The Current Industrial Cycle (Pt 2)

After Congress deadlocks, Trump issues decrees

On August 8, Donald Trump at a meeting of wealthy members of a New Jersey country club he owns announced a series of Executive Orders. These decrees supposedly dealt with the problems of unemployment insurance and mass evictions. Trump claimed they would protect the expanded unemployment insurance unemployed workers have received under the emergency CARES Act passed last March and extend the moratorium on evictions that was part of the Act. Trump also claimed he is giving workers earning less than $100,000 a year — essentially all people who can reasonably be considered “workers” — tax relief through a payroll tax cut. The tax cut is only a moratorium on the collection of the employee contribution — collected by the boss — to finance the Medicare and Social Security trust funds. Trump, however, indicated that if he is re-elected to a second term he will make the abolition of the payroll tax permanent.

The background to Trump’s announcement was the July 31 expiration of the expanded unemployment benefits of $600 a week and the moratorium on evictions. Under the CARES Act, the government handed out trillions of dollars to the capitalists under the pretext of counteracting the effects of the economic collapse associated with the COVID-19 pandemic. But the CARES Act also included a few “sweeteners” for the working class. These included expanded eligibility for unemployment insurance and an increase in unemployment payments by an extra $400 a week plus a federally mandated moratorium on home foreclosures and evictions.

These measures have indeed been a lifeline for the tens of millions of people who have become unemployed since March. However, there was a catch. Under the CARES Act, the moratorium on evictions and the extra $600 in unemployment insurance were to expire in only four months. The Democrats and Republicans, and above all Trump, “assumed” that the pandemic would be over by July 31 and that the millions of people who lost their jobs in March and April would be back at work by then.

However, as soon as the CARES Act passed, a growing number of Republican senators began to complain about the extra $600 in unemployment payments. They claimed that many of the unemployed were collecting more money on unemployment than they made when they were working. The Republican senators ignored the fact that if the bosses call unemployed workers and tell them they should return to work — even at the risk of contracting COVID-19 — the workers immediately lose their eligibility for any unemployment pay. In that case, they either have to return to work and risk COVID-19 for themselves and their families or live without any unemployment or wage income.

As July 31 approached, it was widely assumed that the Democrats and Republicans, who each control a chamber of the U.S. Congress, and the Trump administration would come to a compromise on extending the enhanced unemployment insurance and eviction protection for a few more months. But they didn’t. For its part, the Trump administration did nothing besides float the proposal for a payroll tax cut that is clearly aimed straight at the Social Security old-age pension program passed in New Deal (1) days and the Medicare health insurance program for people over 65 passed under Lyndon Johnson’s “Great Society” in the 1960s.

The U.S. Medicare system as it stands today assumes that people of working age (18-64) should buy health care directly from private insurance companies, which is generally impractical for most people. That is especially true for people over 50. Insurance companies are not willing to sell health insurance to people over 50 at affordable rates. The alternative is to get health insurance directly from their employer. This forces more people, especially older workers, to enter the labor market in hopes of finding a job that offers health insurance. Under the U.S.’s “employer-centered” health insurance system, the boss can at any time terminate workers’ health insurance simply by dismissing them. This helps tilt the balance of forces on the labor market strongly in favor of capital. Both the leaderships of the Republican and Democratic Party, whatever their tactical differences, stubbornly insist on maintaining the employer-centered health insurance system.

However, since private health insurance companies were unwilling to sell insurance to people over 65 at affordable prices if at all, starting in the 1960s the federal government began to offer limited health insurance to seniors. This system is known as Medicare. However, the Democrats and Republicans in the 1960s made sure that Medicare insurance is not available to people of working age. The bosses are somewhat less resistant to government-provided health insurance to people over 65 since they rarely offer jobs to such people.

Payroll tax holiday

It is often claimed by the capitalists and their hired economists that the Social Security and Medicare trust funds are in danger of running out of money. Even if this is true, the remedy is simple. Payroll taxes can be extended to highly paid employees with incomes above $137,700 and to profits, dividends and interest income that go only to the owners of capital. As it is, the rich who do not directly employ workers — money capitalists and landowners — do not pay taxes into the Social Security trust fund. Therefore, a favorite ploy of right-wing politicians attempting to cut or get rid of Social Security and Medicare altogether has been to push for payroll tax cuts on the pretext that they are giving the workers a tax cut. This is exactly what Trump is attempting to do through his Aug. 8 “payroll tax holiday,” which he promises to make permanent if he is reelected.

Trump swears that he will protect Social Security and Medicare, but his actions show that he is moving in the opposite direction. Here is the real program of Trump and the capitalists he represents. By cutting or even eliminating the taxes that provide the funds paid into the Social Security and Medicare trust funds, the funds will inevitably run out of money. Social Security pension payments and Medicare insurance will then have to be drastically cut if not abolished altogether. Then, if people 65 or older who are not wealthy capitalists and landowners like Donald Trump is still want an income to meet their daily expenses or access to medical care, they can under the employer-centered health care system enter the labor market and try to convince some boss to hire them despite their advanced age.

If they cannot find such a boss, they are from the viewpoint of the capitalists “useless eaters,” to use a term used by the German Nazis. It is therefore time for them to leave the scene. This is exactly what capital wants and it is what Donald Trump is trying to implement. Repealing Obamacare with its government subsidies to people who cannot afford private medical insurance without government aid, and repealing the expanded Medicaid health insurance for the poor who cannot find jobs that offer medical insurance as part of the wage, is simply not enough for Trump and his capitalist supporters. They want to get rid of Social Security and Medicare as well.

In negotiations that the Democrats and Republicans carried out as the July 31 deadline approached, the only contribution of the Trump administration was to push for the payroll tax cut. However, the payroll tax cut, which as we have seen amounts to an attempt to destroy Social Security and Medicare, was so toxic that even the GOP senators didn’t want to take it up in an election year. As it is, many of the GOP senators and congresspeople are already facing unexpectedly tough races, not least of all because of the Trump administration’s disastrous mishandling of the COVID-19 pandemic and also because of the Black Lives Matter protests. The Republican senators said, in effect, please President Trump let’s not speak about how we hope to destroy Social Security and Medicare until after the November 3 elections.

