Obama’s Stimulus Package: Will it Prevent a Prolonged Slump and Revive Growth?

With this economic recession many of are us facing difficulties due to medical expenses, utility bills, loss of work hours, or unemployment, we need more then ever to unite and demand better health care and jobs. Obama has announced that he wants another stimulus package, but will it be enough to save the rapidly declining situation of many Americans?

Obama’s Stimulus Package: Will it Prevent a Prolonged Slump and Revive Growth?

Jan 13, 2009
Lynn Walsh
Even before taking over the presidency, Obama was forced to grapple with the deepest economic crisis since the Great Depression of the 1930s. Shocking unemployment figures released in January revealed a sharp decline in the U.S. economy and the onset of a deep and most likely prolonged recession. A million jobs disappeared in November and December, bringing total losses for 2008 to 2.6 million.

In a major speech on the economy on January 8, Obama outlined his stimulus package to create 3 million jobs and jump-start renewed growth. What is the character of this package and can it prevent a prolonged slump and revive growth?

Obama’s Package

Obama is proposing an economic stimulus package of $775 billion over two years, while hinting that it could approach a trillion dollars. About $300 billion (40%) will be tax rebates for “middle class” families and businesses. Around $500 billion will be for Keynesian-type public spending. This will include aid to the states (state governors say they need $100 to $150 billion to avoid savage cuts in social spending).

Extra funds will go to unemployment insurance, food stamps, Medicaid, etc. Obama also proposes to fund subsidies for health insurance contributions. There will also be extensive investment in public facilities and infrastructure: roads, bridges, public transit, libraries, public broadband networks, energy conservation, solar and wind power projects, etc. If implemented, this will be the biggest state spending package, apart from World War II, since Roosevelt’s New Deal in the 1930s.

Obama has also announced a review of the second part of the bank bailout program, the so-called Troubled Assets Relief Program, with $350 billion of the original $700 billion left. Obama promises to draw on this cash to help working families, helping homeowners to avoid foreclosure, and relieving the burden of other debts (auto loans, consumer debt, student loans, etc). As yet, however, he has not put forward any detailed proposals to cancel or modify predatory mortgages, even though more than 2 million homeowners currently face foreclosure.

Opposition in Congress

Obama is unlikely to have his package approved by Congress by the time of his inauguration on January 20, as he may have been hoping. The package, in its current form, faces opposition from both the right and the left.

Many Republicans – and also conservative “blue dog” Democrats – oppose another stimulus package on principle, especially increased public spending (as opposed to tax cuts). This partly reflects electoral calculation.

There is still widespread anger at the $700 billion taxpayers’ handout to the banks and financiers – the profit-seeking moguls who triggered the crisis. There will undoubtedly be suspicions that a large slice of another rescue package will find its way into the hands of big business and the wallets of politicians.

Opposition from the “fiscal conservatives” also reflects doctrinaire adherence to the idea of “free-market” solutions – in spite of the present free-market financial meltdown – and opposition to government deficits.

However, in the face of a deep financial and economic crisis, which raises fears of social upheaval and class radicalization, the leading representatives of capitalism have abandoned the ultra-free-market economic orthodoxy that prevailed after Reagan’s presidency. “In a severe crisis,” said Bernanke recently, “orthodoxy can prove to be a very bad strategy” (Financial Times, 1/4/09).

Despite the prospect of a huge federal government deficit and the danger, later, of explosive inflation, the strategists of the U.S. ruling class support a massive stimulus package to save their system from collapse. Obama is acting in their interests.

Criticism From the Left

There are left Democrats, however, who are critical of the existing package because 40% ($300 billion) will take the form of tax cuts. Of this, $150 billion will go to “middle class” taxpayers ($500 each), while $100 billion is earmarked for businesses.

Most personal rebates are saved in the bank or used to pay off debts, as was shown by the $168 billion tax-rebate package passed by Bush in February 2008. Unlike public spending, tax rebates are much less effective for increasing demand for goods and services or creating jobs.

Obama may well be thinking that tax cuts are always popular and will sweeten the stimulus package with public opinion. Apart from this, he is clearly seeking to appease Republican critics in Congress, attempting to muster bi-partisan support. (Strangely, while opposing deficits, fiscal conservatives never object to tax cuts, which reduce government revenue and invariably increase deficits.)

