Obama's spending cuts target the poor

While President Obama is enjoying his European tour, which is essentially a PR trip to boost his chances of re-election next year, his administration is preparing to bear down hard on the most vulnerable in a bid to cut the country’s soaring national debt.

A group of Democrats and Republicans in the US administration are hard at work on a life-support deal for the capitalist economy that will slash $1 trillion from the Federal budget, which is a cut of about 30% on current spending levels.

They are hoping to agree on a tit-for-tat exchange that will allow an increase in the total debt limit of $14.3 trillion which has already been reached. This is equivalent to a whole year’s national output and is forecast to rise to $20 trillion.

America’s debt was recently downgraded by a credit agency for the first time since the attack on Pearl Harbour in 1941.

Failure to increase the debt limit before its expiration date of August 2 would force the United States to miss interest payments on its debt, risking devastating fallout for global financial markets and the US economy. The Treasury Department is tapping pension funds and other pots of money now that the country has reached its debt limit, but has warned that it will exhaust those measures before August.

Even with an unwarranted optimistic view of a growing economy, and divided over the use of tax increases, Democrats and Republicans agree that the United States needs to reduce budget deficits by $4 trillion over the coming decade to ensure its debt remains at “a manageable level”.

In their third round of talks, the group homed in on the Medicare and Medicaid government health plans for retirees and the poor, which represent nearly a quarter of all federal spending. These areas are expected to eat up a growing portion of the budget in coming decades as the population ages and medical costs continue to outstrip inflation.

But the coalition for capitalism has a big problem on its hands: the American people. About 80% of registered voters, including 70% of right-wing Tea Party supporters, strongly oppose cutting the programmes, according to surveys.

Medicaid is a federal-state partnership that mostly covers low-income children and parents and disabled people. It also covers two-thirds of nursing home residents. Only 13% of Americans say they would support major reductions in Medicaid spending and just 10% back major reductions in Medicare and social security.

"If you watch the debate about the deficit and entitlements, you would think that almost everyone has a problem with the Medicaid programme and wants to change it, or cut it – or both," Kaiser Family Foundation president and CEO Drew Altman said in a statement released with the poll. "The big surprise in this month’s tracking poll is that one group who does not want to cut Medicaid is the American people."

Meanwhile, the crisis continues to mount at state level as the recession cuts into revenues. Yesterday in San Jose, Wisconsin, councillors set a date of June 21 for a vote on formally declaring a fiscal state of emergency and slashing pensions for public employees.

Today in Madison, the Wisconsin Wave is mounting a rally against Governor Scott Walker who will sign into law one of the most restrictive voter ID laws in the country, disenfranchising students, senior citizens, rural residents, low-income earners and homeless people.

Throughout the world millions of ordinary people are clashing with governments intent on slashing spending and raising taxes to repay debts accumulated on the now failed expectations of future economic growth. But the only thing growing is the number of countries like Greece on the verge of bankruptcy and default.

The slash and burn policies of Obama and the Coalition in Britain are the road to social disaster. The global resistance to capitalist crisis measures point to the need for new kind of a much wider democracy, based on the social ownership of the world’s productive resources and, not forgetting, financial systems.

Gerry Gold

Economics editor