The federal budget crisis, and what to do about it

Class issues in the government shutdown of 2013

(CV #49, August 2014)

The federal government shutdown of October 16-18, 2013 is just a bad memory, but the haggling over further government cutbacks continue. All the major social programs are in jeopardy. The following article is excerpted from the presentation at the Detroit Workers’ Voice Discussion Group of September 29, 2013, as edited for circulation in the DWV email list of October 1, 2013.

We are now a couple of days away from a partial federal government shutdown. ... What it all means is that we are entering into a period of new political and financial crises. The two parties, the Democrats and the Republicans, are at each other’s throats, and they are willing to risk damage to the federal government and the economy in that fight.

Well, we have been in the midst of an economic depression for some time. Millions of people have lost their homes, their jobs, their pensions, their peace of mind. Even if you have a job, you may have a hard time earning enough to eat. In Detroit, we see threats to the pensions and health care plans of public workers; one cutback after another in schools and city services; and mass unemployment. All this is certainly cause enough for a political crisis.

What the parties are fighting about

But that isn’t what the parties are fighting about. They agree that the people should be allowed to suffer, and differ only about how deep the cutbacks should be. They are both parties of austerity. They have been haggling for several years over cutbacks to Social Security, Medicare, welfare, and other programs, which they sanitize by the neutral-sounding phrase of cuts to “entitlements”. They are trying to find a way to squeeze millions upon millions of workers harder, while pretending to be for the common man.

The Republicans, both the Tea Party and the other conservatives, are emphasizing the repeal of the expansion of health insurance under the Affordable Care Act, or Obamacare. Let the depression continue; let the climate deteriorate; let people go hungry: what the Republicans care about is repealing Obamacare. In 24 states they have managed to block the expansion of Medicaid [government-paid health care for the poor] that was specified under Obamacare, thus ensuring that millions of poor people won’t have access to basic health care. And they are determined to ensure that people don’t get government subsidies to buy private insurance either.

We’re in the middle of a depression, and also face the worst environmental catastrophe that has ever faced civilization. And what do the conservatives do? They have voted 41 times in the House to repeal or defund Obamacare, and now they threaten to Samson-like bring down the federal government to the same end. Clearly, in their mind, not only will the poor always be with us, they must be stripped of medical care as well.

They are especially upset because they figure this is their last chance to get rid of Obamacare. On October 1, Obamacare reaches the critical point where the health care exchanges for buying private insurance open. By January 1, millions of people among those who were previously uninsured will be insured either under the expansion of Medicaid to be in effect in 26 states or because they can get major subsidies allowing them to buy health insurance at a reduced rate. Millions of people will see that Fox News and the conservatives have been lying about Obamacare.

For their part, the Democrats and the Obama administration are determined to uphold the Affordable Care Act. This is the centerpiece of their legislative program; the accomplishment they can boast about. They are unlikely to give in on it.

But year after year they have conceded to cuts demanded by the conservatives in other social programs as well as carrying out their own privatization and cutback drive. They may or may not make a deal in the present budget fight; they may spurn a deal because they think that the Republicans are going to have egg on their faces if the House of Representatives forces a government shutdown or a government default, just as the Republicans suffered in the 1995-96 shutdowns during the Clinton administration. But they will continue to cut back on social services. The Clinton administration may have won the government shutdown battle of 1995-96, but it was this Democratic administration that spearheaded the end of “welfare as we know it”. Its mantra was that it would move everyone to jobs. It thus contributed in a major way to the suffering under this depression, where it’s clearly impossible for everyone to get jobs, and in which the length of unemployment will last far longer than the limit on how long a person may receive welfare in their life brought in by Clinton. Similarly, Obama may win the current budget battle over Obamacare, but it is his administration which has spearheaded the destruction of the public schools under “Race to the top”, a program which continues Bush’s “no public school left standing”, that is, “no child left behind”.


So let’s look closely at the Affordable Care Act. It is at the center of the current budget battle, and it is also the best thing the Democrats have to offer. Moreover, many of us will have to deal with the medical exchanges opening in October, or help friends and relatives deal with them.

Its pluses

The ACA has both positive and negative aspects. Let’s start by looking at its strong points, such as the following:

• It provides for an expansion of Medicaid to people or families with income less than 134% of the poverty line. This would have been for all states, but due to the conservatives on the Supreme Court, it has to be fought over state by state, and so far about 26 states will take part. This expansion will aid millions of people, not just the unemployed but also people with low-wage jobs.