It was generally expected that the Democrats and Republicans would come to some compromise agreement on extending expanded unemployment payments and the eviction moratorium, probably by cutting but not eliminating the expanded unemployment payments and extending the eviction moratorium for a few more months. But to the astonishment of most observers, the Democrats and Republicans did not reach an agreement.

The Senate Republicans were divided among themselves on whether to agree to a reduction of the extra unemployment pay from $600 to some lesser amount for a few months, or press to eliminate it . The Trump White House, which would be expected to provide the leadership for the Senate Republicans by proposing a compromise, declined to do so beyond the proposal to cut payroll taxes.

Since the Democrats and Republicans took no action, the expanded unemployment insurance and evictions moratorium expired, with the Democrats, Republicans, and the White House blaming each other. This enabled Trump to issue his decrees of August 8, which raised a whole list of new questions. In the long run, the most dangerous of Trump’s decrees for the working class was the payroll tax moratorium, which as we have seen is in reality an attempt to greatly curtail or abolish Social Security, unemployment insurance, and Medicare.

While Trump’s payroll tax moratorium may increase the take-home pay of some workers — though it may not even do that if bosses decide simply to put their funds into an escrow account or to speculate in the stock market rather than pass the tax savings on to the workers — at the end of the year the moratorium expires and the accrued tax comes due unless payroll taxes are cut or abolished altogether as Trump is indeed proposing.

Making the payroll “tax holiday” permanent might briefly help some workers but it would inevitably put the abolition or at least the drastic curtailment of Social Security, unemployment insurance, and Medicare directly on the table in the nearest future. Trump hopes that some workers who otherwise would vote Democratic won’t understand what is going on and fall for the bait.

Trump also decreed an extension of unemployment insurance but only at a reduced $400 per month.

In addition, the portion of the CARES Act waiving the requirement that workers receiving unemployment payments must demonstrate that they are actively looking for work is done away with. Once again, despite the pandemic, people on unemployment are required to hit the pavement in search of work. First — and this applies to the payroll tax cut as well — this is an attack on the ancient “power of the purse” wielded by the legislative branch of government. Historically, this power emerged out of the English Parliament’s centuries-long struggle with the Crown during which it won the power of the purse. The monarchy, for its part, continued to exercise the executive power. This was the situation when the U.S. Constitution with its “division of powers” was written in 1787. (2)

Under the doctrine of the division of powers and checks and balances, questions such as how much money the government can raise in taxes or borrow and spend and exactly on what the government spends its money was decided by the legislative branch and not the king, queen, or in the U.S. the president. Therefore a strong legal case can be made that under the U.S. Constitution all of Trump’s Executive Orders of Aug. 8 are illegal and should be set aside by the courts. There will likely be court action to achieve exactly that.

However, the Democrats seem unlikely to challenge in court Trump’s decree that the extra unemployment insurance is reduced by $200 to only $400 a month. The reason, as we saw above, was that since Congress took no action whatsoever, the unemployed will minus Trump’s decree face the loss of the entire extra $600 they were collecting under the CARES Act. Even if Trump gets away with his latest Bonapartist power grab, to give it its right name, whether there will be relief for the unemployed under Trump’s decrees is highly questionable.

Trump’s decrees include a provision that the states are supposed to kick in 25 percent alongside the federal government’s 75 percent to finance the extra unemployment insurance payments. However, due to the deep economic recession, state revenues have dropped drastically. Unlike the federal government, U.S. state governments have little authority to borrow money. At the insistence of the Republicans, the CARES Act included no help at all to hard-hit state governments. And as even supporters of Modern Monetary Theory are well aware, U.S. states have no authority to issue their own currency. So where will the states get the money to finance their 25 percent share if they can neither raise it in taxes, borrow it, or print it? (3)

Also, under Trump’s decrees, the federal portion of the funds are taken from the Federal Emergency Management Agency, or FEMA. However, the funds under the control of FEMA are limited and it is far from clear that they are sufficient to cover the extra benefit in light of Congress’s failure so far to appropriate additional funds for unemployment insurance.

Later, Trump “clarified” this question in a way that made the situation even less clear. He indicated that he might waive the 25 percent state share in all or in part or increase it. He indicated each state will have to negotiate with the White House individually on their share of the money needed to finance the reduced extra unemployment payments. The implication is that a state under Republican leadership that bows to White House demands may get a “good deal.” Otherwise, they won’t. The takeaway is that the unemployed will have to wait a long time to see any of the reduced $400-a-week unemployment payments if they ever see any of it at all.

Behind this is the determination of the capitalist masters of both the Republican and Democratic parties to use the radically increased level of unemployment to raise the rate of surplus value — and profit. That the capitalists are optimistic they can achieve this is shown by the bull movement of stocks on Wall Street.

Trump’s other August 8 decree supposedly extends the moratorium on evictions provided by the CARES Act, which is now expired. However, Trump’s decree only provides for the U.S. Treasury and Department of Housing and Urban Development to recommend moratoriums, and so is completely toothless. We can be sure it is toothless by design since Trump is, after all, not only the president of the United States but himself a major landlord. He wants to appear to be helping the unemployed — or those who simply cannot afford their rents anymore — to pick up more votes on November 3 while not helping them at all.

If the Democrats and Republicans had agreed to extend the $600 in extra unemployment pay and the eviction moratorium, Trump would have been disarmed. But by not doing so, they have opened the door for Trump’s latest maneuvers aimed at shifting what is left of “the power of the purse” from Congress to an all-powerful executive branch. Under this setup — also known as the Bonapartist system — the all-powerful executive throws the occasional crumb to the workers but in reality serves its real master. The master is the capitalist class, which as a class — not individually — dominates the money market and therefore holds the ultimate purse strings.

Trump’s Bonapartist maneuvers have not been confined only to the expiration of the CARES Act. Earlier, Trump had used the military to violently break up a Black Lives Matter protest near the White House. In light of massive criticism, including from such “retired” generals as James “Maddog” Maddox, Trump’s first secretary of war (defense), Trump seemed to retreat.

Traditionally in the U.S., the police are employed by state and local governments, not the federal government. However, the Federal Bureau of Investigation — the FBI — has long functioned as an elite federal police as well as a political police force. The FBI is supposed to be confined to enforcing violations of federal laws — most laws in the U.S., however, are state laws — or interstate laws. The now infamous J. Edgar Hoover always denied that the FBI was a police force and explained that the U.S. does not have a national police but only state and local police. However, since the creation of the Department of Homeland Security established after 9/11 under George W. Bush, federal security forces often wear uniforms that identify them as “police.”

