Bush's Economic Stimulus Plan - Part I

Bush released his 'economic stimulus plan' today and called for more of the same, that is, neoliberal economic restructuring. We are told that we must institute more of the same restructuring to solve problems that the last round of restructurings were supposed to solve. Fool the U.S. population once, looks like you can fool them again and again.

If you watched the Bush proposal, as I did on C-Span, and then the followup debate with Edward P. Lazear , President's Council of Economic Advisers and Henry M. Paulson Jr., Department of the Treasury, then you actually learned quite a deal about the basics of Neoliberalism: what it is what it is not.

The primary problem for Global capitalism and many national capital's is a downturn in U.S. consumer spending. For it is the US's ability to run massive consumer and national debts that is fueling global capital growth, even though that growth percentage is weak, as a historical average. U.S. consumer overspending and thus increasing consumer debt props up a sagging global economy, without it the economies of Asia, notably China and Japan, and Europe, notably Germany, would be in a far worse state - most of these economies are export led and while they have strong domestic markets - China's is still developing, the others are pretty much solidified - their recent growth is export led. A downturn in U.S. consumer spending means that these national capitals need to find other outlets to pick up the slack, otherwise their economies will suffer a downturn as well. There is no telling where this increased demand might come from. China and India are not developing fast enough nor a rich enough middle class yet to devour these commodities. where will this demand come from? All look to the U.S. and the U.S. government, manager not only of US capital but global capital, puts forth the initial salvo that other countries might try and follow, if they can force it upon their citizens - knowing the collective organization of labor and the favor that the welfare state has throughout Europe, trying to get this policies enacted in Europe is much more of a struggle, but capital has been increasingly successful over the last decade of pealing back gains by labor under claims of global competitiveness, flexibility, nationalism and xenophobia. The U.S. government's - manager of collective capital - primary solution is therefore mechanisms to increase consumer spending at a time when U.S. consumer debt is at historic levels. the government's problem is then how to increase spending that is already economically unsustainable at a global level - correcting this imbalance would be catastrophic, so it must go on - at a personal level - people will be unable to save for retirement and forced to work into their twilight years - but moreover is ecologically unsustainable - an issue that no mainstream spokesperson dare raise. Trying to maintain or increase consumer spending at a time when it is out of control displays the irrationality of capitalist development and its need for growth.

This is where you see the first of two major components of Bush's economic stimulus plan, consumer spending must be maintained, as this is the key to growth. We will discuss the fetishization of growth in a little bit and how it is the sin qua non of capitalism. Back to consumer spending. the other major component was the solution - reduces taxes!

Now, there are several historical methods to increase consumer spending and thus prop up sagging effective demand:

(1) you can increase the wages of workers, thus shrinking profits for individual or sectors of capital while maintaining conditions for capitalist development as a whole. Since workers earn more money they can potentially spend this on commodities, thus realizing the profit (unpaid labor) in the commodities. However, this potentiality is the problem, capitalism must get workers to parley the increased wages into commodity consumption and not into savings - this struggle occurred throughout the 20th century - I think we all know that time free from work was turned into leisure time as cultural activities soon became recuperated into commodified activities - and capital won: time outside of work must now reproduce capital as well; it cannot be self-managed time allowing for self-determination. This was the major strategy under Keynesianism. It was able to get around the inverse ration between wages and profits through a relative surplus strategy of the 'productivity wage', where wage increases were tied to productivity increases. Thus working class power was tied to increasing capitalist power over labor, particularly as power over the labor process was given up under taylorist and fordist methods of production. Capital and the working class both won, supposedly, and as of the 1960s you might have given a qualified yes. but now it clearly seems that capital, on the offensive, is stripping away all the hard one gains of labor during the 20th century.

(2) find cheaper labor to produce the commodities, thus maximizing the existing buying power of another group of workers, hoping that they now buy more goods. this can be more problematic than the first strategy in the sense that this labor must be found either internally or externally of the country. Now, this is the major strategy of U.S. capitalism, under neoliberalism, since the 1970s. Faced with increased working class power, student rebellions, increased global competition - Europe and Japan - and so on, US capital moved to automation and an attack on unions at home and outsourcing abroad in an attempt to stagnate US wages while increasing their purchasing power through exploitation of South American, Southeast Asian or Chinese workers. This also has problems, labor in these foreign countries can also fight back, but moreover, trying to exploit other workers so that you can continue to exploit and maintain power over another nation of workers is best by difficulties. trying to prop up effective demand through exploiting one group more than the other is a tricky balance and one obviously failing since the U.S. consumer must still go into debt to buy products that cannot be automated or outsourced that effectively - they cannot be rationalized enough, yet: thus, the reason why housing, education, health care are some of the most expensive items and what generally drives people into debt and bankruptcy. This strategy can only work for so long and not for all commodities, and it is not working now, as education, housing and healthcare are out of reach of a majority of americans by any reasonable standard of affordability.

