After the municipal elections in Sepdeficit escalating and consumer confidence in the cellar, the tember of this year the inner-party strugcapitalist class in the United States has suddenly begun gle started again. The "righi" took the questioning the leadership of George Bush. White House initiative, presenting their own platform and demanding that the "left" do so as
Chief of Staff John Sununu was the first casualty of corporate well. The platform of the "right" is close capital's sudden Insight that the administration has no serious
Marxism, although revolutionary to economic policy and no visible plan for developing one.
unclear on its evaluation of Mao and not mentioning Trotsky at all. But it contains a clear perspective for a regroupment on a revolutionary, democratic socialist platform and grasps the importance of the polarization taking place inside the
Socialist Left Party (see box). The platform of the "left" is marked by its lack of a clear perspective for party building, which reflects the fact that its hard core is made up of full timers who find it difficult to break with the past, and are fearful also for their positions.
The outcome of this struggle is hard to predict. But it is probable that the RV will become a new party under the hegemony of the "right", which does not want to engage in a long and tiresome battle inside the AKP against the apparatus and the "old guard" and indicated that it would prefer to leave the AKP and start building the RV with other forces. This threat resulted in a new compromise at the
AKP central committee meeting of
November 8.
"Right" wishes to dissolve party
The ban on normal political work was lifted for the RV and the perspective adopted that it should develop into a real party and that the AKP should become the name of the "left" faction inside the RV.
Part of this compromise was that the next party congress is to be held in May-June
1992, clearly reflecting the desire of the
"right" to dissolve the AKP as soon as possible.
This would shift the scene of the political struggle into the RV, but in the RV the
"right" can act as a real faction, unhampered by party discipline. It can openly recruit on the basis of its own policies and
The "left"
cooperate with other forces.
will slowly disintegrate due to its lack of perspectives.
Given the fact that the AKP has a daily
8,000 subscribers, with and paper receives 30,000 votes in a country with a population ot 4 million, a victory for the
"right" will be a small but not negligible gain for the revolutionary left in Europe and the rest of the world. It will be particularly important for cooperation between
20 revolutionaries in the Scandinavian coun-
DAVID FINKEL T implication also: Bush's hege HERE are broader politica mony over the right wing of his own party, reflected in his ability to impose political discipline on Republican rightwing ideologues as well as "moderates", has been severely weakened — hence Pat Buchanan's entry into the Republican primaries. For the first time — only half a year after Operation Desert Slaughter had propelled Bush to a 90% public approval rating and in the very midst of the end of the Cold War and the disappearance of the Communist Evil Empire — it seems that Bush himself can't count on re-election by acclamation.
One incident in mid-November encapsulated both the economic contradictions and their political consequences. On Friday November 15 during a speech in New York, Bush expressed support for a proposal to impose a legal cap of around 14% on the interest rates credit card purchasers pay on their balances, as compared to the present 18%. The stock market immediately went berserk, falling over 100 points within hours and imposing a veto far more decisive than Bush himself ever wielded. In a sardonic commentary on Bush's leadership, Barron's Weekly (November 18) commented: "His harmless little proposal, meant only to demonstrate his concern with the economy thing and prove that his mind wasn't always on packing his bags and flying off to kio o Rome, had decidedly unintended consequences."
The incident, while in itself of no great intrinsic importance, does illustrate such factors as (1) the mass of consumer debt that now retards retail spending; (2) the fragility of the banks whose survival depends precisely on that debt; (3) the general nervousness of investors and traders in a climate where economic news is presumed to be malignant until proved benign; (4) disintegrating confidence in the president's economic competence.
For months, the administration's only apparent strategy has been lower interest rates for commercial borrowers (Bush was apparently trying to make a quasi-populist gesture in extending these to hard-pressed family consumers). A Shearson Lehman Brothers executive noted, days before the November 15 mini-crash, "The Federal Reserve is putting monetary policy to the test. With the economy becalmed by the effects of the credit crunch and eroding consumer optimism, the Fed has not hesitated to lower the discount rate to 4.5%, the lowest level since 1973 (and) the fifth discount rate cut in 1991." Banks in turn lowered their prime lending rate to 7.5%.
No upturn in sight
Such measures are supposed to stimulate investment and critical economic indicators, but, except for a 7% increase in housing starts in October, haven't done so yet. Manufacturing, whose tentative upturn had been the lynchpin of election year recovery hopes, has lost momentum. The government's Employment Report showed factory layoffs of 32,000 workers, a 0.7% decline in hours worked, a probable fall of 0.3% in industrial production and capacity utilization slippage from 79.7% to 79.2%. "Our overall message remains the same: interest rates need to fall further to restart activity" the Shearson Lehman Brothers analysts wrote, suggesting that they have no more positive ideas than the government or the Federal Reserve.
November's news was worse — a net loss of 250,000 jobs throughout the economy — leading to yet another interest rate cut the first week in December. A second major airline, Pan Am, has closed down, following the Midway Airlines shutdown earlier in the fall.
The principal reasons for the poverty of economic program are not hard to describe. The federal government is too deeply in debt to undertake the spending that could simultaneously create jobs and begin rebuilding the crumbling infrastruc-
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recovery
December 23, 1991 • #219 International Viewpoint ture of education, transportation, and health that mainstream journalism now universally recognizes.
The vast resources available for such projects were squandered in the 1980s binge of tax cuts for the rich; deregulationinduced leveraged buyout/junk bond escapades that destroyed the savings and loan industry; and the final spasm of the US's Permanent War Economy, which succeeded so well in bankrupting the Soviet Union that it practically did the same for the USA. During this same decade, the rate of investment in new plant and equipment in the USA from 1982-90 was one third lower than during the period from the 1950s through the end of the '70s.