Trump recently sent these federal forces claiming police powers to Portland, Oregon, though the local authorities and mayor said they didn’t need or desire them to control ongoing peaceful demonstrators in support of Black Lives Matter. These federal forces were then used to violently attack peaceful demonstrators in Portland. Federal employees wore combat-style uniforms identifying them as “police” but had no badge numbers, name tags, or other personal identification. Some of these federal police then seized demonstrators and imprisoned them for several hours (4) without charging them with a crime before releasing them. One demonstrator, a Navy veteran, had his hand broken by these federal “police” when he protested their actions in Portland.

These “police” are being described by many as “secret police” because their actual identity is kept secret. Not only are there no badge numbers or name tags, it was not even revealed what agency of the federal government these federal cops were actually employed by. They appeared to consist of direct employees of the Department of Homeland Security, the Federal Protective Service that is supposed to protect federal property, the Border Patrol (though Portland is not anywhere near either the Mexican or Canadian border), the U.S. Marshal Service, and possibly the FBI. There were even reports that some of these federal “police” were mercenaries hired especially for the occasion. But they do not appear to be actual members of the military. Instead, they are a paramilitary force answerable only to Donald Trump. (5)

Though later it seems that these forces were withdrawn from Portland, Trump announced they would be sent to other cities including Seattle, Chicago and Oakland. What these cities have in common is significant populations of non-white people, especially African-Americans. Could Trump use these paramilitary forces, increasingly claiming police powers, to stage a coup d’etat if he loses the November 3 presidential elections?

Trump himself has hinted that he might do just that. When asked by Fox News reporter Chris Wallace whether he would accept the results of the presidential election, Trump answered, “it depends.” It depends! Trump seemed to be saying it depends on him whether there will be a constitutionally mandated presidential and congressional election on November 3 and if there is, whether he will accept the result if he loses and hand power to Democrat Joseph Biden. In early August, Trump floated the idea in a tweet that the presidential election be “postponed” until it can be “safely” held. Remember, Trump has continued to claim that the pandemic is virtually over. Trump has also repeatedly claimed that the election will be “rigged,” especially if mail-in voting is allowed.

After the November 2016 election where he lost the popular vote by almost three million votes to Hillary Clinton, Trump insisted that he had really won the popular vote and that Clinton only appeared to win because non-citizens voted illegally.

Is there a chance the U.S. general election scheduled for November 3 will be postponed or not held at all? Or if Trump loses, will he stage a classical Bonapartist coup d’etat to stay in power?

What the law says

Under the U.S. Constitution and federal elections laws, the simple answer is no to all these questions. The president does not organize federal elections and has no right to either postpone or cancel federal elections. According to a law passed in 1845 — well before the slave owners’ rebellion — federal elections are held on the first Tuesday after November 1. This year this falls on November 3. Under the U.S. Constitution, as amended in the 1930s, the newly elected Congress takes office at noon January 3 (Eastern Standard Time) and the president takes office at noon January 20, 2020. Therefore, under the laws and Constitution of the United States, if Trump is not reelected to a second term, he leaves office at 12 noon on January 20, period.

In theory, Congress could pass a bill in the coming weeks to move the election to another date. However, the election would still have to be held sometime before January 3 when the new Congress takes office. This bill like all bills would have to be passed by both the Republican Senate and the Democratic House and be signed into law by President Donald Trump. Or if Trump were to veto the bill, his veto could be overridden by a two-thirds vote by both the House and Senate.

However, only a constitutional amendment could legally extend Trump’s term beyond noon January 20. With even Republican leaders opposing any move to postpone the election let alone extend Trump’s term, there is zero chance that Congress will pass a law to postpone the election. The only legal way to extend Trump’s term would be a constitutional amendment. To amend the Constitution, the proposed amendment must first be approved by two-thirds of the House of Representatives and two-thirds of the Senate. It must then be approved by the legislatures of two-thirds of the states. The chance of a constitutional amendment being approved before January 20, 2021, that would legally extend Trump’s term is therefore exactly zero.

Therefore, to extend his current term beyond January 20, Trump will have to stage a “putsch” with the support of the military that would break the uninterrupted constitutional rule that has held since the U.S. Constitution went into effect in 1789. The sole exception of the 231 years of uninterrupted constitutional rule is the rebel states during the war of the slave owners’ rebellion (the U.S. Civil War).

The U.S. president as the personification of the state power

Throughout the history of the state, there has been a strong tendency to personify the state power in the personality of an individual. In ancient times, it was claimed that the king was himself a god who represented the gods as a whole on Earth. In Japan, where a monotheistic religion never became dominant, the emperor was considered a god right down to the defeat of the Empire of Japan in 1945. After the triumph of Christianity in the Western world — and later Islam in other countries — the king, the queen, emperor or empress claimed to be appointed directly by God. In modern times, the president or to a lesser extent the prime minister personifies the state because he or she is the choice of “the People” through a free and democratic election. The “People” replace God.

In the U.S., it is the president who is both chief of state and head of government and personifies the state power. The president personifies the state — so far it has always been a he — because it is claimed he was elected by “the People” in a fair and democratic election. However, in the U.S., even in a purely formal sense, the people don’t choose the president. Instead, the president is chosen by the Electoral College. Each U.S. state is free to choose the exact method by which the members of the Electoral College known as electors are chosen. In the beginning, the members of the state legislatures chose the electors who elected the president. This is how George Washington became president without a single dissenting vote.

But in more recent times, each state organizes an election in which all eligible voters — U.S. citizens who have reached the age of 18 and who have not been convicted of a felony (the exact rules vary state by state) — are eligible to vote for the presidential electors. These electors are in turn sworn to vote for a specific presidential candidate. The state legislators and governors of the states then certify the results. After the election, the electors on the first Monday after the second Wednesday in December meet in their respective state capitols and elect the president by majority vote. Finally, the U.S. Congress must certify the results. At that point, the victorious candidate formally becomes the president-elect. (6)

This is what legally must happen before a person can become president of the United States. There are also unofficial rules and rituals that are followed. One unofficial but extremely important rule is that only a Democrat or a Republican can be president. This greatly limits (bourgeois) democracy in the U.S. even when compared to most other capitalist countries. The losing candidate, whether Democratic or Republican, is then expected to concede as soon as possible to the victorious candidate. In recent decades, this is expected to occur on election night when the TV networks using specially designed computer programs “call” the election.