(3) reduce taxes is another strategy, one employed increasingly by Neoliberals as a guise under which corporations, the capitalist and upper classes dramatically cut their taxation levels and institute a regressive tax system. cutting taxes also dries up social service spending, allowing the neoliberal governments to cut social spending and services - which they are more than happy to since they want to privatize everything and do not want any social obligation to 'the wretches at the bottom' - they advocate social darwinism through the market.

Deconstructing Bush quotes

Bush: This growth package must be built on broad-based tax relief that will directly affect economic growth -- and not the kind of spending projects that would have little immediate impact on our economy. This growth package must be temporary and take effect right away -- so we can get help to our economy when it needs it most. And this growth package must not include any tax increases.

Bush thereby rules out "outdated" Keynesian policies designed to maintain effective demand through downturns in the business cycle. The Keynesian state's primary role was to ensure effective demand through enlargement of the public sector, increased taxation, running state deficits and the attempt to institutionalize the 'productivity wage' by tying wage increases to productivity increases. The Neoliberal state does away with about all of these policies, favoring reducing taxes, not running budgets for social spending - but military deficits are of course ok. Thus Bush writes off spending projects, not based on any empirical reality but based on ideology, because the state is not supposed to be a social service provider anymore or a funder of even last resort for projects - the market is to be sole entity that people turn to. Spending projects cannot be instituted because this would mean that taxes would have to be raised on the rich and corporations, the exact opposite of neoliberal theory and practice. The state is purely an institution for monetary policies/adjustment and a military/prison state.

When one looks closer his tax rhetoric is really about taxes on the wealthy:

Bush: Passing a new growth package is our most pressing economic priority. When that is done, Congress must turn to the most important economic priority for our country, and that's making sure the tax relief that is now in place is not taken away. A source of uncertainty in our economy is that this tax relief is set to expire at the end of 2010. Unless Congress acts, the American people will face massive tax increases in less than three years. The marriage penalty will make a comeback; the child tax credit will be cut in half; the death tax will come back to life; and tax rates will go up on regular income, capital gains, and dividends.

It is really about cementing the temporary reduction of taxes on the rich, for the 'death' tax and tax rates on capital gains and dividends are what Bush and the capital class care most about and where most of the money in tax reductions went. Because the rich are the only who are affected by the death tax and capital gains/dividends tax - most americans and especially the lower classes do not own any stock and if they do, it is a small amount in their ESOP.

Moreover, when Bush speaks it is also in half-truths or one-sided statements:

Bush: In a vibrant economy, markets rise and decline. We cannot change that fundamental dynamic. As a matter of fact, eliminating risk altogether would also eliminate the innovation and productivity that drives the creation of jobs and wealth in America.

Yes, markets rise and decline. the issue is to what degree do the people or an alienated form of government have control over this market and how far will they let the market rise and fall - it is an issue of control over the market. Also, the issue of risk is not eliminating it outright, for under capital risk could never be eliminated, but subordinating the market to control by the people and therefore reducing risk. It is a question of severity and on a continuum of risk, how much is enough? You can have innovation and productivity with a quality welfare state/social safety net - look at the western european countries, they have good rates of productivity, innovation and balance it well with a high standard of living. Trying to argue that the U.S. could not have innovation or productivity with a larger social safety net or even a nice cushy one - since we have the largest economy around - is plain ludicrous. It not only assumes that people are inherently lazy and need to be forced to work but it is apologetic for an economic system premised on forced work and exploitation of labor - that needs us to work so it can extract surplus labor.

And to sum up, throughout the speech it is clear that capitalism is a system dependent on growth - that it is a 'grow of die' economy because the word growth was uttered 14 times. And the whole purpose of the bill was to address the "growth issues", nothing else, which means maintaining effective demand, which raises the problem of how to increase consumption when the market is in a downturn and for ideological and political reasons you are not going to increase wages, create spending initiatives and are unable to force greater exploitation on foreign labor, although this remains to be seen. Capital is thus in a bind and it must resort to reducing taxes, which is acceptable, as reducing taxes is a fundamental of neoliberalism. the problem with this is that it will only increase inequality in the long run and cause a further decline in the quality and quantity of social services and the infrastructure of the United States. It remains to be seen if the American public will buy this, but since it is not subject to a democratic vote or debate they will take it just like they accepted their $300 rebate last time and spent them on a sharper image foot massager.