The budget crisis and the real world



Narratives of the recent, and temporarily suspended budget crisis have tended to emphasize government dysfunction, partisan intransigence and political maneuvering. By placing the blame on generic Washington politicians, media coverage obscured the real issues. This article examines the real economic distress faced by the majority of the U.S. working class as reflecting the ongoing class struggle. Since 1980, this struggle has increasingly taken the form of class war waged by the most powerful employers and their political representatives, aimed at rolling back every gain made by workers - unions, Social Security, unemployment insurance and other safety net programs, and regulations protecting consumers, workers and the environment.

As a result, the majority of the working people face a prospect of less security for themselves, and a bleak future for the next generation. The political battles around the federal budget reflect this reality, with the outcome still to be determined.

The planet of the one percent

The stock market, corporate profits, incomes at the very top - all have regained and surpassed the records they set before the deep economic crisis that began in 2008. In this corporate recovery, firms have been able to expand production (and profits) without hiring more workers. The New York Times reported last Spring, "Right now, C.E.O.'s are saying, 'I don't really need to hire because of the productivity gains of the last few years,' said Robert E. Moritz, chairman of the accounting giant PricewaterhouseCoopers." The article cites United Technologies, which increased its revenue by 20% over seven years without increasing its workforce.

It is no surprise if, in their gated communities, CEOs and other one-percenters think everything is just fine - or would be if the government would stop wasting money on things like food stamps and unemployment for people who should go out and get a second or third job to make ends meet.


Meanwhile, On the planet inhabited by the the 99%, the only good thing about the jobs situation is that it could be worse.

Employment in August was 144 million, still 2 million below the pre-crisis peak in 2007.  If we include growth in potential labor force, we are 8 million jobs below the pre-crisis level.

For the three months thru September, the average job gain was a pathetic 143,000. This was a substantial drop from the mediocre 207,000 average for the first 3 months of 2013. Considering the growth rate in the working age population, at current rates it would take 10-15 years to return to the pre-crisis level of employment - a level that still left too many without jobs.

Most of the drop in the official unemployment rate is due to people leaving, or not entering, the labor force. If someone is unemployed, but has not actively looked for work in the past month, they are not counted in the headline unemployment figures.

But the Bureau of Labor Statistics (BLS) compiles another statistic, known as U6. This includes the regular unemployed, plus those who are working part time but want full time work, plus those who are available for work and have looked in the last year, but not in the last month. This more realistic measure gives an unemployment rate of 13.7%.

Even this misses a lot of people who are not working, would work if jobs were available, but don't show up in any statistics. Examples include full-time students, surviving on student loans; and people in the 55-64 age group who have moved from unemployment to an impoverished retirement.

All together, there is an estimated shortage of about 25 million full-time jobs.

Youth are especially hard hit. The portion of people aged twenty to twenty-four who have jobs has fallen from 72.2 percent in 2000 to just 61.5 percent. Since 1973, median wages have fallen by 30% for young men, and 17% for young women.

Older Americans are also experiencing increased joblessness. The unemployment rate for workers over the age of 55 is still more than double its level before the crisis. At the same time, older workers are the only age group whose employment level is as high or higher than before the crisis. How is that? Even as older workers who are laid off find it impossible to find work, those who still have jobs are afraid to or can't afford to retire, and are increasingly working into their late 60s, 70s, and even 80s.

In an article titled America's Jobless Generation, Jeff Madrick summed up: "We have a situation in which older, more qualified adults are taking scarce jobs from young adults, young adults from teens, the college-educated from those with only a high school degree."

For African Americans, the headline unemployment rate is 13% - double that of whites. For Latinos, it is 9.3%, about 50% higher than for whites. For various reasons, jobless African Americans and Latinos are even less likely to be counted than whites. It is likely that the real unemployment rates are in excess of 26% for African Americans, and 20% for Latinos. The Bureau of Labor Statistics monthly reports do not give figures for native Americans, but previous reports show unemployment close to that of African Americans. Undoubtedly on reservations, as in depressed inner cities and rural areas, unemployment is far higher.

Is unemployment structural?

What is the reason for continued high unemployment? Business economists and commentators blame structural unemployment. The argument is that the economy has changed. There are potential jobs, but the unemployed workers aren't qualified for the jobs that are out there. Effectively, the blame is put on workers - they haven't got the education, or they aren't willing to do the work, or they aren't willing to move to where the jobs are.

If the problem was structural, you would expect certain occupations to show low unemployment rates, with rapidly rising wages as employers compete to hire workers. But the evidence all points in the other direction. Compared with pre-crisis levels, unemployment has increased similarly for all education levels, for most occupations, and for most areas of the country.