This occurs weeks before the Electoral College formally elects the president and Congress certifies the result. Usually, the actual election of the president by the Electoral College is barely mentioned in the media. For example, in 2016 as soon as it became obvious that Trump would carry the Electoral College, Barack Obama called Hillary Clinton and demanded she concede the election to Donald Trump. Since Clinton really wanted to be president and was widely expected to win, there was some concern that she might resist or at least postpone conceding. This could have sparked a broader movement to keep Trump out of the White House, perhaps because he had lost the popular vote.

When Obama called Clinton demanding that she concede, the result of the popular vote wasn’t even in. Nobody even knew for sure whether Clinton or Trump would win the popular vote. But under the U.S. electoral system, this didn’t matter. It turned out that according to the official returns on a nationwide basis electors pledged to Clinton had gotten almost three million more votes than electors pledged to Trump. But the electors are chosen not on a national but a state basis, and on this basis, electors pledged to Trump were in the majority.

In theory, Clinton could have demanded that the GOP-majority Electoral College (7) bow to the will of the American people, who through the popular vote indicated that they did not want the racist far-right Trump to be president. Also, the popular vote was extremely close in four states — Wisconsin, Michigan, Ohio and Pennsylvania — where electors pledged to Trump had won by extremely narrow margins and pre-election polls had indicated that Clinton would prevail. There was also the problem of widespread Republican voter suppression.

Clinton could have demanded recounts in these states. But all moves for recounts were quashed by the courts. Or should there have been new elections for presidential electors in at least some of these states in light of GOP voter suppression? But the U.S. Constitution does not provide any procedure to hold such elections. Or should the votes of the Republican electors from these states have been disqualified because of the undemocratic and arguably illegal ways in which delegates pledged to Trump had been “elected.” This could have shifted the balance in the Electoral College to Clinton, who was after all the winner in the popular vote.

However, Obama and the Democratic Party rejected such a challenge from the very beginning. Within a few hours, Clinton had already bowed to the overwhelming pressure of President Obama, the Republicans, and the Democratic leadership and conceded the election to Trump. The media began to refer to Trump as the “president-elect,” though from a legal point of view he was not yet the president-elect and only did become the president-elect when the Electoral College voted to make it so in December and Congress certified the vote. This killed any attempt to challenge Trump’s right to assume office, which he indeed had no democratic claim to. Trump, however, did have some legal constitutional basis to claim the presidency due to the many undemocratic features of the U.S. Constitution, written largely by slave owners in 1787 before the establishment of bourgeois democracy in any country on Earth.

In practice, the moment the losing candidate concedes the election the media starts referring to the victorious candidate as the “president-elect.” Unofficially, from the moment a candidate is declared the “president-elect” by the media that person begins to personify in his or her person the authority of the state power though the outgoing president still retains all the constitutional and legal authority of the president until January 20.

Dangers of the transition period

The “lame duck” period between the time a “president-elect” is proclaimed by the media and the time that person assumes office — assuming the incumbent president does not get a new term — the U.S. has in effect two presidents. These are the lame-duck outgoing constitutional president and a “president-elect.” This is a period of potential instability since two people, not one, are personifying the state power. Avoiding instability during this potentially dangerous period depends partially on to what extent the outgoing and incoming president work together. It has generally, but not always, gone smoothly. For example, Obama went out of his way to work closely with Trump even before he was legally president-elect right down to Trump’s assumption of the presidency on January 20, 2016. This process of smooth transition began with Obama’s election-night phone call to Clinton demanding that she immediately concede the election to Trump.

One example of a case where things did not go smoothly is provided by the transition period between Franklin D. Roosevelt’s victory over Republican Herbert Hoover — in both the electoral and popular vote in November 1932 and Roosevelt’s assumption of office on March 4, 1933. (8) Before 1936, the transitional period stretched from November until March 4, when according to the original wording of the Constitution the president began his four-year term in office. The Democrat Roosevelt was widely expected to devalue the U.S. dollar against gold, then pegged at $20.67 to a troy ounce, which defined the “gold dollar.” The outgoing Republican president, the by then widely hated Herbert Hoover, represented Wall Street interests, who were strongly opposed to any devaluation of the dollar.

During the transitional period, wealthy speculators figured that they could enrich themselves by withdrawing dollars from their bank accounts in gold dollar coins, which they were entitled to do under the gold coin standard. When Roosevelt became president and devalued the dollar by raising the dollar price of gold, these speculators figured they would sell their gold dollar coins back to the government or Federal Reserve Banks at a considerable dollar profit.

This speculative “run” on gold dollars led to a drain on the gold reserves of the Federal Reserve Banks that make up the Federal Reserve System. To meet the demand for gold coin dollars from their customers, the commercial banks were obliged to withdraw money from their accounts at the Federal Reserve Banks in the form of gold dollars. The result was an “internal drain” where gold flowed out of the Federal Reserve System, not to foreign countries such as is the case in an “external drain” but rather into the private hoards of speculators living within the United States.

Since the laws of the time required the Federal Reserve Banks to keep 40 cents in gold for each dollar in Federal Reserve Notes they issued, it was feared that the Federal Reserve Banks themselves could run out of dollars and even face bankruptcy much like the Bank of England could in theory run out of its own banknotes and face bankruptcy under the Bank Act of 1844.

Fearing that the banking system as a whole was about to run out of dollars, many bank deposit owners who were not interested in speculating in gold began to demand dollar bills — Federal Reserve Notes — from their banks before they ran out of cash. By January 1933, a new bank run was underway that was even worse than the runs of 1931-32. An incipient recovery in the U.S. economy that had begun in July 1932, which was the actual bottom of the global industrial cycle, was in the U.S. interrupted. Once again credit froze up causing the U.S. economy to again sink causing unemployment to rise even more. When Roosevelt assumed office, the first thing he did was declare a bank holiday. Roosevelt’s famous words in his inaugural address to the effect that we “have nothing to fear but fear itself” was a reference to the ongoing bank run. Roosevelt was saying that if people didn’t fear that their bank would run out of money and kept their money in the bank, the bank would not run out of money.

