Capitalism’s Looming Crises: From Budget Debt Hyperbole to Banking Disaster

by Jeff Mackler, published on Socialist Action, March 24, 2023

President Joseph Biden presented his third annual budget proposal at $6.8 trillion on Thursday, March 9. A day later Silicon Valley Bank (SVP), in Santa Clara, California, the nation’s 16th largest, declared bankruptcy, followed days later by New York City’s Signature Bank. A half dozen others faced similar and immediate disasters, brought on, as with the 2008-9 Great Depression collapse, by speculation-driven bank CEOs leveraging their assets far beyond the point when an impending collapse could be remedied with liquid assets on hand or a private quick loan. This time out, with disaster lurking, the failing bank CEOs secretly appealed for help to various top dog institutions like JP Morgan Chase, among the largest banks in the world with asserts at some $2.3 trillion. But in today’s world of high finance during crisis times, secrets are hard to keep. When the word got out, SVP depositors ran for the hills. The shock waves spread around the world with major troubled banks like Credit Suisse, with $1.4 trillion in assets, bought out by the even larger Swiss-based banking giant, UBS, according to an Associated Press report.

Over the past week Bloomberg News reported “Some $600 billion dollars of [stock] market value has evaporated from the 70 biggest US and European banks.”

Panicked bank depositors similarly raced to liquidate their essentially uninsured accounts before lying bank officials, who had days earlier insisted that their banks were stable and prospering, closed the doors heading for bankruptcy.

Meanwhile, Biden’s staff and media entourage gleefully, but momentarily, took to the airwaves to tout his 2023 budget objectives – to reduce the unprecedented US debt, now at the statutory limit of $34.1 trillion dollars, and to do so by taxing the rich, the latter an oxymoron if there ever was one. A slew of New York Times reporters instantly likened Biden’s budget priorities to Democratic Party rhetoric in the run up to the 2024 presidential elections. Indeed, a front-page NYT article the same day stated that Biden’s “Plan Was Unlikely to Pass…,” a gross understatement to say the least.

The corporate media neglected to note that $2.8 trillion of Biden’s $6.8 budget proposal, as with his 2022 proposal of the same amount, was to paid for by increasing the debt limit rather than reducing it.

Still worse for the ruling rich, any Biden decision to stem an oncoming banking catastrophe with promises to once again bail out the super rich by further increasing the US debt to the tune of the multiple $trillions extended during 2008-9 crisis, was dead on arrival. Biden’s top economic advisers were quick to inform him that his budget hype, predicated on qualitatively reducing the nation’s debt, had to be back-burnered a day later. The ruling rich chose instead the temporary gambit of instantly promising that private investors, not the government, would ensure investor deposits. That is, the funds of bank clients, not the failed bankers and their stockholders, would this time out be the prime beneficiaries of the forth coming bailout. Biden and his top officials at the US Treasury and the Federal Reserve met with JP Morgan Chase’s CEO Jamie Dimon and other top bankers to arrange the details based on the latter pledging to protect uninsured bank depositors to cool the panic withdrawal frenzy and no doubt to privately down the line when the failed bank’s disappeared assets were recovered. As we go to press it’s not clear if the super rich will be successful.

Tax the rich rhetoric abandoned

Biden’s previous promises to “tax the rich,” who he repeatedly claimed, “don’t pay taxes” and to “tax the war profiteers” who he demagogically pilloried last month, and the “greedy” oil corporation monopolies that raised fossil fuel prices to the high heavens, tripling their profits during the US-instigated Ukraine War, all came to naught. With the sound of yet another banking time bomb intensifying Biden and his media pundits instantly disappeared yesterday’s tax the rich populist rhetoric.