Commenting on Obama’s proposed tax cuts for the middle class and business, Keith Olbermann (on MSNBC’s Countdown) said: “…the president elect is proposing [tax] cuts that in total might make George Bush blush” (Washington News, 1/6/09).

Though it is the biggest stimulus package since the New Deal, some left Democrats doubt whether it will be enough to revive economic growth. Fervent Obama supporter Paul Krugman, who has been forcefully urging him to implement a Keynesian spending package, now refers to Obama’s “somewhat disappointing economic plan…which falls far short of what’s needed” (NY Times, 1/8/09).

“Our economy could fall $1 trillion short of its full capacity [over 2009-2010]”, declared Obama in his January 8 speech. As Krugman points out, however, the Congressional Budget Office estimates the output loss at $2.1 trillion, double Obama’s figure. When only about $500 billion of Obama’s package is for Keynesian-type public spending, the plan may not be enough to avert “a prolonged slump.”

Huge Deficit

Obama has been spelling out that there are going to be huge – and rising – federal government deficits, implicitly making the point that he has inherited a dire situation. The deficit for fiscal year 2009 is likely to be $1.2 trillion (8.3% of GDP) – a post World War II record – even before Obama’s package is implemented.

A government deficit is itself a stimulus in that government debt finances a share of employment and spending that would otherwise not contribute to economic growth. However, a huge slice of the current deficit (Bush’s last deficit was $455 billion) arises from the bailout of the banks and finance houses – which are hoarding cash and still restricting lending, thus depressing growth.

If Obama’s stimulus package is implemented over the next two years, it will push the annual federal government deficit up to about 10% of GDP. The ratio of the accumulated national debt to GDP will rise from 36.9% to 54.2%, a record apart from the Second World War period. According to some Republicans, this is already a “fiscal disaster,” and Obama will make it worse.

For the strategists of the ruling class, however, Obama’s plan is a necessary evil – to bail out their floundering system. They recognize that deficit spending on a massive scale will saddle future generations with colossal debts. However, they will later offload the burden onto the working class through new taxes and cuts in social spending.

For 30 years, capitalist leaders upheld monetarist orthodoxy, condemning inflation as the plague. Now, when their system is threatened by crisis, they are ready to support the government printing money to bail out the banks, counteract deflation and (at least partly) finance spending.

Inevitably, printing money today raises the specter of inflation tomorrow. But under the headline, “The Printing Press Cure,” a NY Times editorial concludes that “the Fed[eral Reserve] is doing the right thing” (12/23/08). Later, they will turn back to the kind of savage monetarist policies applied under Reagan in the 1980s, which restricted public spending and increased the real cost of debt for workers.

Obama himself has hinted at the price that will be paid by workers in the future. “I’m not out to increase the size of government long-term,” he told the NY Times (1/9/09). Obama says an important part of his budget will be “repairing” major entitlement programs, Social Security, Medicare (health care for retirees), and Medicaid (health care for the poor).

“Repair” means cuts: higher payroll tax contributions, a later retirement age, and reduced health benefits. Obama’s package, comments columnist David Brooks (NY Times, 1/9/09), “is not an attempt to use the crisis to build a European-style welfare state.” Keynesian spending is for an emergency, to try to prevent economic collapse and political upheavals. Afterwards, capitalist leaders will attempt to return to fiscal conservatism.

Perspectives

Will Obama’s package prevent a prolonged slump and revive growth? Despite the scale of state intervention (the cyclical deficit, plus the bank bailout package, plus the proposed stimulus), it is still limited in comparison to the economic forces that have been unleashed by the U.S. and global downturn. Obama plans to create 3 million jobs, but there are already 11 million unemployed, and it will get worse.

In reality, the most favorable scenario for U.S. capitalism is that Keynesian-type intervention will cushion the recession and prevent the onset of a depression. Even this, however, is not guaranteed. A further crisis on the U.S. and global financial system, a collapse of the dollar, and other convulsions in the world economy, could all exacerbate the crisis of U.S. capitalism.

Even if it averts a prolonged slump, Keynesian state spending in itself will not necessarily jump-start the economy, producing self-sustaining growth. That would require renewed, extensive capital investment by big business – and the capitalists will only invest if they are assured an acceptable level of profitability.

A big proportion of the toxic debt and industrial overcapacity, given current levels of money-backed demand, will have to be squeezed out of the system before there can be any return to broad-based growth.

