January 2013 marks the beginning of the sixth year since the last crisis began in August 2007 and the fifth year since the crisis reached its climax with the panic on Wall Street in September 2008. Compared to the stormy events of those years, recent weeks have been relatively quiet.
The European debt crisis has at least momentarily eased with the decision of the European Central Bank to expand the euro-denominated monetary base—though much of the European economy remains in the grip of recession with unemployment still rising. In the U.S., the economy remains sluggish as the leaders of the ruling class seek ways to accelerate growth in order to halt and reverse U.S. de-industrialization and prevent a serious social and political crisis.
This is therefore a good time to take a larger view of the current economic situation within the broader long-term evolution of the capitalist system. This month I will focus on the U.S. government deficits and the current austerity drive.
The U.S. federal government is now carrying a debt of over $16 trillion and is fast approaching the current legal maximum of $16.4 trillion. The financial situation of the federal government doesn’t affect only the United States but the entire world, since not only is the U.S. government the world’s biggest borrower, it is also the center of the entire world imperialist system.
Real versus manufactured crises
On New Year’s Day, just as I predicted last month, a last-minute agreement was reached between the Obama administration and the congressional Democrats and Republicans to avert mandatory tax hikes and spending cuts that would have withdrawn as much as $800 billion of purchasing power from the U.S. economy over the next year. If such a withdrawal of purchasing power had actually occurred, the U.S., and perhaps the world, economy would have been thrown into an artificial, government-induced recession that would have aborted the current global industrial cycle. Exactly because of this, there was virtually no chance this would actually happen. Far from seeking to induce a recession, the political leadership of the U.S. ruling class is attempting to accelerate the slow rate of growth of the U.S. economy.