The corporate media was instructed to shift its focus to more serious US-government perceived evil enemies like the Chinese, Russians, Iranians, Venezuelans, immigrants, and most recently, via a bi-partisan House resolution condemning “socialism “itself as the ultimate evil. The February 2 twisted House diatribe concluded with the single admonition, “Resolve that Congress denounces socialism in all its forms, and opposes the implementation of socialist policies in the United States of America.” The vote was 328-86-with the majority of Democrats, 109, voting in favor and 14 voting “present.” The resolution neglected to denounce the bi-partisan “socialism for the rich” policies always pursued with abandon by the ruling elite. It served only as a crude Republican Party-initiated maneuver to ensnare and red-bait incautious Democrats while providing hoped for future justification to gut social programs.

Biden’s 2022 budget pledge to spend some $6 trillion to remedy catastrophic fossil fuel-induced global warming, was similarly disappeared while fossil fuel production escalated and profits last year reached new highs. The same with the military-industrial complex, once again bloated by $billions for the US-instigated Ukraine War. Need we add that the US multi-trillion dollar gambit to substitute expensive US-fracked liquefied natural gas (LNG) for the cheaper Russian gas that previously supplied Germany and much of Western Europe, and the associated US obliteration of the Nord Stream pipelines constructed to deliver it – detailed by Pulitzer Prize journalist Seymour Hersh – were central to US imperialist objectives? Ukraine has proved to be picture perfect as yet another a $multi-billion, if not multi-trillion dollar fossil fuel war.

The rich don’t pay taxes    

Under Joseph Biden today, and his presidential predecessors, whether Clinton, Bush, Obama or Trump, the taxes paid by the super rich have steadily declined – to near zero in some years.

An errant Internal Revenue Service trove of documents released in a ProPublica whistle blower report revealed that four of the nation’s richest men, the approaching $trillionaires – Amazon’s Jeff Bezos, Tesla’s Elon Musk and financiers Michael R. Bloomberg and Warren Buffett – “paid almost no federal taxes, and in some years paid no taxes at all.” No doubt, the tax dodgers’ deeds were in full compliance with the U.S. tax codes, written and re-written into law countless times by the ruling class’s elite lobbyists and handful of select congressional representatives, Democrats and Republicans alike. And if the richest four largely avoided taxes, not to mention getting tax rebates, one can assume with certainty, contrary to Benjamin Franklin, [“Nothing is inevitable except death and taxes.”] that their ruling class cohorts and their multi-national corporations, with tax havens from the Cayman Islands to Ireland, similarly operate to largely avoid taxes. Today, the $trillion multi-national corporate entities’ “legal” tax avoidance schemes increasingly include the technical division of their behemoth enterprises into literally thousands of “small business partnerships” that qualify for tax exemptions galore.

Similarly, the US military budget, including its 2023 rendition, has soared, along with Biden’s fossil fuel extraction projects, today slated for the pristine and ever increasing areas made “accessible” via global warming to easy drilling in the Arctic region. Biden’s previous approval of 2000-plus off-shore drilling permits gave proof once again that corporate profits, not the future existence of humanity itself, drive the system forward to oblivion!

The debt limit scam

There is no disagreement that Biden’s current $6.8 trillion budget proposal cannot be approved without a congressional agreement to raise the mandated cap on how much the government can borrow to pay its bills, that is, to print ever more paper money or issue bonds or other financial instruments to avoid the world’s richest nation declaring bankruptcy, not to mention once again bailing out the nation’s banks and leading corporations to the tune of tens of trillions of dollars. Last year’s high-powered budget rhetoric had the corporate media predicting imminent disaster if a “balanced budget,” including an immediate extension of the debt limit, was not immediately approved. Biden’s 2023 budget shortfall is again at $2.8 trillion, presumably to be covered by raising the debt cap. Today, however, the rhetoric has been toned down a bit with “budget experts,” including Treasury Secretary Janet Yellen, suddenly discovering that the implementation of various “accounting techniques” will allow the government to continue to pay its bills, that is, to avoid instant bankruptcy, until at least August, 2023. After August, according to a recent Senate Finance Committee report accompanied by a report from the chief economist at Moody’s Analytics, Mark Zandi, “millions” of US jobs will be lost and the US will, again, instantly tumble into recession. “Unless,” that is, according to the Democrat-controlled Senate Banking Committee headed by Elizabeth Warren, “House Republicans agree to extend the debt limit.” In short, the entire unfolding budget debate, wherein rightwing Republicans are said to be holding the nation hostage to an unprecedented default and US bankruptcy, is nothing less than sham partisan bickering, with each side seeking political leverage to pose the other as irresponsible, or reckless, while maneuvering behind the scenes to shuttle additional $millions and $billions to their favored corporate benefactors.