The current recession is likely to continue in the U.S. and globally for some time, and a recovery, when it begins, is likely to be slow and uneven. Even if Keynesian measures soften the impact of recession, the working class will pay a heavy price for the capitalist crisis, through low wages, mass unemployment, and poverty. Keynesian measures will not overcome the anarchy of market forces or cure the capitalists’ lust for profit.

At the same time, attacks on workers will provoke mighty struggles, a questioning of the capitalist system, and a search for a real alternative. At best, Keynesianism offers a temporary palliative for capitalist crisis. The idea of democratic socialist planning, on the other hand, will gain more and more support as the only way of harnessing science, technology, and productive forces to meet the needs of society as a whole.

SA launches campaign to stop budget cuts in WA to higher ed, social services

Tacoma Community College Socialist Alternative Club, and Evergreen Socialist Alternative have launched a campaign to stop budget cuts to WA state higher education and social services budgets. With a projected budget deficit of $5.1 billion, the desperately needed colleges that require state subsidy could have budgets cut by 20% or higher. In this time of recession, education is absolutely necessary to retrain workers to build a new economy, barriers such as the suggested caps to enrollment must not be allowed!
Please visit our sister blogs:
http://stopthecutswashington.blogspot.com/
http://www.evergreencommitteeforfullfunding.blogspot.com/

Victory for Chicago window factory workers!

UE workers in Chicago have won their demands, but are still now jobless. Can we use their tactics to win other demands? This article and more can be found at www.socialistalternative.org
email: tacomasocialists@gmail.com


Chicago Factory Occupation Leads to Victory

Dec 13, 2008
Bryan Koulouris
By occupying their plant, and refusing to budge, workers at the Republic Windows & Doors factory in Chicago have provided an inspirational example to workers around the country of how workers can fight and win their demands.

The workers were shocked when they heard that their factory was being closed down. They were outraged when the bosses told them that they'd only have three more days of work. The reason? Bank of America was cutting off its loans to the window company. This is the same Bank of America that has been handed billions of dollars in government bailouts.

The workers didn't take it laying down; they fought back. This can be a lesson for us all. The workers, represented by the United Electrical Workers (UE), reclaimed a strategy that helped to build the labor movement in this country: they occupied the factory. They demanded a good severance package, and they won. This shows the potential power of working people when we're organized and when we take action.

A workplace occupation poses the question: who's in charge here? Management has no power to give orders when workers run the show. In fact, it may have been possible to demand even more than the workers won due to the potential success of this militant tactic. The general population of Chicago and the country expressed a deep sense of sympathy for the workers. In future struggles, this sympathy can be turned into widespread solidarity demonstrations and support networks.

When layoffs and cuts are proposed by corporations and their political servants, working people need to look to the brave example of the Chicago window workers who occupied their workplace and refused to be chased out.

This occupation has sparked discussions among workers across the country on how they too can fight back against cuts. It is essential that union leaders follow the brave example of these Chicago workers. The union leaders need to demand better unemployment benefits and jobs for all in order to organize the unemployed. Instead of funneling trillions of dollars in loans to banks, the unions need to demand a massive public works program to ensure every worker has a job

To stop layoffs due to factory closures and bankruptcy, it will require that we raise the demand of public ownership under workers' democratic control and management in order to save jobs. If companies say that they can't afford to keep paying for good jobs, then we need to get them to open their financial records to the workers' movement. If they're telling the truth, then we need to take over the workplaces ourselves.

Chicago Workers Occupy Factory - A militant example of the way forward for the labor movement.
Dec. 7, 2008
By Will Soto

On the afternoon of Friday, December 5, the roughly 260 workers at Chicago’s Republic Window and Door factory were told that the factory was closing down and that they would be laid off. These workers make up Local 1110 of the United Electrical Workers (UE). They are owed roughly $1.5 million of vacation and severance pay. There are even rumors that some of their most recent paychecks bounced. Merry Christmas indeed.

It doesn’t seem like the company has totally gone belly up. Instead workers think that the company is trying to move production to another state where they can pay lower wages.
They were thinking that they could just shuffle everyone out the door, disregard the laws about giving workers appropriate notice, forget about paying severance and vacation, and close up shop. The workers had a different plan - they took the place over.

Starting on the afternoon of Friday the 5th they began their sit-in. The police came but they left after figuring out the situation and did not try to forcibly remove the workers. The workers are very well organized and the occupation looks disciplined and coordinated. They are occupying the factory around the clock in three shifts. Some workers are sitting in with their families.

