Sacrificing the poor to make a deal

EVEN LIBERAL apologists for the Obama administration had trouble swallowing this one.

When word came that President Barack Obama made a deal with Republican House Speaker John Boehner to cut $38 billion in federal spending for the 2011 fiscal year that ends September 30, Washington Post commentator E.J. Dionne told NPR, "Maybe the president is going to run for re-election on the slogan 'Capitulation we can believe in.'"

Obama's surrender on the $38 billion sanctioned the single biggest one-year budget cut in U.S. history. But House Republicans already want to leave that record in dust--they're demanding action on House Budget Committee Chair Paul Ryan's slash-and-burn, 10-year plan to cut $5.8 trillion from the federal budget. Under Ryan's plan, Medicare would be privatized, and Medicaid would be converted into a block grant program for the states--even as taxes for the wealthy and businesses are reduced.

Anyone who expects Obama to push back against Ryan should take a look at the deal the president made on the near-term cuts. By agreeing to the $38 billion reduction, Obama gave Boehner more than he originally asked for at the beginning of the year. Boehner and Republican leaders originally proposed a reduction of $33 billion in current fiscal year spending, but the Tea Party caucus in the House demanded that the speaker up the ante, and the House passed a resolution calling for $61 billion in cuts.

Obama, of course, didn't admit that the cuts are harsh--on the contrary, he trumpeted the deal with Boehner as a success: "This is an agreement to invest in our country's future while making the largest annual spending cut in our history."

The White House did prevent Republicans from completely cutting off federal funds to Planned Parenthood, which uses the money to support family planning and women's health services--not to provide abortions, as Republicans claim. But Obama did sign off on the Republicans' demand for a ban on federal funding for abortion providers in Washington, D.C., reinstating a Bush-era restriction.

The media's coverage of the budget deal largely focused on the feverish negotiations as a shutdown of the government loomed. But the real story here is how the politicians--from both parties--sacrificed the poor in coming to their agreement.

Half the $38 billion in cuts come from education, labor and health programs, according to the Washington Post. Among the lowlights of the deal are: a $1 billion reduction in programs to prevent HIV/AIDS, viral hepatitis, sexually transmitted diseases and tuberculosis; $600 million slashed from community health centers; and a $390 million reduction in contingency funds for heating assistance for low-income people.

The New York Times offered a summary of further cuts: a $1.6 billion cut--or 16 percent--in the budget of the Environmental Protection Agency, reductions in programs to improve food safety and the elimination of $3 billion in payments to states that increase the number of children enrolled in health insurance programs for low-income families. Pell grants, which provide financial aid for college students, will be ended for summer school. Another $3 billion will be cut from federal funds for local transportation projects.

But while working people will suffer from worse air and water quality, fewer educational opportunities and less access to health care, the Pentagon brass will get an extra $5 billion to play with, bringing the total defense spending for the fiscal year to $513 billion.

And this biggest single-year budget cut in history might soon seem like small potatoes. Next comes the battle over the 2012 budget, which Paul Ryan has linked to his 10-year plan to radically reduce the size of the U.S. government and eliminate what remains of the welfare state.

To get their way, Republicans are threatening to hold the entire U.S. economy hostage by refusing to authorize an increase in the U.S. debt ceiling. This would prevent the Treasury from borrowing to finance the operations of the U.S. government and repaying holders of U.S. bonds around the world--and would certainly trigger an international financial crisis. While the Republicans may be bluffing, their threats signal how far the right is willing to go to drive its agenda.

Obama is promising to respond with his own long-range budget proposals in a speech today. According to press reports, the president will call for some tax increases on the wealthy to help raise government revenues--but Obama will also support the work of the last year's deficit commission that recommended cutting the deficit by more than $4 trillion in 10 years, mostly through a sharp reduction in government spending.

Of course, if Obama did want to require the super-rich to do their part in "shared sacrifice," he could have demanded that the Bush-era tax breaks for the super-rich be allowed to lapse when they expired at the start of this year. Instead, Obama blessed an agreement made during the lame-duck session of Congress in December that extended all the tax cuts for two years--and allowed the wealthiest to pocket $115.5 billion in 2011 alone.

Meanwhile, Obama's own proposed budget for 2012, released in February, contained an austerity hit list all its own.

The White House proposed a freeze on non-security discretionary spending--meaning a reduction once inflation is taken into account. Obama had already targeted year-round Pell grants before the Republicans got around to it. At it was Obama's budget team, not John Boehner or Paul Ryan, who first proposed cutting the Low Income Home Energy Assistance Program budget from $5.1 billion to $2.5 billion next year--a move that would leave an estimated 3 million people in the cold, literally.