Last year’s budget villains, when the Democrats held a majority of the House of Representatives and the US Senate, were the dissident “centrist” Democrats, Senators Kyrsten Sinema, of Arizona, and West Virginia’s multi-millionaire coal magnate, Senator Joe Manchin III. In point of fact, the Democrat’s two holdouts were mere stalking horses for the ruling rich, allowing Biden to gut his touted climate crisis mitigation and “tax the rich” promises, that he and his party had zero intention of seriously implementing. Today the villains are to be the House majority Republicans, who will be similarly blamed for thwarting Biden’s “tax the rich” promises.

The Republicans, equally dedicated to playing the annual budget war games, claimed in response last week that while still-unnamed social programs had to be cut to win their approval to once again raise the debt ceiling to achieve the mandatory “balanced budget,” they envisioned no cuts in the government’s most expensive Social Security and Medicare programs. The stage is once again set for the behind-the-scenes deals orchestrated by the real representatives of the US ruling elite – not the millionaire and handful of petty billionaire posturers who constitute the US Congress.

The truth behind the US debt

The last major financial crisis of the Bush and Obama era saw the ruling elite expend literally tens of trillions of dollars in bailout funds to save the bankrupt US banking and related financial systems and key corporations, including the then bankrupt General Motors Corporation. At that time, 2008-9, the U.S. debt stood at $10 trillion. Today is stands at more than triple that amount, at $34.1 trillion, an amount that exceeds the entire annual US Gross Domestic Product, now at $25.4 trillion.

The US, the nation that previously lectured its European Union associates to refrain from issuing inflation-abetting debt to pay its bills, today exceeds all others in printing paper money to do the same. And inflation, today  “officially” exceeding 7 percent, and likely higher, is raging, but not because of some mysterious out-of-control economic forces that can be remedied by the Federal Reserve increasing borrowing rates. The decision to raise prices resides in the exclusive purview of the highly monopolized corporate capitalist system.  Their decision on this critical issue, as with the myriad of others they deploy to maintain profit rates when they are increasingly under attack, has the direct effect of transferring value from the mass of workers who produce it, to the elite who steal it.

Today’s ruling class has spared nothing to preserve their inherently flawed system. US union power has been reduced to its lowest levels in a century, giving the corporate elite a virtual lock on wages – effectively freezing them for decades, when adjusted for inflation. The same elite preside over an increasing monopoly on prices, having consolidated previous competitors and/or driven them out of business. Over the past decade or so, some half of the listed stock market corporations and banks have either been absorbed by the major players or dissolved. Capitalist-imperialist monopolies rule as never before. They rule over governments and continents. They essentially control both wages, that they suppress with the support of the compliant, often corrupt, labor bureaucracy, and prices, that they raise today with abandon.

As the world’s most powerful economy, and with the US dollar since the end of WWII established as “the coin of the realm,” US capitalism retains the ability to pay foreign creditors’ bills with US bonds that are pegged at sufficiently high interest rates to discourage the immediate abandoning of US financing. But new developments, that today include emerging nations previously excluded from the world economy, are in operation that threaten to change the rules of the international capitalist order.

The emergence of China as a world power

That China is emerging as a major imperialist competitor on the world marketplace, led by more than 1,000 Chinese billionaires, as compared to some 780 in the US, more than adequately explains US hostility. By 2028 China’s economy is expected to surpass the US. When China was admitted to the World Trade Organization in 2001 it was as a third rate player, with US corporations essentially reaping super profits by constructing state-of-the-art virtually tax free plants in China often employing legions of teenage girls from the impoverished countryside to labor in prison-like dormitory factories for 80-hour work weeks at six cents an hour. Six cents!

