The “economic recovery” plan being pushed by congressional Democrats, far from representing a serious response to the social disaster threatening working people, underscores the complete subservience of the Democratic Party to Wall Street.
Having voted to spend $700 billion in taxpayer money to prop up the banks and rubber-stamped further bailout measures bringing the total allocation of public funds to $2.25 trillion, the Democrats are proposing a derisory $150 billion to address a social crisis that is likely to surpass any economic slump since the Great Depression.
The social spending being proposed by the Democrats to address the worsening situation confronting tens of millions of workers amounts to 6.7 percent of the sums approved to secure the fortunes of a few thousand bankers and big investors.
The immense disparity illuminates the class character of the response of the government and both political parties to an economic crisis that has exposed the bankruptcy of the socio-economic system they defend.
The Democrats, who control both houses of Congress, have played the leading role in pushing through the measures proposed by Treasury Secretary Henry Paulson, the former CEO of Goldman Sachs, and Federal Reserve Board Chairman Ben Bernanke to rescue the banks. All of the actions taken have proceeded from the standpoint of protecting the interests of the most powerful sections of the American financial aristocracy. The Democrats’ economic stimulus proposals, which they portray as parallel measures to boost “Main Street” America, amount to little more than political window dressing.
On Monday, Bernanke testified before the House Budget Committee and gave qualified support to the Democrats’ push for a stimulus package. Grateful Democratic leaders hailed the central bank head and cited his authority in appealing for support from the Bush administration and congressional Republicans.
Democratic House Speaker Nancy Pelosi, verbally bowing and scraping before the chief representative of Wall Street, said, “Chairman Bernanke made it clear that a new economic recovery package is critical to boost our weakening economy. I call on President Bush and congressional Republicans to once again heed Chairman Bernanke’s advice.”
In his testimony, Bernanke warned of a “protracted slowdown” in the US economy. But he cautioned against any stimulus measures that provided direct relief to struggling homeowners or workers impacted by plant closures and layoffs. He threw cold water on modest Democratic proposals for federally funded infrastructure projects, such as road and bridge repair, that would provide a relatively small number of jobs.
Instead, he proposed that government funds be used to bolster businesses and encourage corporate lending. As the Wall Street Journal reported, “Congress has a variety of tools to address the problem, Mr. Bernanke said. Among them are loan guarantees or partial guarantees and direct lending to businesses, as well as further support for housing through mortgage companies Fannie Mae and Freddie Mac. Lawmakers could also wield tax credits or other tax measures to stimulate lending, or help state and local governments ‘obtain credit at more normal rates.’”
Bernanke told the lawmakers that any stimulus program had to “limit longer-term effects on the federal government’s structural budget deficit.” This from the co-author, along with Paulson, of a bank bailout that will, according to the Congressional Budget Office, drive up the government’s fiscal 2009 deficit to more than $700 billion—an estimate that is widely considered unduly optimistic.
The public funds being allocated to the banks and financial firms grow virtually on a daily basis. On Tuesday, Bernanke announced a new program costing up to $540 billion—nearly four times the Democrats’ stimulus proposal—to prop up money market mutual funds.
On the same day Paulson announced the terms for banks seeking direct injections of taxpayer funds in exchange for shares of non-voting stock sold to the Treasury. He made it clear that the program will be used to facilitate a further consolidation of the US banking system, a process that will increase the power of the biggest banks to dictate the terms and interest charged for mortgages and other consumer loans.
Congressional Democratic leaders have yet to finalize their proposals for a new stimulus package. Last month the House passed a $61 billion bill which Bush threatened to veto. It died in the Senate.
That bill included money for infrastructure projects, an extension of unemployment benefits and increased spending on food stamps, home heating subsidies and state Medicaid programs. It had no provisions to halt home foreclosures, bar layoffs or recompense people who have suffered huge losses in their retirement savings and 401(k) accounts—estimated on a national scale in the trillions of dollars—as a result of the fall in the stock market.
The Bush administration is opposed to any government spending that would provide even a small number of jobs outside of the private sector, and congressional Republicans are demanding that any stimulus package be loaded with business tax cuts. Democratic leaders have signaled their willingness to incorporate Republican tax provisions in a compromise bill.
The political maneuvering continues against the backdrop of a deepening recession. Fed officials predict that the unemployment rate will rise from its current level of 6.1 percent to more than 7.5 percent, while some economists forecast a jobless rate of 8 or 9 percent in 2009. Alan Blinder, a professor at Princeton and former Fed vice chairman, told the Financial Times this week that the US faced its worst recession in 26 years.
Layoff announcements are mounting. On Tuesday, Yahoo said it would cut its work force by 10 percent and a Wall Street analyst predicted that Merrill Lynch would eliminate 10,000 jobs after Bank of American completes its acquisition of the company. Said Richard Bove of Ladenburg Thalmann Inc., “Bank of America’s ‘slash and burn’ style following acquisitions is likely to be pronounced at Merrill.”
Meanwhile, according to the Wall Street Journal, Merrill’s global strategy head, Peter Kraus, is preparing to leave the firm and pocket $10 to $25 million in compensation.
Merger talks between General Motors and Chrysler are intensifying in pursuit of a deal that would eliminate more than 30,000 Chrysler jobs and thousands of GM positions.
The Democratic “economic recovery” proposal is a fraud. The only basis for a serious plan to provide relief for the millions who are being victimized by the failure of the profit system is a socialist program to nationalize the banks and major corporations and transform them into public utilities, under the democratic control of the working class.
Only in this way can the resources of society be marshaled to provide jobs with decent wages, housing, health care, education and a secure retirement for all.
The Socialist Equality Party calls for emergency measures to halt home foreclosures, recompense all those victimized by predatory lenders, and fully restore the savings of working people.
We call for a $3 trillion program of public works to rebuild the country’s neglected and crumbling infrastructure and provide jobs for the unemployed.
The bank accounts and stock portfolios of bankers and big investors whose speculative activities have precipitated the crisis should be seized and utilized to provide aid to distressed workers and small businessmen and their families.
These socialist policies can be implemented only through a break with the Democratic Party and the building of a mass socialist movement fighting to establish a workers’ government. This is the program being advanced by the Socialist Equality Party and its presidential and vice presidential candidates—Jerry White and Bill Van Auken.
We urge all those who see the need for a socialist alternative to the two parties of big business to support our election campaign, cast a write-in vote for our candidates, and join the SEP.