This final bank crisis could have been avoided if Roosevelt and Hoover had worked together during the transitional period. Either Hoover could have suspended the convertibility of Federal Reserve Notes and other forms of currency into gold — which Roosevelt did anyway in March 1933, which ended the run — or Roosevelt could have issued a clear statement that he would not devalue the dollar. The failure of the outgoing Herbert Hoover and incoming Franklin Roosevelt to work together on the currency question during the November-March transitional period had the effect of extending the super-crisis until March 1933 which further deepened the Depression leading to even more unemployment. (9)

A more recent example of the “perils of the transition period” is provided by the 2000 presidential election. On election night November 2000, Republican George W. Bush was declared the winner in Florida, which put Bush over the top in the Electoral College. Gore promptly conceded to George W. Bush and the media began to describe Bush as the “president-elect.” It turned out, however, that Gore had won the popular vote by a narrow margin.

Then Bush’s so-called victory in Florida kept narrowing and Gore withdrew his concession, which had no formal legal meaning. The media had to stop describing Bush as the “president-elect.” After weeks of in-fighting and considerable Republican intimidation, the Supreme Court in a purely partisan 5-4 vote stopped an ongoing recount. It later became obvious that had the recount continued it would have confirmed Albert Gore’s victory in both the popular vote and the Electoral College.

By the votes of five partisan Republican Supreme Court Justices, the result of a presidential election was reversed and George W. Bush was declared president-elect and sworn in on January 20, 2001, instead of Albert Gore. However, Gore refused to contest Bush’s “victory” and, over the opposition of the Black Congressional Caucus, congressional Democrats voted to certify an election that had just been stolen from them.

Will Trump steal the 2020 election?

Considering the slight differences in policy both domestic and foreign between Trump and the extremely conservative Joseph Biden, it would seem unlikely that Trump will find enough support to end more than 230 years of uninterrupted constitutional rule. It is this long period that gives the U.S. state its legitimacy in the eyes of the American people. The ruling U.S. capitalist class would be foolish to throw such an asset away lightly. As president, Biden would be expected to avoid Trump’s extremely provocative racist rhetoric at home and extremely chauvinist verbal attacks against U.S. “enemies” such as China and “allies” such as Germany. But the essence of U.S. imperialism and the policies of its state both within the U.S. and around the world would remain unchanged.

However, none of this precludes the possibility of Trump stealing an election by bending the laws and even breaking them as long as the pretext of constitutional rule is maintained. Indeed, this is an old American tradition. Tammany Hall, the corrupt Democratic machine that dominated New York City politics from the early 19th century until the 1960s, was notorious for the slogan “vote early and vote often.” Chicago, also home of a corrupt Democratic machine, was infamous for its “Chicago Methods” of stealing elections.

Indeed, there is good reason to believe that John F. Kennedy won the presidency in 1960 only because the Chicago machine and the Chicago “Outfit” — the mob — managed to steal enough votes to swing the state of Illinois vote from Republican Richard Nixon to the Democratic John F. Kennedy. But just like Democrats Albert Gore in 2000 and Hillary Clinton in 2016 conceded elections that were stolen from them, the Republican Nixon conceded the election of 1960 that Democrat John F. Kennedy had stolen from him. And most important of all, the post-slavery “Jim Crow” system of apartheid in the U.S. South was built in no small measure by election stealing by the Democratic Party achieved through the illegal and unconstitutional suppression of the African-American vote.

How Trump and the Republicans hope to steal the election of 2020

U.S. elections are undemocratic compared to most capitalist countries for many reasons. One of these is that elections are not held on a holiday or a weekend like they are in virtually all other countries, but on a workday. This gives individual bosses, most of whom are Republicans, many ways to influence the election. If they believe that their workers are likely to vote Democratic, they can insist the workers work long hours on election day and threaten them with dismissal if they don’t put in a full day’s work. Exhausted and not inspired by the milk-toast opposition of “pro-business” Democrats to the Republicans, they are likely as not to go home and hit the couch on election day rather than stand in line for hours to vote Democratic.

On the other hand, the bosses can encourage their employees to vote if they expect them to vote Republican. In that case, they can urge them to take time off and do their “civic duty” to vote and promise not to dock their pay. Even if an individual boss — or supervisor — doesn’t do this, the reality is that after putting in a full working day workers will likely skip voting. Therefore, under today’s political conditions keeping the election day on a weekday strongly favors the Republicans over the Democrats. It also favors “corporate Democrats” over “progressive Democrats” in primary elections.

However, some but not all states — remember in the U.S., elections are organized by the states not the federal government — have adopted policies that largely overcome the problem created by holding elections on a workday making their elections in this respect more (bourgeois) democratic. Among these is mail-in voting. Under this system, a ballot is mailed to the eligible voters — either all voters, which is the democratic (with a small “d”) way to do it or on request of the individual voter, a few weeks before the election. This way voters have time to decide at their convenience exactly when to mark the ballot and then mail it in. They have more time to consider the issues and they are less likely to make a mistake in marking the ballot and can correct any mistake they do make.

This year, the still rising (in the U.S.) COVID-19 pandemic means that if you stand in line to vote in a “booth” on November 3, you will not only experience an inconvenience, you will be risking your life and the lives of your loved ones. The majority, though of course not all, U.S. voters prefer Joseph Biden as a “lesser evil” to the widely hated Donald Trump. They might be willing to go out of their way or vote after an exhausting working day to help get Trump out of the White House. But how many will be willing to risk their lives to do this? And of those who are willing to risk their lives, how many are willing to risk the lives of family members if they catch COVID-19 while standing in line to vote. The Republicans and Trump are betting that many potential Biden voters will not be willing to risk the lives of themselves and/or their loved ones simply to vote for the “lesser-evil business Democrat” Joseph Biden.

Trump, therefore, has made a special issue of opposing voting by mail. He claims that voting by mail enables widespread “fraud” supposedly because it will enable many people not legally eligible to vote — in reality, he means people of color and even poor whites who normally do not vote — to vote. For example, Trump threatened to sue the State of Nevada whose legislature, now dominated by Democrats, has just passed a vote-by-mail law. Trump has even claimed that if voting by mail is allowed, not a single Republican will ever again be elected to any office.

