Obama's failure to avert a devastating sequence of cuts represents another betrayal of the millions of American workers who voted to give him a second chance in the November election
Washington's political elite have devised a suitably ugly word for an ugly process - sequestration. This is the euphemism they have concocted to label the devastating sequence of cuts which will imminently hit the US economy. The word may seem obscure but it is easily translated into something the rest of the world can understand: austerity. The sequester will involve eye-watering federal spending reductions of $85 billion (£56 billion) over the rest of this year and totaling $1.2 trillion over the next decade.
As the US economy struggles to emerge from recession this is likely to provide serious headwinds to growth. GDP is currently forecast to grow at 2% this year but that could be downgraded with some estimates suggesting the sequester will hit growth by 0.8%.
Obama: from hero to zero
The deadline to dodge this blow was March 1st of this year. In the period prior to this date, there was a surreal re-run of the political manoeuvrings that took place around the fiscal cliff at the beginning of the year. The chaotic posturing on Capitol Hill provided another example of Karl Marx's dictum about history repeating itself, first as tragedy, then as farce. Speaker John Boehner quaintly told his congressional opponents to 'get off their ass and do something'.
Obama characterised the sequester as "series of dumb, arbitrary cuts".
Despite their tough rhetoric, however, neither was able to avert sequestration, probably because beneath their surface rivalry both men are committed to the shrinking of the US public sector.
The March deadline had been arranged as part of the deal between Obama and his Republican opponents that allegedly prevented the economy going over the cliff in January. In return for a modest set of tax hikes on those earning $400,000 per year, the President agreed at that point to postpone the negotiations on possible welfare and military cuts until March 1st.
The January deal was hyped by Obama and his team as an example of bipartisan cooperation and of his negotiating acumen, but his failure to block the sequester now demonstrates that he has dropped the ball and allowed the Tea Party-dominated Republicans to dictate the economic agenda. His failure to avert the cuts also exposes the shallowness of his claim to be a champion of the 'middle class' and represents another betrayal of the millions of American workers who voted to give him a second chance in the November election.
The cliffhanger trilogy
This latest financial cliffhanger is third in a sequence of self-imposed road blocks the Washington elite have contrived recently in order to legitimate an assault on the threadbare US welfare state.
Two years ago, the insurgent Tea Party congressmen who had 'shellacked' Obama in the 2010 mid-terms, stalled budget negotiations by demanding the President set an automatic financial trigger at the beginning of 2013. This was their condition for accepting the creation of a congressional supercommitte that would investigate further cuts in the future.
This trigger - the fiscal cliff - was due to be activated last New Year's Day. By that date, however the Tea Party was in political retreat in the aftermath of Obama's re-election in 2012. Republicans therefore reluctantly accepted a tax hike on those earning upwards of $400,000 (a climbdown from Obama as he had campaigned on $250,000 as the threshold) in return for sequestration going ahead on 1st March.
Most pundits expected the cuts would be avoided by then as they were intentionally devised to be politically toxic to both parties. It was assumed the Republicans would never contemplate the $42 billion defence cuts and that Democrats would not tolerate the same amount being axed from the welfare budget. Unfortunately this optimism took no account of the unreconstructed fanaticism of the Tea Party caucus in Congress.
The Chairman of the influential Joint Economic Committee is right-wing Congressman Kevin Brady. He is typical of the current generation of Republicans who see austerity as the panacea for the US recession. In a recent article, bizarrely entitled 'What Kind of Cuts Grow the Economy', he argued:
“Time and again, economic studies have shown that countries that reduce their government deficits through spending cuts – rather than tax increases – can boost economic growth and job creation even in the short term.”
This reflects the mentality of Congress conservatives who have dug their heels in over the sequester and see it as a golden opportunity to slash and burn the US welfare state.
Brady and his cohort will be salivating at the gory details of the sequester. It is not difficult predicting which sections of society are in the cross-hairs of the Republican die-hards. The whole spectrum of the US welfare state will be ravaged by the cuts. As Niraj Chokshi observes:
'What is clear is that the spending cuts are broad, bad for states, bad for business, bad for the economy, and bad for a lot of people. If you like to fly, are an educator, have kids in school, work for the federal government, are poor, or simply participate in the economy (aka anyone), sequestration could impact your life.'