• It provides for substantial subsidies for people purchasing health insurance through the new medical exchanges, if their income is less than 400% of the poverty line but more than 134% of the poverty line.

• It provides that private insurance plans can’t penalize or refuse people for pre-existing conditions. This means that a lot of people who are otherwise uninsurable will be able to get insurance. It also means an end to insurance companies canceling insurance when people really need it for major expenses, using the pretext that one supposedly forgot to mention some previous medical condition.

• While the plans have deductibles and copays, there is a maximum limit to how much one has to pay out of pocket (in addition to the insurance premiums) for health care in a year. This is $6,350 for next year. Clearly this limit will be a very heavy burden for many people, but it does protect against catastrophic expenses which could easily reach hundreds of thousands of dollars or even more.

For these reasons, Obamacare is likely to help millions of people. Thus it is likely that the ACA will grow in popularity as many people benefit.

Its minuses

But there are also negative features of this bill. The main problem is that the ACA is based on preserving and expanding private insurance, rather than providing a single-payer system or simply expanding Medicare, and its provisions were worked out hand in hand with the private insurers and health monopolies. This has consequences:

• A large percentage of health expenditures will continue to go to the profits of the private insurers and health monopolies, to huge salaries for health executives, and to maintaining the huge paperwork network built up to ensure that the health monopolies provide as little actual health care as possible.

• The standpoint of the bill is that cost control is to be achieved by ensuring that health expenditures are painful for the population. They are to be helped to have insurance, so that hospitals and health monopolies can get paid. But health care costs are still going to be painful. For one thing, all the health plans available under the ACA will require large deductibles or co-pays [except that people with incomes less than 250% of the federal poverty line may qualify for major reductions in deductibles, co-pays, and total out of pocket expense if they buy a silver-level plan]. There are four levels of plan that will be available through the health exchanges: bronze, silver, gold, and platinum plans. The bronze plans will pay for only 60% of one’s expense; the silver for 70%; the gold for 80%, and the platinum for 90%. Moreover, the subsidies provided by the ACA are based on the cost of silver plans; if one wants a better plan, one pays all the extra expense for it.

The pain will, of course, be borne by poor and working people, not the rich. The ACA will thus ensure that the rich continue to get better care than the poor. It will result in many contradictions: for example, the ACA is supposed on one hand to promote preventive care, and certain services are to be offered free under all plans; but at the same time, the cost of care will still deter many people from seeking it.

• Starting in 2018, the ACA will penalize so-called “Cadillac” health insurance plans. The idea is to ensure that nothing better than the so-called platinum plans will be available. This is to be achieved by a whopping 40% excise tax on plans with premiums exceeding $10,200 for individuals or $27,500 for families. So any unionized workers who have managed to maintain very good health plans will lose them.

• The plan will do nothing serious to stop the distortion of the quality of medical care by the big insurers, the big pharmaceutical companies, or other health monopolies. This is a major evil, but it is a story in itself and would require another meeting to explain all its ramifications.

• The plan is extremely complicated, so that people will have a hard time understanding what it provides or how to proceed. The result is that industry lobbyists and lawyers will have a field day in interpreting rules and regulations and writing new ones. Ordinary people will still have to protect themselves against the bad interpretations of private health companies over whether to cover various treatments.

Indeed, the ACA divides up the people into many different categories, each affected differently by the act. This will make it harder to fight for improvements in the act. I said that a person with health insurance will have to pay in any one year a maximum of $6,350 in addition to the insurance premiums: but does this include drugs? Does it include psychiatric treatment? Dental work? Orthodontic work for children? The answers aren’t that clear except that they will vary from plan to plan, and person to person.

The result of market principles

The Affordable Care Act thus has many problems; and some of these could have been avoided by following the single-payer health system used in Canada, which at least eliminates the private insurers. These problems are an example of what happens when trying to provide general services while maintaining privatization and market principles.

Yet this is the best the Democrats can do. When it comes to other programs, they directly sponsor their own cuts to the conditions of working people. Obama backs replacing the cost of living index that determines Social Security payments with the so-called “chained CPI”, which means cutting future Social Security increases. Obama’s “Race to the Top” program is devastating the public schools, undermining teachers’ unions, eliminating community public schools, and subjecting students from poor families to a regimented system of education. Obama’s idea of a jobs program is to give subsidies to the auto companies and to banks, hoping that this will trickle down to the masses. Obama’s idea of reform is to bribe Wall Street to embrace it, and it’s no accident that the result is that inequality has soared under Obama as under Bush.