Though exaggerated, there is some truth in Trump’s claim. In many U.S. elections, it is a rule of thumb that if voter turnout is high the Democrat wins but if low the Republican wins. Many elections are won by the Republicans because potential Democratic voters, though more numerous than Republican voters are not inspired enough to bother to vote. But if voting was made easy — and under the conditions of the pandemic safe — through mail-in voting under present U.S. political conditions where there is still little socialist class political consciousness among the working class, the Democrats would win many more elections than they are now. And in the future, it would increase the chances that working-class candidates could defeat both the Republicans and the Democrats and any other capitalist candidates.

By opposing mail-in voting, Trump is saying to the Republicans that if such voting is allowed — which is the only democratic and safe way to conduct an election in light of the COVID-19 pandemic — many Republican senators, congresspeople and other elected officials considered “safe” up to now will face defeat. Privately, while many Republican officeholders up for reelection this year would prefer Biden in the White House to Trump, they can’t say this. If they do, they will lose the votes of Trump’s fanatical but highly motivated racist supporters whose votes they need if they are to win (re)election. (10)

Trump has also stepped up his attack on the U.S. post office. The U.S. Postal Service and its workers have been under attack for years, mostly by Republicans, who hope to privatize its functions. The post office has also been pressured by the rise of email and other forms of social media. But this year the attacks on the post office are taking on a new significance because voting by mail is the only safe way to vote this year and here the post office retains its full importance. Under the new postmaster-general, pro-Trump Republican Louis DeJoy, mail deliveries have slowed considerably according to the postal workers’ union. Also, many mailboxes and mail-sorting machines have under the pro-Trump DeJoy been removed.

While public outrage has forced DeJoy to promise not to remove any more mail boxes and sorting equipment, he has indicated he will not replace those that have already been removed. If this situation is not changed by November, many voters who are rightly concerned about COVID-19 will not vote. This will help Trump and the Republicans. It will also mean that if voting by mail is still widespread despite the obstacles that Trump’s and DeJoy’s assault on the post office and its workers have erected, reporting of the November elections results will be delayed. This increases the chances that the results will be contested, especially if Trump loses.

Finally, we get to Trump’s statements that he may not “accept the results” because they will be fake, especially if voting by mail is allowed, because the results will “be rigged.” By “rigging,” Trump means more people who are legally entitled to vote exercise that right.

As we saw, a presidential candidate only becomes unofficially but not legally the “president-elect” when his or her opponent concedes. However, once the person at the head of the ticket does “concede” it becomes hard to build a movement in the streets or elsewhere to contest a stolen election. Richard Nixon in 1960, Albert Gore in 2000, and Hillary Clinton in 2016 all put the stability of the state power ahead of the rules of both formal democracy and the legalities that govern U.S. elections.

Trump in a typically Bonapartist attempt to blackmail the U.S. ruling class hints that he will not concede the election even if the broadcast networks project Joseph Biden as the winner in the Electoral College. Instead, he may declare that the election was rigged. Perhaps Trump will challenge the result in the increasingly Republican-controlled courts, including the Supreme Court. Remember, the Republican Supreme Court reversed the results of the 2000 elections by handing the White House to the defeated Republican candidate George W. Bush. Could they do so again 2020?

If Trump does not concede, according to all traditions the media will not be able to declare Joseph Biden the “president-elect.” Then, Trump’s reactionary-racist base, perhaps even in armed demonstrations, may rally in the streets demanding the courts declare Trump the winner. By allowing the elections of 2000 and 2016 to be stolen from them without a fight, the Democrats have made it much easier for Trump to steal the election from Biden in 2020.

Trump has good reason to believe that Biden, who strongly believes in “bipartisanship” with the Republicans on not only foreign but domestic policy as well, will quickly concede the election to him if Trump has any pretext at all for claiming he won the Electoral College. Biden and the rest of the reactionary pro-corporate leadership of the Democratic Party want a strong Republican Party because only the widespread fear and hatred of the Republican Party enables the Democratic leaders to hold their increasingly shaky multi-class coalition together. If Biden concedes the election, the media will declare Trump “reelected,” and he will be sworn in for his second term as the unchallenged “legitimate” president of the United States on January 20, 2020.

The bottom line is that Biden will have to win “big” if he is to win at all.

The monetary dangers of the transition period

One factor from 1932-1933 that didn’t apply for the 2016 transition period when the dollar was strong but could very well apply in 2020-2021 is the problem of the dollar’s value. The dollar was under pressure during the 1932-33 transition period for four reasons. One was that Britain, then still a major industrial nation and competitor of the United States, had just devalued the pound during the global banking crisis of 1931 putting pressure on the U.S. to do likewise. The second reason was that because the Democratic Party coalition in those days included silver miners who were dreaming of massive Treasury purchases of silver if not the return to the free coinage of silver. (11) The third reason was that during the super-crisis the demand for the devaluation of the dollar had grown because of the widespread belief that an increase in the means of circulation as measured in the arbitrary unit of measurement we call the U.S. dollar would boost effective demand and thus end the crisis of mass unemployment. Also, heavily indebted farmers and small business people believed that inflation would ease the burden of debt. So when the Democratic platform called for maintaining “a sound dollar at all costs” but did not mention the gold standard, this was widely and correctly viewed as a call for a dollar devaluation.

Today the dollar is again under pressure as indicated by the rising dollar price of gold, which recently hit $2,000 for the first time. If, or rather when, the dollar price of gold hits $2,067 an ounce, one U.S. dollar will represent what one U.S. penny represented in terms of gold when Roosevelt assumed office. If the recent “bull move” in gold turns into a full-scale run on the U.S. dollar, the entire international monetary and credit system that is built on the dollar system will be in peril. One thing that could trigger such a run, would be a period of acute political instability in the U.S. associated with the November-January transition period.

Trump has been hinting that he won’t leave the White House quietly and will contest the election both in the courts and maybe in the street if Biden appears to carry the Electoral College. In such a contested election, the ruling class will likely put pressure on Biden and the Democrats to concede if only to avoid or stop a run on the dollar. Under today’s conditions, this would take the form of an accelerating rise in the dollar price of gold, with price increases spreading to other commodities.

Trump, the Republicans, and the Democrats were willing to expand unemployment insurance temporarily adding an extra $600 a month and a one-time $1,200 — about enough to pay a month’s rent — while they handed out trillions of U.S. dollars newly created by the Federal Reserve System to the capitalists. The U.S. federal deficit is expected to rise from about $1 trillion a year in the pre-COVID period to $4 trillion. However, the combination of the huge amount of cash idled by shutdowns and people staying away from the malls plus the trillions of additional U.S. dollars created by the Federal Reserve System was expected to make the situation manageable.

