The deficit vs. income inequality: A focus on government debt hides the real crisis for the US majority

Share with your friends


When capitalist politicians were running up the federal debt with the wars in Afghanistan and Iraq, Bush era tax cuts mostly for the rich, and 2009 financial bailouts, they weren’t the least bit concerned.

It was only when the working public started wanting unemployment insurance and foreclosure relief, and wondering why education and social service funding was disappearing, that the rulers discovered the debt “crisis.” The term “fiscal cliff” was coined for budget deadlines at the end of 2012, as if the country was going to fall into a dark, scary abyss on Dec. 31.

Why is the spotlight on the debt, when poverty and income inequality in the U.S. are higher than ever? Simple: as an excuse to gut social programs, with Social Security, Medicare and Medicaid on top of the list.

But the real crisis is the steady decline in wages for the vast majority of the U.S. working class, a crisis that is only deepening as Republicans and Democrats “compromise” to manipulate the budget.

The debt crisis scam. First, some basic definitions. The budget deficit is the shortfall of tax revenues below federal expenditures in a given year. The debt is the total money owed over the years.

Often compared by politicians to household finance or “balancing the checkbook,” deficit and debt debates cover up the underlying skullduggery that funds an empire and props up the financial system.

The “fiscal cliff” is a product of the Budget Control Act of August 2011. It mandated that if a “super committee” on deficit reduction could not come up with $1.2 trillion in debt reduction over 10 years, the Bush era tax cuts would end, and across-the-board spending cuts would take effect Jan. 2, 2013. The super committee failed, and the government headed toward the “cliff.” Yet, the crisis was artificial and self-imposed.

The debt of the federal government goes back to its inception, growing with each war and recession or depression. Deficit spending is hardly new.

But the Bush years and the 2007 financial meltdown combined to add approximately $8 trillion to the debt, which is now in excess of $16 trillion and climbing. So government debt is very real — and ultimately unsustainable. But it is due to capitalism’s own unbridled militarism and give-aways to the financial elite. It certainly isn’t because there’s “no money”!

Despite the drumbeat of the politicians and media, the debt is not because “entitlement” programs such as Medicare and Medicaid are too generous, or Social Security is “insolvent.” With a surplus of $2.7 trillion, it’s not. On the contrary, the debt comes from the wasted costs of continuous wars and 1,000 overseas military bases. Past and present military spending consumes 54 percent of income tax revenue, says the War Resisters League. The debt is also caused by welfare to corporations and the elite, and propping up the system during “bust” cycles.

Capitalism’s debt addiction. Karl Marx explained that the only part of the national wealth that actually belongs to modern peoples is their national debt. And the working class is surely being forced to pay it.

Financial interests buy government bonds and are guaranteed repayment with interest; easy money for capitalists. But as the debt spirals, there is less enthusiasm for buying bonds, as they look less and less likely to ever be repaid.

Yet debt is a like a drug for capitalism. The more the drug flows through its veins, the greater the dependency. Wall Street finds debt so lucrative that it develops toxic new sectors to buy and sell debt, creating bubbles out of fictitious capital. And risking permanent crisis.

Now the federal government is deeply in debt to the very system that needs bailing out! And the working class is being bled dry. The debt addict is reaching rock bottom.

Wages plummet, consumer debt skyrockets. As the last minute fiscal cliff “compromise” shows, working people continue to get the short end of the stick. Their taxes rose while the wealthy got off with little pain. Taxing the rich and corporations is now supposedly “off the table.”

Spending reductions due to automatic budget cuts (or “sequestration”) were delayed until March. A decision over the “debt ceiling” limit on the amount of debt the government can carry, was deferred until mid February.

Unemployment benefits were extended another year, but other social services are on the chopping block. (See Preparing to sacrifice the poor and elderly.)

Working people and the poor feel the staggering income inequality every day. That the Republican and Democrat politicians say and do nothing about it makes it clear whose side they are on.

Since the late 1970s, the transfer of riches to the already obscenely wealthy has been consistent. From the lowest to the highest paid layers of the working class, wage growth has trailed far behind productivity. In other words, workers are producing more, but are getting paid less for doing so.

Meanwhile, growth in income for the top 1 percent has risen sharply, through tax decreases, loopholes and profit off-shoring. Not a cent of their gains has gone into creating jobs, let alone creating good ones.

For the bottom 90 percent of workers, real wages (wages adjusted for inflation) have increased just 14.5 percent since 1979, while the top 1 percent increased 134 percent. Stated another way, more than a third of income growth (38.3 percent) has gone to the top 1 percent, while the bottom 90 percent received only one-third of increased income. The bottom 60 percent took just 11 percent of it! For the bottom fifth, the increase was just 0.7 percent in all those years.

Since the early 2000s, real wages for the bottom 40 percent have declined.

While employees’ wages have barely moved over 33 years, their debt has gone through the roof.

Consumer debt, including credit cards, auto loans and student loans, is at an all-time high of $2.7 trillion. Student loans have seen the largest increase, as out-of-work people returned to school. Mortgage debt is $13 trillion even though it has declined slightly in recent years due in part to workers losing or being unable to buy houses.

For the very poor, whose numbers are expanding, the benefits offered by Temporary Assistance for Needy Families (TANF) has dropped significantly since it was gutted during the Clinton administration. A family of three receives less than $400 a month. The elderly and disabled get just $4.30 per day for food!

Time to end monstrous inequality! The real crisis is declining wages — or no wages — and ballooning working class debt. The federal deficit debate is a ruse to steal from workers by cutting essential services to pay the costs of empire.

Government debt could be done away with tomorrow by eliminating the system that created it. While only socialist revolution will solve the problem, good starting demands are ending military spending and increasing the income tax of the ultra-wealthy to 70 percent.

The proceeds could be redirected to productive use by fully funding social services, education, and housing, and by repairing and upgrading infrastructure, mass transit and renewable energy. In the process, great jobs at truly living wages would be created. Now is a good time to fight for these changes!

Dennis Sanders can be contacted at

Also see: Preparing to sacrifice the poor and elderly

Share with your friends