Compelling data from Politico demonstrated that China’s WTO entry accelerated America’s de-industrialization. A 2020 analysis by the nonprofit Economic Policy Institute, a labor-oriented think tank, estimated in January 2020 that “The U.S. trade deficit with China alone resulted in the loss of 3.7 million [US] jobs from 2001-2018.” Additional millions of US jobs were lost, often at unions wages, to other low wage countries from Indonesia, to Mexico, Haiti, Vietnam, India and beyond.

Today, twenty-two years after China’s admission to the WTO, China’s economy is no longer dependent on massive US investment. Indeed, China’s industrial and technological infrastructure, including its Belt and Road initiative, increasingly rivals, if not exceeds, the US. China’s Belt and Road infrastructure project today includes one-third of all world trade and GDP and over 60 percent of the world population. US presidents from Trump to Biden today impose punitive tariff against more competitive Chinese imports, manufactured via advanced Chinese technologies and scientific breakthroughs that US corporations falsely claim have been stolen by Chinese entrepreneurs. Not long ago, no tariffs were imposed on the same commodities manufactured by China-based US corporations using near slave labor workers provided by compliant Chinese “Communist Party” officials.

Inter-imperialist rivalry and shifting trade blocs

Today, the world is ablaze with ever-competing trade blocs that have nothing to do with post WWII Cold War alignments when the Soviet Union’s trade with Eastern Europe, following social revolutions that abolished capitalism there, allowed for significant social advances, including systems of socialized health care, free education, generous pensions and industrial development. Most of these gains have long been abandoned as the previous deformed and degenerated workers’ states – bureaucratized and corrupted by Stalinism – have been re-integrated into the world capitalist system. Today’s world is increasingly divided and re-divided into ever-changing trade blocs, all based on competing capitalist forces constituted and ever reconstituted by varying degrees of reactionary class forces. Today’s BRICS bloc, for example, Brazil, Russia, India, China and South Africa, in no way resembles a progressive alternative to US-dominated formations. In every instance, competing capitalist states, led by the dominant capitalist-imperialist powers, maneuver against each other to seek advantage for their capitalist elites on the world market place, almost always at the expense of their respective working classes. The world’s working people have little or nothing to gain in this emerging “multi-polar” capitalist world, dominated by competing exploitative powers.

For US corporations, offshoring jobs to low wage countries and shielding profits to tax havens to maximize US competitiveness on a world scale are in the same category as US union-busting, speed-up, pension cuts and the super-exploitation of immigrant and the racist mass incarceration prison labor system at home. The “Chinese model” is not qualitatively different, with China’s capitalist-imperialist state increasingly becoming the major player in Latin American and Africa in the race to secure profitable investments via alignment with compliant capitalist governments, whether presided over by tyrants or “democrats.”

In the heyday of the Obama administration when federal interest rates were near zero, his Federal Reserve and Treasury Department officials practiced “quantitative easing,” wherein they virtually gifted unprecedented $trillions in “loans” to the crisis-ridden corporate elite. These virtual gifts were justified with the lie that they would be used to build new plants in the US that would provide new jobs for US workers, whose previous jobs had been “offshored” to low wage countries like China. But in the highly competitive and increasingly technology driven world market place, where average profit rates, as we shall demonstrate, are inherently in decline, US corporations saw zero need to invest in new US plants. The promised US jobs never materialized. Instead, the government’s “free money” to bail out the rich was “invested” in a frenzy of stock market speculation schemes that boosted stock prices and paper profits to unprecedented heights. The measure of US prosperity became the stock market and its increasing creation of instant millionaires and billionaires – the products of a frenzied casino capitalism where the “house always wins.” Biden himself, armed with the data, periodically and demagogically verbally damned the corrupt brokerage houses for orchestrating their own stock buy back schemes to drive up share process while on the other leaving no stone unturned to advance their interests.