The danger of large deficits for the U.S. government does not lie in the government, which can pay off its debts in Federal Reserve-created dollars, being unable to pay its bills. As the supporters of Modern Monetary Theory are always pointing out, since the U.S. federal government unlike many other governments can pay its debt in Federal Reserve-created legal-tender dollars, it seems unlikely that the central bank would ever allow the U.S. Treasury to go bankrupt. (12) Rather, the danger lies in the upward pressure on interest rates that occurs when the U.S. Treasury competes with private borrowers — corporations, banks, and individual consumers — for loans. All things remaining equal, the larger the federal deficit the greater the chance of the private credit markets freezing up like they last did in 2008.

However, when the economy is depressed, money tends to fall out of circulation and accumulates in the banks. This situation allows the U.S. federal government during depressed times to run much larger deficits without putting dangerous upward pressure on interest rates than it can do in more prosperous times. The Federal Reserve for its part was counting on the dollar’s role as the main international means of payments to prevent any dangerous depreciation of the dollar. Indeed, when the credit markets came close to freezing up in March, a rush into U.S. dollars led to a brief drop in the dollar price of gold accompanied by a rise in the dollar’s exchange rate against other currencies. This allowed the Federal Reserve to engineer an unprecedented expansion of the dollar monetary base without having to face an immediate inflation-breeding — and ultimately interest rates increasing — run on the U.S. dollar.

The hope in the White House, Congress, and the Fed was that by mid-summer the economy would be rebounding as the arrival of warm humid summer weather would cause the pandemic to enter a period of remission. Virologists and other medical experts warned the U.S. government that this was possible but could not be relied on since there are many viruses that are not seasonal. The U.S. government, however, disregarded these warnings.

The Federal Reserve hoped that it would be able to stave off a dollar crisis by destroying some of the dollars it created in March and April without throwing the U.S. economy back into recession. In that case, Trump might even be able to win reelection — or at least steal the election — based on a “successful” handling of the pandemic and a sharp post-COVID rebound in the economy. Indeed, in March as the seriousness of the pandemic became apparent, Trump enjoyed a brief popularity bump that is typically seen at the beginning of wars when the public rallies around the “commander in chief.” Trump, who is fascinated by military pomp, declared himself a “war-time president,” much as George W. Bush did in the days right after 9/11.

However, by late July this scenario was unraveling on virtually every front. While the pandemic appears to be entering at least a remission in China much of the rest of Asia, as well as Australia and New Zealand (where it is winter), in the U.S. new cases and hospitalizations began to climb once again. The surge in cases was particularly strong in Southern and Western states under Republican control where the “reopening for business” preceded particularly rapidly, but also in “progressive” California, firmly under Democratic control, which had also moved to “reopen for business.”

Recessionary shocks

With the COVID pandemic soaring during the hot and humid U.S. mid-summer, ruling-class economists and pundits split into two camps. One camp demanded that the stimulus, especially the $600 in extra unemployment payments, be extended. Here I am not talking about progressives who of course favor the continuation of the expanded unemployment payments and indeed making them permanent. I am referring to ruling-class economists such as Larry Summers.

“I personally doubt what I think is the market’s view, which is that we’re going to have most people vaccinated and life returning to normal, sometime by spring of next year,” Summers told Bloomberg News. “Everybody makes a mistake — they focus on the size of the package, and they don’t focus on the duration of the package, so they don’t focus on the rate of flow of stimulus.” Summers was saying that you can’t have a Keynesian-style “stimulus program” and then withdraw it before recovery becomes “self-sustaining” without the economy sliding back into recession or worse.

Warning from the precious metals markets

But on the other side, there is the warning from the precious metals markets that is pushing the policymakers in the Trump administration, Congress (especially the Republican Senate), and the Federal Reserve System in the opposite direction. Chris Vermeulen, a writer for the on-line financial website FX Empire, wrote in the July 23 edition, “Precious metals have been on the move higher for much of the past 24+ months.” Precious metals include the money commodity gold. This reminds us that despite the boasting of the Trump administration, generally echoed by the mainstream anti-Trump “resistance media,” a cyclical recession was approaching before the pandemic struck. “Yet,” Vermeulen writes, “certain forces have attempted to quell the upside advance as global investors adopt a more fearful stance relating to the global economy. … Our research team has been warning that Silver would become the Super Hero of metals in the near future. … ”

Silver versus gold

As we know, gold and not silver is the main money commodity today. Silver for many thousands of years was used alongside gold as a money metal. However, the value of silver — defined as the quantity of labor socially necessary to produce a given weight of silver — starting in the last third of the 19th century has fallen sharply both absolutely and relative to gold. Therefore, in contrast to gold, the cheapening of silver has encouraged the growth of industrial as opposed to monetary uses of silver. During the final phase of a boom, the U.S. dollar comes under downward pressure against gold (rising dollar price of gold). However, even though the boom is in its final phase it still goes on.

At this stage in the industrial cycle, silver gets an extra boost because it is seen by investors as a convenient hedge against the threat of inflation — and stagflation — but it also enjoys a boost in demand relative to gold because industry is still expanding. The dollar price of silver, therefore, becomes especially frothy. When the dollar begins to depreciate against gold late in the boom, the dollar price inflation shows up first in silver and other precious metals whose use value isn’t primarily monetary but rather industrial.

If the depreciation of the dollar against gold continues, the dollar price inflation spreads from non-gold precious metals to oil, agricultural commodities, wholesale commodities as a whole — this stage was reached 2007-08 just before the panic struck — and finally, if the depreciation continues, to retail prices. This final stage was avoided in 2008 when the Bernanke Fed failed, despite other “bold actions,” to expand the dollar-denominated monetary base before the real panic struck. As a result, stagflation was avoided at that time. The U.S. and world economy went straight into the Great Recession instead.

Once the recession hits with full force — whether stagflation develops or not — the demand for silver as an industrial metal drops sharply as the demand for industrial products collapses. The dollar price of silver will decline relative to gold even though the dollar price of gold drops too, though to a lesser extent. The dollar price of silver is hit both by the sharp decline for it as an inflation hedge and as an industrial commodity. This shows that it is gold and not silver or other precious metal whose use value is primarily industrial that functions under today’s conditions as the actual money commodity.

