Vol. 77/No. 2      January 21, 2013

The “deal” passed by Congress and signed by President Obama Jan. 2 raised payroll taxes on working people and income tax rates on some wealthy U.S. families making more than $450,000 a year. It also postponed $110 billion in government spending cuts until March 1.

“The deal averts calamity for the time being,” said the Financial Times, “but only at the expense of setting up a potentially even more explosive showdown two months from now.”

The decision to begin with a package that includes some tax hikes for those with higher reported incomes is more an appeal to the notion of “shared sacrifice” for the “nation’s” troubles than it is about raising revenue.

While lower echelons of the bourgeoisie and other wealthy layers beholden to them will pay a little more in taxes, it won’t be enough to make them move to Russia to hang out with actor Gerard Depardieu, who recently left France to avoid higher taxes. Of course, the real wealth of the big bourgeois families is not disclosed on tax forms or anywhere else. And they can pay all the lawyers and accountants they need to make use of “loopholes”—it’s their system.

“Both the president and House Republicans have agreed to shrink a critical part of the government to its smallest in at least half a century,” stated a Dec. 18 New York Times article. The steepest cuts are aimed at “discretionary spending,” the part of the federal government budget covering everything except defense, “national security” agencies, interest paid on the debt and Medicare, Medicaid and Social Security expenditures. But these latter three “entitlements” are on the chopping block as well.

The $110 billion in spending cuts, which were supposed to take effect Jan. 1, were put off by the capitalist rulers for two months as they work to win more support and angle to avoid provoking workers’ resistance. It’s the opening wedge of a plan to cut at least $1.2 trillion from the U.S. budget over the next decade.

This scheme originated after a bipartisan “supercommittee” set up in 2011—the Joint Select Committee on Deficit Reduction—became gridlocked on mandating how to carry out this course. Without an agreement, Congress voted to enact future automatic cuts that would be “triggered” to social programs and the military in 2013 if an agreement couldn’t be reached before then. This was the “fiscal cliff.”

Obama at the time called for “balancing” raising taxes and cutting Medicare, Medicaid, and Social Security programs. In 2011 he said he could be open to raising the Medicare eligibility age from 65 to 67 and lowering the yearly cost-of-living adjustment for those on Social Security; two proposals that House Speaker John Boehner has recently been promoting.

Obama has been pushing for $400 billion in cuts from Medicare and other programs over the next decade. Boehner has argued for cuts of $600 billion.

The new tax code increased the payroll tax—one of the most regressive forms of taxation, affecting workers with the lowest incomes the most—by 2 percent to 6.2 percent. Two years ago it had been cut to 4.2 percent in hopes this would “stimulate” the economy. Some 77 percent of households will receive a higher tax bill this year, according to the Tax Policy Center.

Some Republicans, despite so-called philosophical opposition to raising taxes, especially on the top income brackets, decided to back the tax hike on income over $450,000. One-third of them joined Democrats in approving the bill in the House.

While they have yet to come up with ominous new images like “fiscal cliff,” the rulers have built in a series of events—from the March deadline to deal with the congressionally mandated budget cuts to hitting the federal debt “ceiling” to the upcoming debate on the 2014 budget—as pegs for austerity measures they advance.

At the end of February, government borrowing to cover spending is expected to reach the debt limit of $16.4 trillion, posing the need for Congress to once again raise it, as it has done 40 times over the past 30 years. Boehner insists any raise must be matched with spending cuts exceeding any debt level increase, reported the Wall Street Journal.

Also, the current budget only allocates federal government funds through March 27. Unless Congress approves additional funds for the rest of the fiscal year, a shutdown would result in the layoff of tens of thousands of public workers.

Following passage of the fiscal law, Moody’s Investors Service said it might cut the U.S. government’s credit rating, making clear the cuts put in place so far are not enough to satisfy the wealthy bondholders.
 
 
Related articles:
No ‘shared sacrifice’ for bosses’ gov’t
Mounting evictions in Spain meet resistance
4.85 million jobless, capitalist crisis deepens
 
 
 
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