Any visitors to the factory floor are escorted and the workers are keeping a close watch on everything. The company has already packed up and moved some of the machinery, but the workers know where it is located and they are checking on it every few hours. Many Chicagoans are helping out with donations of money, food and sleeping bags. They had a rally of several hundred outside the building on Saturday, December 6.

This factory occupation is a welcome break from the trend of factory closures and layoffs that have gone down without much of a fight. It remains to be seen how much the workers will gain as a result of this. The company claims that it can’t afford to pay the workers because Bank of America won’t extend them the credit. Bank of America says that the company’s debts are not its problem. Democrat Congressman Luis Gutierrez is scheduled to meet with the bank and the company on Monday to try and iron out the problems. Workers are justified in their anger against management and the bank. This same Bank of America is among the financial giants who have lined up to receive billions of dollars of federal bailout money. Workers are asking where is our bailout?

There is no question that these workers’ brave step is a big deal. They deserve the support of all working people and the entire labor movement. Socialist Alternative salutes these workers and supports this occupation. This country has not seen many factory occupations in the last half-century. It was just over 70 years ago in Michigan that the United Auto Workers fought and won the Flint sit down strike of 1936-37. After forty days of bitter struggle they beat the company and inspired a nationwide wave of factory occupations. Certainly many leaders of this factory occupation know this history and they are steeled for the possibility for a long sit-in.

It is important to note the unique history of the independent UE, the union that these workers belong to. This union comes out of the CIO and the radical traditions of industrial unionism of the 1930s. Unlike some of the most corrupt union leaderships, its officials do not get exorbitant salaries. During the 1990s they supported the creation of an independent labor party. The union’s motto is “the members run this union.” The workers democratically voted to occupy this factory.

The UE and the Chicago Federation of Labor needs to publicly build support for this strike from workers and other unions around Chicago. This heroic action by these workers could be used to revitalize the labor movement in the city, and establish a new tradition of militancy among the working class.

This struggle will be an inspiration to other workers on the need to fightback against cuts and layoffs. The labor movement needs to fight each and every layoff and cutback, explaining that if bailouts and public ownership can be used to protect rich investors, then these same policies need to be used to defend workers.

These workers are united and determined to win all that they can. Victory is hardly guaranteed, but sit-ins and factory occupations are proven tactics used around the world by workers who often have no other recourse against layoffs and closures. Perhaps most importantly, factory occupations are important assertions of workers’ rights to own and run their workplaces. As one of the workers joked on Saturday, “we’ve got a lot, we’ve got this whole building.”

How to support the Republic workers
Contributions are both welcome and needed:
through PayPal: use the "Donate" button on the UE home page
by Mail: UE Local 1110 Solidarity Fund, UE Western Region, 37 S. Ashland, Chicago, IL 60607
Send a message to Bank of America demanding they meet the workers demands
For more information, call UE at 312-829-8300.

Socialists meet in Tacoma November 24th

Tacoma Socialist Alternative will be meeting this Monday, November 24th, 6:30 pm at the University of Puget Sound in Tacoma. We will be discussing potential campaigns to start/restart/join, such as our struggle to scrap the WASL testing, and building an independent, pro-worker, anti-corporation party. We will also discuss current events such as the sinking economy and the failure of the government in their bail-out of Wallstreet. The following article is from our newest issue of Justice newspaper, you can find it and more at socialistalternative.org
For directions to our meeting please email tacomasocialists@gmail.com

Bail Out Working People,
Not Wall Street!