The Federal Reserve’s “quantitative easing” 2020 “loans” to bailout corporate America, at $8.1 trillion, amounted to a startling one-third of the country’s entire Gross Domestic Product, essentially replacing 100 percent of corporate loses attendant to the COVID-19 economic recession. Bailing out the super rich is what capitalist government is really about. Why invest in yet another round of essentially non-competitive state-of-the-art manufacturing plants with minimal, if any, profit expectations, when the government’s virtual free money would bring instant returns making the likes of Bezos, Musk and Co. instant near trillionaires? Further, why should any self-respecting capitalist build a US-based plant when the same plant can be constructed in the myriad of ever-increasing below poverty wage countries, where compliant governments guarantee near zero tax rates and a virtually unlimited supply of super-exploited near free labor as compared to the labor and benefit costs in the advanced capitalist nations?

Marxist economic theory and capitalist crises

Today’s unprecedented financialization of capital, that is, the increasingly speculative investment in the stock market and related institutions that have little or nothing to do with increasing investment in the real economy, are the norm for the capitalist-imperialist system worldwide. Karl Marx’s exposition of the laws of capitalist development aptly explained this fundamental contradiction, especially his “Law of the tendency of the rate of profit to fall.” Simply put, Marx repeatedly explained via four volumes of his classic “Capital,” that the average value of commodities produced for the marketplace is a measure of the average quantity of labor power embodied in them in the average course of their production. In the course of time, and competition among and between capitalists, the proportion of human labor embodied in every commodity, as compared to machine labor, diminishes [Marx demonstrated that machines produce no value]. Capitalists profit only by the extraction of human labor power in the course of production. No self-respecting capitalist would employ a single worker were it not for this irrefutable proposition. Yet, as incessant competition drives the system forward, forcing ever new rounds of technological innovation, with the less competitive players ever driven from the market place, average profit rates, again based on the decreasing quantity of human labor power embodied in each commodity, decline. That capitalist profits are inherently subject to decline compels the capitalist class to resort to literally every measure we see today to counter this law in order to maintain profits.

Capitalism has no solutions

Today’s crisis-ridden world capitalist system, with zero exceptions, has sought to resolve this inherent contradictions, as we have demonstrated, at the expense of working people everywhere. Ever more ferocious worldwide competition and the introduction of ever more sophisticated technology have reduced average corporate profit rates everywhere. For the elite, their solutions inevitably include turning their unchallenged economic, political and military power to their advantage. Hence, capitalism’s endless bloated war budgets, wars of intervention and conquest, massive imposition of economic sanctions against competitors, environmental destruction, deepening fossil fuel exploitation that threatens ever-deeper climate catastrophes, and the US maintaining 1,100 military base in 110 countries are all necessary to maintain their power and profits.

The same with capitalism’s systemic racism, mass incarceration, sexism, LGBTQI discrimination, privatizing public education and social services, anti-labor policies, de-industrialization, speed up, etc. All are aimed at countering capitalist competitors worldwide and countering the ongoing pressure on profits. All are aimed at countering the inherent contradictions of the predatory, anti-democratic system itself, regardless of the cost in human lives and the planet’s survival as a viable entity. Those capitalists that fail to compete are destroyed or absorbed into ever more powerful dominating monopolies. The bailout of the failed banks and/or their massive bankruptcies in 2008-09 continues unabated today. The weaker banks are driven from the market as we saw last week, with the panicked ruling rich ever seeking new mechanisms to limit the damage, increasingly at the expense of working people. Today’s corporate driven inflation is a prime example.

For working people, breaking with the two-party capitalist shell game is an essential starting point. This includes building powerful independent social movements dedicated to mobilizing decisive mass forces to champion the interests of the vast majority. It includes fighting to break the stranglehold of the two-party capitalist duopoly in the political and economic areas and the construction of a fighting labor party based on qualitatively expanded, militant, democratically-organized trade union movement in alliance with the oppressed and exploited.

Effectively challenging the imperialist beast undoubtedly entails the construction of a deeply-rooted mass revolutionary socialist party aimed at unifying all of the above struggles and the vast working class majority to pose a realistic alternative to the rapacious capitalist system. Join us!

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