It makes a difference. If unemployment is structural, it means the worker has to change - get the right education, the right training, move to the right location. So the policy response can be limited to training programs. But the real problem is lack of jobs. In New Haven last month, a new fast food restaurant posted a sign saying "Now Hiring." More than 600 people lined up for the minimum wage jobs. Only 15 would be hired full time, another 30 part time. It doesn't matter how well trained or educated they were: at least 90% of the applicants would still end up without a job. Education and training are important, but not as the only or even the major component of a jobs program.

Job Quality

What about the quality of jobs that do exist?

The trend to low-wage, temporary, part-time jobs has accelerated since the crisis. In one example, Reuters reports that many Walmart stores are only hiring temporary workers, and temps are now 10% of the payroll, up from 1% or 2% before this year.

Many of the relatively good jobs that were lost in the recession have been replaced with low-paying jobs in sectors like restaurants and retail. A recent report that shows large numbers of college graduates in occupations that do not usually require a college degree, such as taxi drivers and retail clerks. All together, as many as 48 percent of all college graduates are employed in occupations that require less than a college degree.

The situating confronting low-wage workers was dramatized when McDonalds released a financial planning guide for their employees. The McDonalds budget reportedly included "working a second job, turning off their heat, spending just $20 a month on health insurance, and never buying food or clothing." Not to mention providing for children, increasingly common for fast-food workers whose median age is 28.

There is a direct connection between high unemployment and low wages.

High unemployment seems like a dream come true for business. It allows them to hire over-qualified workers at rock-bottom prices. They can have a just-in-time work force, available 24-hours a day, but paid for only those hours they are called in to work. No wonder, as Robert Reich reports, "Employee pay is now down to the smallest share of the economy since the government began collecting wage and salary data sixty years ago; and corporate profits, the largest share." Most of profit share has gone to the biggest corporations, especially the financial sector.

The result of all this is that the median (typical) under-65 household has lost $7,490 in annual income since 2000. Just-released figures show that there were nearly 6.7 million more poor people in 2012 than in 2008.

Then, there are the attacks on public workers, the disappearance of company pension plans and the erosion of private retirement accounts as people approach retirement; the continuing home foreclosures, often in defiance of agreements or even of the law, and the erosion of services at all levels of government.

The Coalition for Human needs summed it up:  Three years into the Great Unshared Recovery, poverty is worse than in 2008, median income is down, and people are slipping out of the middle class. More than one-third of our nation is near poor-106 million people live below twice the poverty line, one lay-off or crisis away from poverty.

An article in the New York Times by Eduardo Porter, hardly that paper's most liberal writer, is titled America's Sinking Middle Class.  He cites a 2010 Census Bureau study defining the middle class "as a house, a car or two in the garage, a vacation now and then, decent health care and enough savings to retire and contribute to the children's college education."  Porter's article shows that a shrinking minority of the population, and certainly a minority of working class Americans, fit that definition.

This is the real world that we all inhabit.


Real nature of crisis. Class warfare.

As Communist Party Chair Sam Webb points out, the government shutdown and threatened debt ceiling default were the latest in a string of ultra-right attempts to reverse the outcome of the 2012 election and stage a "very American coup." Ending the shutdown without concessions was not only a political victory for the administration - it was a victory for democracy and for the American people.

There were three major factors that contributed to the ending, or suspension, of the October political crisis. The first was the overwhelming rejection by the American people of the extortionist tactics employed by the Tea Party. The second was the firm stance by the Obama administration and the Democratic congressional leadership that they would not submit to blackmail. The third was the consensus from mainstream business and Wall Street groups, that the Tea Party had gone too far in threatening to force default.

The ruling class (i.e., the wealthiest and most powerful individuals and corporations who exercise direct control over much of the economy and significant influence and control over all levels of government, most popularly known as the 1%) is divided on tactics, but they share many of the same economic goals. In a sense, the Tea Party is playing bad cop, while more mainstream elements take on the role of good cop, saying "Agree to a few more concessions or I won't be able to restrain my crazy Tea Party partner."

In an October 9 email, Sen. Bernie Sanders (Independent-VT) summed up the class warfare aspect of the budget crisis:

It is also important that people understand that the real issue here is not just the desire of Republicans to defund Obamacare. At a time when the middle class is collapsing and poverty is increasing, these right-wing ideologues want to repeal virtually every piece of legislation passed in the last 80 years which protects the elderly, the children, the sick, the poor and the environment. The truth is that ending Obamacare is just a small part of the right-wing extremist agenda, which is heavily funded by the Koch brothers and other very wealthy and powerful special interests. Their full agenda includes privatizing Social Security, ending Medicare as we know it, slashing Medicaid funding, eliminating the EPA and the Department of Energy and abolishing the concept of the minimum wage. Needless to say, they also want more tax breaks for the rich and large corporations. It should be clear to everyone that their long-term goal is to move this country into an oligarchic form of society in which billionaires completely control the economic and political life of this nation.

