The New Budget Is a Deathblow for the Poor

Approximately $1 billion was cut in the federal budget and an additional $1.5 billion will be cut later. At the same time, the raise in taxes will not happen if everything goes according to plan. Several critical voices are now warning that the belt-tightening policy hardly signifies any solution in the U.S., which is increasingly becoming a paradise for corporations while the ever increasing number of poor fight for their survival.

“Before we were fighting to avoid eviction. It has now become worse; it’s about making sure that people do not starve to death,” said Cheri Honkala, the national coordinator for the network of organizations assisting the poor in the U.S. Previously their most important method of work was to occupy empty houses with poor families which have been evicted and were now homeless. They are now planning to open a little farm in Philadelphia where Cheri lives in order to grow food for the needy.

“We never thought that we would become farmers and gardeners in our movement. But it has gotten so much worse for the people and the problem of hunger is so serious,” she told Flamman. The disappointment with Obama’s politics cannot be wrong; Cheri sounds both dejected and bitter.

“Those who plunged with body and soul into his campaign are now desperate, angry and disillusioned. He was the one who should have raised the issues of social assistance and medical insurance on the political agenda, but what is he doing now?”

Like all presidents before him, he uses resources for war and everything becomes a compromise after compromise with the conservatives.

“His health care reform was a catastrophe; it was completely on the terms of the insurance companies,” she said.

The Philadelphia program that was saving families from being evicted will be closed on Sept. 1. Nationally, every 30 seconds a family is evicted from its home; another one million people are expected to become homeless this year.

“They are continuing with the politics of impoverishment. We should take control of the banks but it’s all about protecting the rich and the corporations. And now we have new cuts from the Congress,” she said.

Obama has not only lost the trust of the radical groups. Even the traditional liberals are concerned with his politics of concessions. The New York Times’s renowned economists such as Nobel-Prize winner Paul Krugman, cannot hide their frustration: “Republicans have, in effect, taken America hostage, threatening to undermine the economy and disrupt the essential business of government unless they get policy concessions they would never have been able to enact through legislation.”

The background is that Obama needed to raise the ceiling for how much the country can borrow in order to carry out politics, which has already been adopted by the Congress. The limitations established by the debt ceiling are called politics of rules, the same type of politics that the EU demands from its member states, which sets the spending limit for the Swedish government.

“The politics of rules is a tool to keep back the demands from professional and social movements when economic crises would require expansive policies in order to reduce unemployment,” said Swedish economist Kenneth Hermele to Flamman.

For the past 50 years, the American Congress has, however, more or less automatically raised the debt ceiling, two times a year on the average. Republicans have now decided, being strongly influenced by the ultraconservative tea party movement, to contribute tenaciously to the reduction of governmental intervention. It resembled extortion: if the debt ceiling had not been raised, the result would have been an economic meltdown.

Why Spend :ess?

Critics like Elizabeth Drew from the New York Review of Books think that Obama has already gone much too far to accommodate the Republicans through deep cuts in the social programs. She says the reason for that, based on sources in the White House, is that it is the only important thing for Obama to do to be re-elected. That is why he wants to stand out as a compromise-friendly politician. Shocked and irritated, she asks, “Why, in the midst of a stalled recovery, with the economy fragile and job creation slowing to a trickle, did the nation’s leaders decide that the thing to do — in order to raise the debt limit, normally a routine matter — was to spend less money, making job creation all the more difficult?”

The U.S. has had a growing mountain of debt for a long time. Paul Krugman does not think that this is the most important problem right now. Another liberal economist, Richard Wolff, expressed a different view when he was interviewed by Amy Goodman on Democracy Now. The social projects seem to be negotiable.

“There are a number of things that are not on the table. And frankly, I’m amazed that the president refers to what he does as a ‘balanced approach.’ First of all, the war and its enormous costs, off the table in any serious way. Going back to a serious taxation of corporations and of the rich in America, just, for example, at the scale that they were taxed in the 50s, 60s and 70s, off the table,” Wolff said.

He compares the portion of the tax-based receipts from corporations between the 1940s and now. “For every dollar that individuals paid in income tax, corporations paid $1.50. If you compare that to today, here are the numbers. For every dollar that individuals pay to the federal government, corporations pay 25 cents.”

The same thing is happening with the rich. The marginal tax used to be at 91 percent. Now it’s down to 35 percent. The tax revenues gave the government the resources to create 11 million jobs between 1934 and 1941. According to Wolff, private companies cannot manage to create jobs now; the government has to intervene. The one thing that liberal economists agree on: the politics that the Senate has just approved at the moment of this publication risks throwing the country in even more profound crisis, something that can have consequences for the global economy. Additionally, if one takes similar measures in many EU countries, there is a great risk for global depression.

“So those demanding spending cuts now are like medieval doctors who treated the sick by bleeding them, and thereby made them even sicker,” said Krugman after the adoption of the deal. He speculates that the deal “will take America a long way down the road to banana-republic status.”