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The Politics of the Debt Ceiling

Dissident Voice Article

By Ben Schreiner

Lost amid the frenzy over the manufactured debt ceiling crisis, has been precisely what it is really all about. Therefore, we must first begin by briefly laying out just what the debt ceiling is and what it isn’t. After all, despite the sustained wall-to-wall media coverage, this critical element has been largely left ignored and obscured.

The debt ceiling, contrary to popular belief, is in no way tied to future spending. It is instead related to already allocated funds. By raising the debt ceiling, Congress simply confers its formal authorization to the executive branch to continue with spending commitments it — Congress — has already authorized. A failure to raise the debt ceiling would thus not limit future spending in any way, but merely see the country renege on current financial obligations.

The entangling of the debt ceiling with future expenditures, then, is not inborn in the actual process of raising the ceiling itself. It is instead a result of a calculated choice made by the president and Congressional leaders. And herein lies the manufactured nature of the crisis.

But with this understood, why, then, has each political party chosen to so eagerly engage in the destructive political theatre unfolding before our eyes?

For Democrats, the eagerness to dance to the beat of the debt ceiling drum is due to the simple fact that the party has become beholden to the austerity-bent financial elite. No longer a party comprised of liberal economic Keynesians (i.e., those believing in a strong social safety net and governmental spending as a means of stimulating lagging demand), the Democrats are now a party of fiscally conservative economic neoliberals intent on slashing governmental spending. A brief foray into the history of this metamorphosis is in order.

All Are Now Neoliberals

Prior to the 1980s, the Democratic Party was indeed a party of Keynesians—in fact most Republicans were too, with President Nixon even declaring, “We are all Keynesians now” back in 1971. This consensus helped ease the path for liberal Democrats to enact the party’s landmark social welfare programs: Social Security and Medicare/Medicaid. And it was in this vein that the Democrats came to assume the mantle of the “party of the people”—however wrought with problems this notion truly was.

Yet, as the economic turmoil of the early 1970s became further entrenched, leaving the orthodox Keynesian proscriptions unable to adequately restore robust rates of capital accumulation and economic growth, the Keynesian model over time came to be abandoned. And with the subsequent rise of Reagan to the presidency in 1981, a return to an unfettered free market ideology had begun. Neoliberalism had arrived.

Much as Keynesianism had before it, neoliberalism soon ascended to distinction as the economic bipartisan consensus—endangering the once enshrined Keynesian welfare state in the process. And thus it was in 1996, that the Democratic Bill Clinton (working alongside Congressional Republicans) came to level the first substantial blow to the rather frail American social safety net.

Clinton’s euphemistically deemed welfare reform — which threw scores of destitute welfare recipients onto the rolls of exploitative state workfare programs — was triumphed for “ending welfare as we know it.” Clinton, shepherding the rise of the “centrist” New Democrats and the transition of his party to that more of Reagan than of the people, might as well have declared, “We are all neoliberals now.”

Returning to the present, we now find President Obama continuing along the path Clinton first forged. In fact, the president—seeking to preserve his stark financial advantage over his 2012 competitors—finds himself obligated to toe a strict fiscal line. In other words, he must pursue a continued rollback of the American welfare state that his principal backers — the financial elite — hold as a prerequisite for restoring proper rates of capital accumulation. In failing to appease his corporate campaign donors, the president would be left to face reelection without his critical financial lifeline. This would create a near fatal weakness, given that Mr. Obama has little with which to galvanize his party’s traditional working class base. After all, any gains he may have accrued in the enactment of his meek health care reform legislation are surely to be of secondary importance to an electorate of which 25 million of whom are either jobless or underemployed.

Hence it is the Democrat Obama who oversaw the renewal of the Bush era tax cuts (including a payroll deduction that siphoned more funds out of the Social Security Trust Fund, paving the way, no doubt, for its future “salvation”). And hence it is the Democrat Obama who readily offered cuts to Social Security and Medicare in his recent debt ceiling negotiations with House Republicans. It is the Democrat Obama, in short, who vigorously pursues the unraveling of the social safety net. What the president’s financial backers want, they get. In the end, you indeed dance with the one that brought you.

Drowning Government in the Tub

If the Democrats have come to be the party of Reagan, the Republicans have become the party of Grover Norquist (the rabid anti-tax crusader and founder of the influential Americans for Tax Reform). It was Norquist who once quipped that his goal was to shrink government down to where “we can drown it in the bathtub.” The Republicans now appear intent on actually accomplishing this.

At the vanguard of this Republican attack is the party’s ultra-right Tea Party faction — for whom no amount of cuts are ever deemed to be enough. For the Tea Partiers, emboldened by the rising stock of their presidential hopeful Michele Bachmann, failing to raise the debt ceiling is seen as just another means to shrink the government down to the size of a bathtub.

Establishment Republicans — as equally tied to the financial class as their Democratic rivals — seem content at the moment with temporally irking the financial class with their appeasement of their more radical Tea Party colleagues. For the Republican leadership, the risk/reward scale still tilts heavily towards a rather bountiful reward, given the role envisioned for the Tea Party to play in the Republican’s ultimate aim of unseating President Obama in 2012. As Senate minority leader Mitch McConnell has already stated, the primary task of Senate Republicans is just that: defeating Obama.

Therefore, establishment Republicans are willing to allow a wide discretion to the Tea Party, even as it helps steer the debt ceiling debate ever closer to the cliff’s edge. In the Republican’s constant search for any means by which to inflict another, perhaps even fatal, political wound to the president, the risk is undoubtedly well worth it.

The Bipartisan Consensus

The two political parties, though, do still share substantial commonalities. The principal at the moment being their common willingness to remain laser focused on the debt debate. Both remain intent on doing so because neither is in possession of any viable solutions for the bevy of other, and more substantial, problems facing the nation. Thus, the longer the attention remains on the debt, no matter the toxicity of the political atmosphere, the better for both. For as unemployment creeps ever higher (currently at 9.2%), neither party in the end has anything resembling a jobs agenda. Just as neither party has a means (or desire) of getting out of Afghanistan and Iraq (needless to say Libya, Pakistan, Yemen…).

The origin of the general ineptitude of both political parties is found in the formation of their neoliberal consensus and the accompanying financial calamity left in its wake.

What occurred in 2008, in brief, was the catastrophic collapse of the neoliberal ideology. It was neoliberal free market ideologues like Hank Paulson and his Wall Street brethren, recall, who turned to the state for salvation. With such a public discrediting of its fundamental tenets by its most ardent prophets, neoliberalism was unmasked. All lingering neoliberal rhetoric is now really understood to be nothing but a farce. The discrediting and eventual disbanding of the neoliberal model appears to be unfolding along the same general trajectory that ran the Keynesian model aground in the 1970s. It will assuredly be a protracted process, but set in motion it has.

Yet, because each party moved headlong toward building the neoliberal consensus over the past three decades, neither is currently positioned to fully capitalize on its associated disaster. Therefore, until a new economic model fully emerges within either party, which is capable of properly restoring a sufficient rate of capitalist accumulation (albeit only biding the time until the next inevitable crisis is to occur, as long as remaining within the capitalist framework), the attention of both parties is to remain on the national debt. The orchestrated political spectacle will continue apace.

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