Obama and the Grand Blackmail of Debt

Coercion is the preferred political weapon in Washington. Confronted by the necessity of increasing the ceiling of federal government debt, the Republican Party and all of the forces of the conservative right have threatened the incumbent of the executive branch: or really confronted the problem of the deficit with strong cuts in public spending, or refusing the authorization to elevate the debt ceiling.

The right in the United States has already entrenched as absolute truth the false idea that the majority of the population wants to tighten the excessive expenses of a wasteful government. Obama has acquiesced to this notion and given his presidency to conservatives on a silver platter.

In reality, the White House capitulated some time ago. It knew that the fiscal stimulus approved at the beginning of the administration was insufficient and its duration was too short. By refusing to release a new fiscal package, Obama put the noose around his neck. When the effect of the first stimulus ran out, Obama was the target of criticism for the failure of his plan. Quickly, through the art of magic, the crisis was perceived as being more related to the poor management of the economy under Obama than with 20 years of deregulation and abuses in the financial sector. The discussion passed from the necessity of tightening the belt of the financial sector to the urgency of trimming the deficit.

The reality is that it is absurd to try to resolve the problem of the fiscal deficit in the middle of a recession. There is a very high level of unemployment in the United States (around 20 million people with total or partial unemployment) and wages are depressed. That which in its moment allowed consumers to maintain demand was the value of their houses, but now the price of those continue to fall. Aggregate demand has collapsed and businesses are not hiring; this drives a vicious cycle that can only close with a fiscal stimulus. Congress and Obama have chosen another path: Washington only discusses reducing spending as a way to lower the deficit.

In reality, a government can reduce the deficit in two ways: it can increase its fiscal income, or it can reduce its public spending. The surveys reveal that the majority of United States citizens are in favor of increasing taxes on the wealthiest strata, those who have benefited from the neoliberal model for decades. But the political class in Washington (that is to say both parties) has already accepted that increasing collections is not the way to reduce the deficit. Here is demonstrated who holds real political power in the United States democracy. On the other hand, the politicians in Washington prefer to reduce public spending, which necessarily carries with it a major contraction of the economy of the country. To the conservatives this is unimportant because of the political erosion that it will cause for Obama.

In the place of presenting options with leadership, Obama preferred to accommodate the priorities of the conservatives. Instead of dealing with the problem of public finances with other options, he chose to bow. The truth is that it is unnecessary to increase the debt because there are many alternatives. Besides increasing revenue, a cut in military spending is an evident option. But the Pentagon’s budget has been increased every year of the Obama administration.

The most important thing should be a true reform of the health care system. Today this system is composed of social security and the Medicare and Medicaid programs. The cost in those components is the most important factor in the growth of the deficit. But the cost of the health care system is due to the control of monopolies in the pharmaceutical industry and in the insurance companies. The Organization for Economic Co-operation and Development data shows that the cost in the social health care system in the United States is greater than that of countries such as Germany or Switzerland. But in terms of quality, the service in United States establishments is far lower than that of those countries. The reality is that the pharmaceutical-insurance complex is as powerful or more than the military-industrial complex when we consider its impact on the public account. The proposal in Washington to reduce the cost in the public health care system fails to rein in the oligopolies. The reduction is carried out by reducing the number of people eligible for services and reducing quality.

The blackmail has worked. It is said that if the conservative plan is not accepted (in both parties), a catastrophe will ensue. This should be analyzed with caution. For the moment the political class in Washington finds itself well-off with the argument because what interests them is dismantling the last vestiges of the United States welfare state.