The most powerful nations in the world met recently at the G-20 in Toronto and managed to agree on only one thing of significance: the need to reduce deficits, \u201chalf by 2013.\u201d\u00a0Implied by the statement is the need to lower deficits via \u201causterity,\u201d meaning eliminating or reducing social programs.<\/p>\n
Why does every mainstream political pundit or corporate CEO fanatically agree that reducing deficits is the most important thing to do now? Let Obama explain:<\/p>\n
\u201c…if financial markets are skittish and don’t have confidence in a country’s fiscal soundness, that is also going to undermine our recovery.”<\/p>\n
Apparently, the most important policy for the world economy cannot be said in plain English.\u00a0What does Obama mean? Essentially, he is saying that \u201cfinancial markets\u201d should determine how wealth is distributed and how the economy is directed.<\/p>\n
What are financial markets? And why must every country be at their mercy?<\/p>\n
A financial market is anyplace the super-rich invest their money.\u00a0 It can be done through a bank, hedge fund, or a private equity firm, etc.\u00a0The rich demand that their investments are safe and therefore are especially \u201cskittish\u201d at the slightest hint of inflation or other economic distress.<\/p>\n
The rich who dominate financial markets advocate only one solution to balancing budgets: reducing or eliminating social programs.\u00a0They ignore the other solution\u2014 a massive public works project\u2014 because it directly affects them in a negative way: raising taxes on the wealthy.<\/p>\n
This raises another issue.\u00a0The investors who control financial markets know that a day of reckoning is coming:\u00a0the massive debt that was pushing forward the world economy for years needs to be paid back, and those who own the banks don\u2019t want the responsibility.\u00a0 Better for millions of workers to sacrifice social services, pensions, wages, etc., than for thousands of rich investors to be taxed.<\/p>\n
Some people will argue that it is counterproductive to tax the rich, since they will then choose not to invest their money, causing further harm to the economy.\u00a0\u00a0 But this is already happening and happens every time a recession hits.<\/p>\n
The New York Times describes one example of the rich hoarding their money, until better, profitable times return:<\/p>\n
\u201cOnly on Wall Street, in the rarefied realm of buyout moguls, could you actually have too much money… Private equity firms, where corporate takeovers are planned and plotted, today sit atop [are hoarding] an estimated $500 billion. But the deal makers are desperate to find deals worth doing…\u201d (June 24, 2010).<\/p>\n
Rich investors are not investing in companies because consumers are not buying the products that corporations produce.\u00a0And where mainstream economists blame \u201cconsumer confidence\u201d for this problem, the real issue remains \u201cconsumer impoverishment.\u201d<\/p>\n
It is the rich investor that lacks the \u201cconfidence\u201d that the unemployed or low-waged worker can buy enough of the products produced by corporations.\u00a0This is the problem that will continue to haunt the establishment economists, who will incessantly preach that the economy is on a perpetual verge of recovery.<\/p>\n
This illusion of recovery is being instituted into government policy. The Obama administration has argued that federal stimulus money is only needed in small doses to put the economy back on track.\u00a0With politicians agreeing that the recession is \u201cbasically over,\u201d less stimulus money is being offered.<\/p>\n
Indeed, Congress has had a terrible time passing the tiniest stimulus bill, which would extend unemployment benefits and help states with Medicaid costs.\u00a0If such a bill is eventually passed, it will be a mere fraction of what is needed.<\/p>\n
Because Obama insists that \u201creducing deficits\u201d is the new governmental priority, the stimulus faucet will quickly dry up (since government stimulus is financed through deficit spending).<\/p>\n
But for millions of U.S. workers, the debate over stimulus spending is not theoretical, but a matter of life and death.\u00a0If no federal stimulus is passed\u2014 and the current one has virtually died in Congress\u2014 millions of unemployed people will have zero income. Meanwhile, the states budget crises will worsen, shutting off state-run health care, social services and education, while slashing public sector jobs by the thousands.<\/p>\n
Both Democrats and Republicans agree that \u201cfinancial markets\u201d should dictate the economic policy of the U.S. The two parties disagree only to what degree and how quickly to implement the same policy.<\/p>\n
The American labor movement must find an independent voice to demand that a stimulus bill be passed.\u00a0 Labor \u2014 especially public sector workers \u2014 must ally themselves with the unemployed, students and teachers, and other victims of the states\u2019 budget crises who will suffer real tragedies unless a federal stimulus bill is passed.<\/p>\n
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Shamus Cooke<\/em> is a social service worker, trade unionist, and writer for Workers Action (<\/em>www.workerscompass.org<\/em><\/a>).\u00a0 He can be reached at <\/em>shamuscooke@gmail.com<\/em><\/a><\/p>\n