OBAMA'S LATEST sellout to the Republicans has added to the mounting dismay of his liberal supporters. "What have they done with President Obama?" asked Paul Krugman in his New York Times column. "What happened to the inspirational figure his supporters thought they elected? Who is this bland, timid guy who doesn't seem to stand for anything in particular?"

Indeed, we've come a long way since the crisis-wracked early weeks of 2009, when Obama signed a $787 billion stimulus package, the largest in U.S. history. In those early days, the media freely speculated that Obama would be a second edition of Franklin Delano Roosevelt, the U.S. president during the Great Depression credited with passing the New Deal.

But as SocialistWorker.org's Lance Selfa wrote as Obama took office, "[T]he tension between new possibilities and old assumptions will mean that there will be many opportunities for the 'change' that Obama promised to be derailed--and for his supporters to be disillusioned."

In reality, the stimulus turned out to be woefully underpowered, partly because a third of the money was devoted to relatively less effective tax cuts and partly because the economic crisis was so deep. The measure was large enough to prevent a total economic meltdown, but it was too weak to stop the rising tide of unemployment for another two years.

That jobs crisis is continuing today. The apparently good news of a recent drop in the unemployment rate to 8.8 percent is misleading given the number of people have dropped out of the labor force altogether. As the Economic Policy Institute reported, some 24.5 million workers were either unemployed or underemployed in March--almost double the 12.9 million who were in that category in 2007.

You might expect a Democratic president to use the difficult times working people are facing to score political points against his Republican rivals in Congress. Obama could at least call for a federal job creation program--even if it was blocked by Congress, he would at least put political heat on Republicans. Instead, Obama pretends that the unemployment problem is more or less over--something that workers in every city and state know is wrong.

But some people are doing just fine. Thanks to the $700 billion Troubled Asset Relief Program and a multitrillion-dollar, no-interest commitment from the Federal Reserve, the Wall Street banks that were deemed too big to fail are now bigger--and fatter--than ever. As MarketWatch columnist David Weidner noted, "[B]ig banks continue to prosper in their post-bailout era. Jamie Dimon of JPMorganChase got a 51 percent pay raise to $23 million. John Stumpf at Wells Fargo received a raise to $17.56 million in compensation. Brian Moynihan at Bank of America got $10 million for his first year."

THE CORPORATE media is enabling the bipartisan austerity drive by excluding any serious examination of alternatives to slashing away. But there are alternatives--plenty of them.

As former labor secretary Robert Reich pointed out, a return to the tax rates of the Eisenhower administration of the late 1950s would wipe out the deficit and create a surplus to fund new government initiatives to benefit working people:

From the 1940s until 1980, the top tax income tax rate on the highest earners in America was at least 70 percent. In the 1950s, it was 91 percent. Now it's 35 percent. Even if you include deductions and credits, the rich are now paying a far lower share of their incomes in taxes than at any time since World War II.

The estate tax (which only hits the top 2 percent) has also been slashed. In 2000, it was 55 percent and kicked in after $1 million. Today, it's 35 percent and kicks in at $5 million. Capital gains--comprising most of the income of the super-rich--were taxed at 35 percent in the late 1980s. They're now taxed at 15 percent.

If the rich were taxed at the same rates they were half a century ago, they'd be paying in over $350 billion more this year alone, which translates into trillions over the next decade. That's enough to accomplish everything the nation needs while also reducing future deficits.

If we also cut what we don't need (corporate welfare and bloated defense), taxes could be reduced for everyone earning under $80,000, too. And with a single-payer health care system--Medicare for all--instead of a gaggle of for-profit providers, the nation could save billions more.

But in Washington, where politicians of both parties are bought and paid for, almost no one will stand up for such a program. Congress' 80-member Progressive Caucus has "The People's Budget," which calls for higher taxes on the rich, investment in health care and education, and a big jobs program. But most of the Democrats involved failed to mount a consistent challenge to Obama--whether on budget issues, civil liberties or endless U.S. wars--when Democrats had control of both houses of Congress.

Progressive proposals of any kind are unlikely to have any real impact on the budget debate unless they are linked to an active, fighting social movement. Roosevelt, after all, was pushed to the left by a labor upsurge and a rebellious working class--Obama has so far felt pressure almost exclusively from big business, which is why he's bowed to it again and again.

To move forward, organized labor and the left have to recognize that Obama is not an ally, but a willing partner in the drive to reduce working-class living standards in the U.S.--deeply and permanently.

The potential for grassroots mobilization is clear enough. The huge mobilizations of Wisconsin workers and students against Gov. Scott Walker's anti-union legislation sparked protests in neighboring states and around the country. And the April 4 National Day of Action called by the AFL-CIO, while mostly symbolic, did tap into a willingness to organize and push back.

We need to keep building these struggles--and be clear about who's on our side, and who is not.