That long period of expansion ended with the deep recession of 1979-81. Thereupon came Ronald Reagan's most spectacular achievement, and ultimately the most ruinous: embarking upon the greatest campaign of deficit spending in US (or world) history, bailing out the economy - massively re-distributing wealth upwards in the process — and doing so in the guise of a fiscal conservative!
The bills are now due, as the federal deficit for the coming fiscal year is projected to rise over $300bn. The government's obligations to the savings and loans cesspool are estimated to run anywhere from several hundred billion to one or even two trillion dollars. Looming even larger are the impact of
The impending insolvency and need for re-funding of the Federal Deposit Insurance Corporation (FDIC) fund to reimburse failed banks' depositors is well-known; but a union organizer whose work brings her in contact with bank examiners told this correspondent: "The situation is really much scarier than anyone is reporting, in terms of the danger of really big banks going
Nightmare on Wall Street
Hence, of course, the near-panic on Wall Street over the specter of lower bank profits on credit cards, even though such news in principle should have encouraged at least the retail sector.
Meanwhile, the ritual of Christmas seasonal shopping is underway, which is played out as follows: early dire predictions of sales slumps are relieved by a massive turnout of shoppers the crucial first weekend after Thanksgiving (end of November), only to be followed by December fears of a slowdown, ending with a redemptory last-minute feeding frenzy to leave merchants with "better than expected" results. The scenario this year looks generally similar, but with the ominous wrinkle of large pre- rather than post-Christmas markdowns to lure the shoppers. A high volume of sales may thus be accompanied by thinner profits.
This phenomenon is of course limited to those who shop at all. But a growing sector of the population cannot: the long-term jobless and the homeless. Trickle-down economics have had at least one effect. The federal government's deficits have been passed down to state and local governments in the form of sharply reduced or federal aid, precisely at the time when it was most needed, causing in turn savage social service cutbacks by more than two thirds of the 50 state governments. In the case of Michigan, gripped by the auto industry slump and the brutal administration of a hard right state governor, General Assistance (welfare) to all non-disabled adults was terminated in November, creating almost instant homelessness for close to 100,000 people in the state, including 50,000 in the city of Detroit alone.
Opinions among bourgeois writers as to what to do vary widely. The financial editor of the conservative Chicago Tribune, in his column for Sunday, November 10, suggested a return to Keynesian principles of government spending. Felix Rohatyn, in a series of articles in the New York Review of Books and elsewhere, has argued for a mobilization of resources to restore crumbling infrastructure from highways and bridges to the disastrous public education system. The question, of course, is where the money is to come from after over a decade of debt-driven speculative boom - it was Keynes's program for governments to run massive deficits in (ostensibly) prosper-
Robert Heilbroner, also writing in the New York Review of Books (October 24, 1991) observes that the logical place to turn is taxes for purposes of public investment, given that the US population (notably its upper income sectors) is one of the least taxed in the world. This runs, however, violently counter to the ideological run of play, which views the "disappearing middle class" in this country as being wiped out by ruinously high taxation. This terminology facilitates massive mystification inasmuch as "the disappearing middle class" amalgamates yuppie stockbrokers and speculators wiped out in junk-bond
USA and real estate collapses with working class families losing their homes and medical insurance along with their decent-
Actually, between 1980 and 1.990 the tax burden on the richest 10% of the population fell by close to 10%, while the tax burden on the poorest 20% (that is, those
"middle classes") increased more than 15%. The richest five million US families secured $370bn in tax reductions between 1981 and 1988 — and little if any argument is being made to claw back some of this windfall by restoring some semblance of a progressive tax structure.
"If Christmas spending is a washout," write the Shearson Lehman Brothers executives in an early December newsletter, "expect a fiscal fix in the first quarter as politicians will become united on a desire to please the electorate before November."
A "fiscal fix" means an electionyear tax cut, which will be the outnegotiations between Democrats looking to score points by aiding the "beleaguered middle class" while Bush and the Republicans seek a big capital gains (paid on profits from stock sales and so fraudulent) promise that this measure will "spur investment and create In reality, such measures bear only a dubious relations to the timing and strength of a recovery. That recovery may begin this spring, or may be delayed by the onset of "double-dip" recession. Whenever it does come, it seems very unlikely to have the power to reduce the size of the government's deficit, a tumour massive enough to block the flow of resources for desperately urgent public investment — so desperately urgent that some of US capital's own brightest thinkers now regard it as the key to the country's future.
Where the left can hope to intervene in this debate may lie in the areas of national health care, where millions of working people have been stripped of insurance in the manufacturing sector crisis; in grassdisintegrating schools and collapse of public amenities; and perhaps in the arena of independent politics should any of the tentative third-party initiatives (such as the exploratory presidential campaign of African American Ron Daniels) cohere as a progressive force in the 1992 election. * 1. Pat Buchanan, a one-time a speech writer for Richard Nixon, is a rightwing newspaper columnist known 2. Savings and loans are US thrift institutions, originally carrying limited charters to facilitate home loans and family savings. Although the details are too complex to recount here, Reagan-era deregulation enabled them to maintain their federal deposit insurance while engaging in "investments" that amounted to nothing more than real estate and junk bond speculation. The extent of fraud and collapse of these institutions easily dwarfs Teapot Dome scandals. Credit Mobilie or the 1920 2 1 Teapot Dome scandals.