Bryan Koulouris, November 12, 2008

In less than a year, the U.S. government has thrown over one trillion dollars at the big investment banks and insurance companies. Imagine that: one trillion dollars. It is hard to fathom. Twelve zeros after that one. $1,000,000,000,000. Count those zeros: twelve. That’s a lot of money. With that kind of money put to good use, the U.S. government could have covered all out-of-pocket medical expenses for everyone in the country for seven years. With that kind of money, the U.S. government could have finally rebuilt New Orleans and the Gulf Coast and given every working American a $3,500 cash bonus. The bailouts may have stabilized things in the markets for a few moments, but possibly not for long. For instance, one of the big banks that was given a chunk of change separate from the $700 billion package was AIG. This predatory lender has been given $143 billion; they’ve already spent $90 billion, and executives continue to get ridiculous compensation. The housing speculators who helped to create this crisis are being rewarded for their greed. This shows that the bailout was not attached to any sort of accountability or real democratic oversight. Yet, after all this money has been thrown at finance, the markets are still in chaos and the crisis threatens to spread further throughout the world economy. The market volatility index is at 80% as we reach November. Any index rating above 50% is considered “financially dangerous.” In the past year, there has been an increase in unemployment of 2.8 million people (Bureau of Labor Statistics), and over a million people have lost their homes. Recent figures show a decline in both the Gross Domestic Product and consumer spending, and house prices continue to decline. Workers do not have enough income to continue to prop up the economy. We are in a recession, and the financial decline is likely to last for years. The recession means that the corporate and Wall Street masters will be trying to cut working hours, provide less in wages, lay people off, and resort to cutting corners that will force us to work harder and sometimes at greater personal risk. The System Causes Crisis Recessions are built into the framework of the capitalist system. Big business makes more money by paying workers less. So over the past 20 years, good union manufacturing jobs have been shipped off to Mexico and China as the big companies search for cheap wages. Legislation like the North American Free Trade Agreement (NAFTA) under Clinton in 1994 helped to exacerbate this global race to the bottom in workers’ wages. Since then, millions of jobs in heavy industry have been lost. The jobs that have been created over the past 20 years are overwhelmingly low-paid work. For example, the anti-union Wal-Mart has become the biggest employer in the country. The big companies aren’t creating good jobs in the real economy. Now, the super-rich want us to pay for their system. States and cities throughout the country face debt and budget cuts. Hospitals and services for the blind are on the chopping block in Massachusetts. Education cuts are forcing larger class sizes in other parts of the country. Libraries, elderly care, community centers, and other public services will be attacked by corporate politicians throughout the nation. Who Should Pay for This Crisis, and How? Handouts to the big banks and companies do not provide real jobs or benefits for working people. We need the type of economic growth that affects our day-to-day lives. The “boom” of the Bush era saw a decrease in living standards for many working-class people. We need spending and economic growth, but not the kind that only benefits corporate greed. We need a massive public works program to improve schools, healthcare, and transportation. We need union jobs to develop alternative energy and rebuild our infrastructure. We need quality public childcare and improved affordable housing. We don't need more handouts to some of the richest people in the country. The money is there to pay for jobs and services. The big financial institutions and the super-rich should be taxed heavily. The wars in Iraq and Afghanistan should be stopped. The failed banks and companies should be taken into public ownership under democratic workers' control. This would free up billions, indeed trillions, of dollars to meet the needs of ordinary people. In order to get jobs and services, we have to fight for them. The labor movement in the 1930s organized massive sit-down strikes, community support rallies, and protest organizations of the unemployed. Good jobs, better services, and more rights on the job were won through these battles. We need to get organized to resist the coming attacks. Unions and community groups have the potential resources that could be used to build real fighting movements that challenge corporate greed with strikes, mass actions, and direct resistance. Workers make society function by producing all the goods, distributing everything, and providing all the services in society. The big company executives don’t drive the buses, trains, and trucks that keep America moving. The politicians don’t teach our kids, clean the floors, and take care of the sick. We have the potential power to make things better. Bosses and politicians only make things worse. We can struggle to win a better life instead of this potentially bleak future, but we have to be organized at the grassroots and our leaders have to be willing to fight for our needs. If this system, capitalism, can’t afford to guarantee us jobs, heat, and homes, then we can’t afford their system!

Socialists Meet Sept. 8

Tacoma Socialist Alternative will be meeting this Monday at 6:30 at the One Heart Cafe on 6th Ave and Fawcett in downtown Tacoma. We will be discussing the very possible Boeing IAM strike, we will have a report back from the Republican National Convention, as well as upcoming events this September and October. This is a public meeting and all are welcome to join us. Please email tacomasocialists@gmail.com for more info.

Socialists Meet Monday 8-18

Tacoma Socialist Alternative will be meeting on Monday, August 18th, at the Blackwater Cafe located at 747 Fawcett St Tacoma at 6:30 pm. We will be discussing the CWI school in Europe from which Brandon attended and will speak about, and issues in Latin America with introductions from Nate and Hope. We will also discuss our current boycott campaign against the WASL, and other ongoing activities. This is a public meeting, please join us if you are interested in us or our campaigns.