Sanders is one of the 29-member Conference Committee charged, in the wake of the government shutdown, with drafting a new budget. He has called for a budget that protects Social Security and moves forward to address the real needs of the American people for jobs and economic security. But other committee members include rabid Tea party Republicans (including Paul Ryan, the committee co-chair), and mainline Republicans. The committee also includes a wide range of Democrats. In the past, some have indicated a willingness to compromise in the direction of accepting cuts to Social Security, as long as they get some concessions in return. Recent statements by Senate Democratic leader Harry Reid, to the effect that past concessions were a mistake and he would not support a "grand bargain" in the conference committee are encouraging, but he has left the door open for future concessions.

Working people need a program that addresses the real needs of the 99%.

  • No more Tea Party hostage taking! Abolish the debt ceiling, and pass a real budget.
  • End the sequester. The budget should reflect real needs, not artificial spending limits.
  • No cuts to Social Security, Medicare. Medicaid, Food Stamps, Unemployment Insurance or other safety net programs. Pass H.R. 3118 increasing Social Security benefits.
  • Jobs at living wages for the 20 million unemployed and underemployed meeting the real needs of the country for infrastructure, health, education, environment, renewable energy and research.
  • Financing through increased taxes on the very rich, closing loopholes that favor the wealthy and their corporations, and enacting a financial transaction tax, and cutting military spending.

A program along these lines is realistic and possible - the U.S. has the resources and there is broad popular support for these items. The 80-member Congressional Progressive caucus has introduced legislation that moves in this direction. But the political balance in Congress makes any forward motion extremely difficult. It will be a tough battle even to resist the pressure for more cuts as the price of avoiding a new budget crisis when the present agreement expires in January.

The factor that can tilt the balance in a progressive direction is a continuation and escalation of the mass pressure that helped force an end to the October crisis, and has strengthened the positions of President Obama and Democrats like Harry Reid. Millions of phone calls, letters, marches and rallies in every congressional district are the only thing that can shift the focus away from Wall Street's phony focus on deficit reduction to the real work of rebuilding the country and increasing economic security for working Americans. 


Photo: "Stand for Workers" demonstration, Philadelphia, August 11, 2012.      Ben Sears


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  • More on the Obama Administration: Obama has stoutly defended the NSA, with lies and half-truths, while it continues unabated to violate the basic democratic rights of the American people and to lay down the mass surveillance and infrastructure foundation for a future police state. This factor alone should cause all of us to reassess any remaining committment to this government and its party. Lenin broke completely with the second international social democratic parties of Europe in 1914 when they betrayed the workers and European people by voting for the war credits which sent millions to their deaths in Word War one. Lenin was, for a time, isolated by this action, but it absolved him, and his party, of responsibility for supporting this terrible imperialist created tragedy. In the end, the Russian working people and soldiers rallied around the communist party of Russia precisely because it **oppossed** the war and the parties and governments which backed it. Similarly, we need to break from both of the major parties or face responsibility for supporting their class war on the American people at home and their imperialist wars and 'interventions' abroad. Please think about this.

    Posted by Eric, 11/06/2013 1:06pm (5 years ago)

  • Hi there, I appreciate the clear presentation of statistical data and real-world employment/income conditions for the American working class. But the other premise of the article - that the Obama administration is working for the American people - is sadly mistaken. This administration is the 'right-wing in drag'. It represents not the American people but the interests of finance capital (aka Wall Street) and the miitary inedustrial system. Proof? 1. Obama has surrounded himself with financial officials directly from Wall Street or with strong ideological and often financial links to it; 2. His Obamacare is a gift to insurance companies, not to the American people; 3. He has said nothing meaningeful about the mass poverty and hunger resulting from the actions of his Wall Street and military-industrial friends (War Resistors league real-world math shows 49% of current federal budgets go to military or related spending and to servicing debt on previous military ventures); 4. His imperialist foreign policies have killed untold numbers of people in Libya, Syria, Afganistan, and Iraq. It may once have seemed justifiable to work with the liberal side of the democratic party; but there is virtually nothing left of that side! Breaking with Americas one-party state - i.e., with the two branches which serve one military-industrial/finance capital master - is the minimum starting point for progressive action in America today.

    Posted by Eric, 11/06/2013 12:54pm (5 years ago)

  • this is not a good political party

    Posted by Floyd , 11/06/2013 11:39am (5 years ago)

  • Much thanks, Art Perlo for this timely article.
    The program set out herein is achievable.
    Congressional districts have to be hit hard by militant, massive protests,
    at home and in DC.
    The condition of the working class in these United States of America is horrendous.
    The economy, the country, the life conditions of our people has to rebuilt, as you write.
    We have to love and protect one another, or we face a real extinction, along with all other life forms on the planet.

    Posted by E.E.W. Clay, 10/28/2013 11:35am (5 years ago)

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