, serious cuts in the military budget are off the table. The New Secretary of Defense Leon Panetta reassured the top brass of the military that there would be no cuts in defence spending: ‘I will do everything I can to ensure that further reductions in defense spending are not pursued in a hasty, ill-conceived way that would undermine the military's ability to protect America and its vital interests around the globe.’

Winslow Wheeler pointed to the fact that discussions on serious cuts in defence are postponed. ‘The debt deal kicks the defense budget can down the road for this and future Congresses. People should not read precision and certainty into a political deal specifically designed to be uncertain and indistinct.’

I would agree with the terms uncertain and indistinct if this was a ruling class that did not stir up fear, anxiety and military passions among the people. The stirring up of fear and military passion among the people by the merchants of war and their political and oil and finance allies in the US is usually directed towards economic ends of the military–industrial complex. These merchants also employ their militaristic scheming for a drastic change of tide in election seasons. Hence with the US presidential elections coming in 2012, and with the current state of the US economy, the people must now be very vigilant against the possibility for war. This vigilance is necessary in the context of the recent warning by Robert Baer, a 21-year CIA (Central Intelligence Agency) veteran, who is predicting ‘that Israel will bomb Iran in the fall, dragging the United States into another major war.’ 

What history will teach us in the future will be whether the ‘tired opera production’ was one other facet of the armaments culture. This is the system of beliefs, values, understandings, cultural practices and institutions which legitimizes the accumulation of weapons and preparation for war. The function of this armaments culture is to spread fear so that citizens are demobilised and disoriented. This is because the absence of revenues from taxing the wealthy and the plan to maintain the trillion-dollar ‘security’ budget presents a fundamental contradiction for US society. This contradiction can only be resolved by intensifying the exploitation of the most oppressed in the USA and shifting the costs of the capitalist crisis onto the shoulders of others by force.

Domestically, there will be large-scale cuts in the entitlement programmes of social security, Medicare and Medicaid.

Internationally, there will be the effort to maintain the dollar as a reserve currency while the US Federal Reserve print more money and invent some other formulation or bubble of the type that was called ‘quantitative easing’. This plan to export the crisis outside US borders will face difficulty because the intensity of the crisis means that the contagion from the capitalist depression is not simply a US question. Efforts to exert US financial and military hegemony now face the reality that other societies are paying attention. The press reports from the rest of the world indicated that the rest of the world was not going to sit idly by. From China, the Beijing Global Times warned the US:

‘It is too early to cheer for this deal, since raising the debt ceiling simply means the US can now borrow itself into further debt … This does not seem a smart move. By using new debt to pay back the old, the US is sinking further into quicksand.’

From Russia, Prime Minister Vladimir Putin had harsh words for the US, calling it a parasite that is ‘leeching on the world economy’.

Consider the position of the head of the Central Bank of China. China will continue to ‘seek diversification in the management of reserve assets, strengthen risk management, and minimize the negative impacts of the fluctuations in the international financial market on the Chinese economy.’ China will also take ‘effective measures to maintain relatively rapid growth to safeguard economic and financial stability.’ 

China has the largest sum held in US Treasury bills but this rising power will be diversifying the management of its reserve assets. The Japanese central bank has intervened to save the yen, and like Switzerland, is dropping all pretences of leaving the fate of their economies to the vagaries of the market. Latin American states are looking for ways to protect themselves from the US dollar. As of 2010 the Latin Americans have created a virtual currency – the sucre – to trade among themselves in order to protect the region from the crisis of the dollar. In the Middle East the countries with huge dollar reserves are turning to hoarding gold. The price of gold has skyrocketed. What is Africa doing? Will this unfolding crisis stimulate a faster rate of conclusion for the African single currency? Business as usual where African central banks send their money to be devalued in the Federal Reserve Bank of New York cannot continue.


From the discussions now raging in the USA there are radical alternatives being proposed to the rank and file as manifest in the call for self-organisation and self-mobilisation. There is no absence of clarity on the reality that the charade of the debate on the debt was one more dance to conceal the real powers of the masters of the universe on Wall Street. The dominant political parties are controlled by the same forces of finance capital that own and control the regular military and the private military contractors. 

It is now up to progressives to join with the popular call for mobilisation by using whatever skills and talent at their disposal to point to the reality that the assumptions of the Budget Control Act of 2011 are unsustainable. 

In our discussion last week, we drew attention to the fact that the debt ceiling debate was an indication of the intensified class warfare at the national and international levels. The US rulers were sending a message that the US military and the masters of the universe will remain at the top of the international economy by force. 

Historically, racism and militarism have been the tools of the US rulers. While the debate was going on about the debt ceiling, a new study of US census data revealed that wealth gaps between whites and minorities in the United States grew to their widest levels since the US government began tracking them a quarter of a century ago. White Americans now have on average 20 times the net worth of African-Americans and 18 times that of Latinos. According to the Pew Research Center, the gaps were compounded during the housing bust and the subsequent recession, and essentially wiped out much of the economic progress made by people of colour over the past 20 years. ‘This report is pointing to just how much the socioeconomic inequalities have been exacerbated by the recession and poor economy.’

The call by Olbermann is for the mass of poor black, Latino and white to combine. Unlike other progressives who call on the people to seek solutions from Obama, Olbermann called on the people to be their own leaders. The challenge is to stimulate this striving for self-organisation and self-mobilisation to cripple the armaments culture in order to start on the road to build the structural alternative to capitalism. 

Horace Campbell is professor of African-American studies and political science at Syracuse University. He is the author of ‘Barack Obama and 21st Century Politics: A Revolutionary Moment in the USA’. See www.horacecampbell.net.


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