One estimate suggests up to 2 million jobs will go as a result of the failure to block sequestration, half of them before the end of this year. Education will be particularly hard hit. 30,000 teachers face the premature termination of their contracts. The world-famous Head Start scheme (prototype of Britain's Sure Start) could be forced to end pre-school education for 70,000 children from deprived backgrounds. Over 350,000 people could be deprived of access to mental health support - a grim irony in the wake of the Newtown school massacre. Stressed-out air traffic controllers face a pay cut and the possible closure of 10 control towers.
These cuts, of course, will come on top of the well-entrenched inequalities of US capitalism. A newly-released documentary, ‘A Place at the Table’ has drawn attention to the staggering statistic that about 50 million Americans are malnourished due to poverty, a quarter of them children.
Republicans have tried to deflect political heat by claiming their shibboleth of defence spending will also be curtailed. A sane approach to this issue might imply reducing the size of America's vast nuclear weapons capability or its unmatched number of overseas bases.
The reality of the sequester defence cuts, however, it that they will also impact most heavily on the US working class. Most of the 800,000 Defense Department employees earmarked for 'furlough' (compulsory unpaid time-off) will be civilian workers. Obama was keen to emphasise the war machine of US imperialism would be safe on his watch by posing in front of a new nuclear submarine as he prepared for the sequester at a naval base in Virginia.
Obama versus the sequester?
Obama feigns annoyance with the sequester but its content is not far removed from his own economic policy as pursued through his first term. On entering the White House in 2009 he declared his goal of reducing federal spending to 7.4% of GDP by this year, and then down to 6.3% by 2019. Both these figures represent a significant downsizing from the last year of the Bush administration.
Obama and senior politicians from both major parties have colluded to create a narrative that the 2008 crash was primarily caused not by reckless bankers but by an unsustainable public sector. In his State of the Union address last month, Obama stated:
“The biggest driver of our long-term debt is the rising cost of health care for an aging population. And those of us who care deeply about programs like Medicare must embrace the need for modest reforms. Otherwise, our retirement programs will crowd out the investments we need for our children and jeopardize the promise of a secure retirement for future generations..."
Obama used this occasion to soften up resistance among his critics on the left to the sequester he knew was coming. His apologists in the US media have sought to re-boot his second-term reputation as a progressive on the basis of his approving reference to gay marriage in his Inauguration speech and his cautious moves toward immigration reform. His half-hearted attempts to thwart the sequester, however, mean that the legacy of his Presidency may well be a hollowed out public sector.
The reaction on Wall Street to sequestration exposed the reality of a measure that has torpedoed Obama's self-proclaimed status as a champion of ordinary Americans. The Dow Jones Industrial Average soared to record levels in the wake of the announcement of the cuts.
The fat cats of Corporate America will be rubbing their hands in glee as they contemplate an eviscerated public sector. Their elation will be in stark contrast to the millions who held their nose to re-elect Obama last November. The Pew Research Center recently found the vast majority of respondents wanted to see spending on federal programmes maintained or increased and that the most popular strategy for deficit reduction was further taxes on the top 2% of high income earners.
As one analysis of this research put it: 'Americans Are Asleep on the Sequester. The GOP (Republicans) Better Hope They Don't Wake Up'
As this headline suggests, if the American right think it is game over they may be in for a rude awakening, The spirit of the Occupy movement still flickers in the US working class and there are hopeful signs it could re-ignite in the near future. Rick Snyder, Republican Governor of Michigan, has recently declared a financial emergency in the city of Detroit that enables him to appoint an ‘economic czar’ with draconian powers.
This appointee will be equipped with powers to terminate collective bargaining, cut social services and privatise public utilities. This union-busting operation has already sparked resistance in the city which is a traditional bastion of the black and white working class. A similar attack by Mayor Bloomberg of New York has also generated a recurrence of the scenes witnessed in the city at the peak of the Occupy movement in 2011. 5,000 bus workers and their families marched across the Brooklyn Bridge last month to protest against Bloomberg’s attempt to scrap the Employee Protection Provision, a scheme that provides job security for the city’s school bus drivers.
Disputes such as these are likely to intensify as the impact of the sequester carves into the American public sector. There will be further ‘cliffhanger’ negotiations as the debt ceiling is due for debate in Congress at the end of this month. The two major parties will once again hang the sword of government shutdown over the heads of American workers as an incentive to swallow more austerity.