As far as their effect on the working class, the difference between the Republicans and Democrats is that between quick death with the Republicans, who would deny the poor access to medical care, and death by a thousand cuts by the Democrats. That is what they are fighting over in the budget fight.

We have the resources to do better

Why are both parties fighting for cuts? It’s not because the US isn’t rich enough to provide decent health insurance, and many other countries provide better health insurance than here. It’s not because there aren’t enough resources to eliminate poverty. It’s because while things have been getting worse for the workers, they have getting better for the CEOs and financiers and the entire so-called 1%. It’s because the resources are being monopolized by the rich. Both parties represent the bourgeoisie, the 1%, not the working masses. They both are determined to please the CEOs and exploiters.

The fact is that the present depression affects the different classes in our country differently. The bourgeoisie would prefer a booming economy, but they have managed to find the silver lining in the present depression. They are using the depression to cut wages and benefits, and they have restored the level of their profits to pre-depression levels. They are increasing the share of the national wealth that goes to them. It is the drive to constantly increase this share that lies behind the pressure for “entitlement reform” and for one cut after another in social programs.

The capitalists think the workers exist for one purpose only, to make money for the rich. They are slowly chipping away even at the right to retire, and they advocate that the retirement age should be increased. They said that the country can’t afford to have so many people retired.

But why is that? Is there a shortage of food, houses, and resources so that we need the aged to go back to work? On the contrary, this country can produce all that we need, and the problem is generally that there are so many things produced that the markets are glutted. If there really were shortages of goods and resources, then we would see everyone working, and we would see wages go up as the capitalists sour the country looking for employees and trying to bribe them to come over from other jobs. In that situation, many older people probably would love to work, and there would be no need to force them out of retirement by cutting pensions. Instead we see millions of people without work, and capitalists cutting wages right and left.

So what will happen in this situation if the aged are stripped of pensions and forced back to work? Will more goods be produced? Not at all. It will simply spread the competition for existing jobs over a larger workforce. But eliminating pensions would shift more resources from the workers to the rich, and this is what the capitalists are after. The capitalists aren’t short of labor; they are long on greed.

Serious social programs

If workers are to survive the depression, we need to unite on a class basis and demand the social programs and mass relief that the resources of this country can provide.

• We need to demand the end to trickle-down economics, and the provision of mass relief for the unemployed, the underemployed, and the people who have seen their homes foreclosed.

• We need to demand the end to the destruction of the public school system and the social safety net. This includes preserving the positive part of the ACA.

• we need to demand serious programs to preserve the environment and the climate.

But we should also take account of the fact that the present economic and political system is in crisis. The Republicans and Democrats may both agree on austerity for the masses, but there is a real fight between them. This fight looks like it is going to lead to a temporary government shutdown, and it’s going to continue afterward. It reflects that the bourgeoisie doesn’t know what to do about the current economic problems, and is squabbling among itself. It reflects the fact that market fundamentalism is bankrupt. It doesn’t have any answer to the depression other than austerity for the masses. It has proved to be nothing but a system for raping the people and the country.

An end to the privatization of the government

So we must demand an end to the privatization drive and to market fundamentalism. If the present social services are to be preserved and extended, then they have to be changed. The privatization of the government, whereby one government program after another is handed over to the private insurers and other corporations, must be ended. We need to curb the financiers and eliminate the complicated financial instruments that no one really understand. We need to fight against the needless complexity of the present programs, whereby the corporate lobbyists and monopoly interests pervert every program into its opposite, and instead insist on ones whose functioning is open to public inspection.

Right now it might seem that market fundamentalism has gone on forever and will last forever. But the infighting between Democrats and Republicans is a sign that the system is reaching an impasse. This growing political crisis will be painful for the masses as government services are restricted, and more cutbacks re enacted. But historically, crisis can be a harbinger of change.

Market fundamentalism is in crisis. The enactment of the ACA shows that government intervention is needed to solve various problems. But unless the working class organizes in its own right, what follows won’t be too much better. For example, we can see that the ACA preserves market fundamentalism in its design and methods, and this is going to lead to many problems. We need to fight not only for our immediate needs, but to influence the changes to come. We can’t just support any changes that come, but we need to maintain a critical attitude to them and to fight for the real end of market fundamentalism. This struggle over survival will still be a partial struggle, a struggle with the results of capitalism rather than the underlying system itself. It won’t yet overcome the underlying capitalist system which continues through one phase after another. But such struggles will be one means by which the working class will step-by-step transform itself and develop the class-consciousness needed to eventually challenge and overthrow the capitalist system itself.<>  

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Last changed on August 20, 2014.