Several days after Vermeulen raised his warning in FX Empire, writers Steven Frank, Vivien Lou Chen, and Elena Mazneva in the July 25 edition of Bloomberg News pointed to the same trend that Mr. Vermeulen spotted a few days earlier:

“For the pandemic of 2020 would soon show itself to be the driving force behind one of the most ferocious rallies the gold market has ever seen. At the close of trading in New York on Friday, bullion had spiraled to $1,902.02 an ounce, some 30% higher than the low it hit in March and just 1% off a record high set back in 2011.”

Frank, Chen and Mazneva go on to quote Mark Mobius of Mobius Capital Partners as saying, “When interest rates are zero or near zero, then gold is an attractive medium to have because you don’t have to worry about not getting interest on your gold.”

In recent weeks, the Federal Reserve Board has somewhat reduced the U.S. dollar monetary base, which the Fed controls. The monetary base consists of actual green dollar currency plus coins made of base metals, pennies, nickels, quarters, half-dollar pieces, and though they have never been popular, base-metal dollar coins. Also, the monetary base includes the dollar-denominated deposits that the commercial banks are required to maintain with the Federal Reserve. Unlike in 1932-33, the Federal Reserve Banks can now simply go to the U.S. Treasury and request it to print additional paper dollars and mint base-metal coins to meet the demands for paper dollars and base-metal coins from the commercial banks. Under the present currency system, unlike in 1932-33, the Federal Reserve Banks do not have to maintain gold reserves to back the dollars they issue. Instead, the gold reserves are held by the U.S. Treasury, which, unlike the Federal Reserve Banks, is not allowed under the present rules to issue currency.

Under the current system, a run on the U.S. dollar into gold doesn’t take the form of a fall in the gold reserves of the Federal Reserve Banks. Instead, it takes the form of a rising dollar price of gold on the open market. It is possible that if a run against the dollar into gold reaches extreme levels, the U.S. Treasury might sell some of its gold to knock the dollar price of gold back down though it would do so at the cost of reducing its ability to sell more gold in the future. However, the U.S. Treasury seems determined to resist the sale of gold, though it can still do so if the treasury secretary and the White House feel it is necessary. For now, the burden of checking the recent rise in the dollar price of gold falls on the Federal Reserve System.

As the Fed in response to the COVID-19 crisis flooded the banking system with newly created dollars, interest rates in the U.S. and around the world plummeted. For example, at the beginning of 2020, the rate of interest on 10-year government bonds was on January 10, 2020, quoted at 1.825 percent. The dollar price of gold was $1,560 per troy ounce. By July 31, the rate of interest had fallen to 0.536 percent, a dramatic decline. This reflected both the huge expansion in the quantity of the Federal Reserve-created dollars and the COVID-19 depression that reduced the demand by the industrial capitalists and others for loan money. However, the fall in the long-term rate of interest also increased the dollar price of gold for the first time above the psychologically significant level of $2,000 an ounce, though it later fell back.

On August 7, the dramatic drop in the long-term interest rate showed signs of “bottoming out” with the rate on the 10-year bond quoted at 0.562, but this was not enough to prevent the dollar price of gold from rising to $2,028, the first time it was quoted above $2,000 on a Friday. The following week, the rate of interest on the 10-year bond rose more convincingly to 0.709, the highest rate on a Friday close since June. This was finally enough to halt the rise in the dollar price of gold, which fell back to $1,950 on Aug. 14. The rising rate of interest has occurred not only because of the Fed’s destruction of some of the extra dollars it created but also because of the higher stock market and commodity prices.

According to the U.S. Labor Department, consumer prices increased 0.6 percent in July. Such a double-digit annual rate of increase in the U.S. consumer price index has been rare in the post-stagflation era. The last time consumer prices increased at a faster rate was January 1991. Could double-digit inflation at the consumer price level already be here? The U.S. producer — wholesale — price index also increased 0.6 percent, according to official government statistics, the same double-digit rate on an annual basis.

In plain language, if the Fed wants to stop the recent depreciation of the U.S. dollar, which is already breeding inflation at both the wholesale and retail level, they will have to allow interest rates to rise, which would then make it much more difficult for the federal government to continue to run $4 trillion deficits without risking a seize-up of the private credit markets. If the federal government “stimulative” policies are to work, they must be backed up by a continuation of the Federal Reserve monetary policies that keeps interest rates near zero over the coming months. And such Fed policies can only be successful if the dollar doesn’t fall “off the cliff” against gold.

But what happens if the Federal Reserve ignores the rising dollar price of gold to support “stimulus policies”? This will mean that “stagflation will arrive sooner rather than later. And such stagflation raises the specter of a “Greater Depression” when the new “Volcker shock” that would then be necessary to once again stabilize the dollar kicks in. “All these things,” Chen Mazneva and Mobius write, “when taken together, have even triggered concern in some financial circles that stagflation — a rare combination of sluggish growth and rising inflation that erodes the value of fixed-income investments — could take hold across parts of the developed world.”

Stagflation, as we explained last month, is always succeeded by a recession, and given today’s higher rate of indebtedness than in the days of the last Volcker shock means the recession that would follow would be nasty indeed compared to the early 1980s recession, perhaps even a “Greater Depression” worse than the 1930s. Therefore, a section of the capitalist ruling class is saying, let’s end the “stimulus” now, despite the deflationary risks pointed out by Larry Summers and other ruling-class voices, before we sink even deeper into this quicksand.

We now see another reason why the Democrats and Republicans and the Trump administration are resisting the extension of the CARES Act besides the drive of the U.S. capitalist class to increase the rate of surplus value. First, neither Trump, the Republicans or the Democrats are willing to cut the trillion-dollar-plus military budget. This even though no foreign country is in a position to attack U.S. territory except by launching a suicidal nuclear strike. If the government was willing to cut the military budget, this would create additional room for the Treasury to raise money for the unemployed and other victims of COVID-19 without putting dangerous upward pressure on interest rates. However, this course is ruled out by the insistence of the Republicans and the Democrats as well to not only maintain the current level of military spending but increase it further.

Increasing deficits by putting upward pressure on the rate of interest could well shorten or at least weaken, if not pull the rug from under, any recovery from the COVID-19 depression. Alternately, if the Fed resumes the creation of still more dollars to counteract the upward pressure that the federal government deficits are putting on interest rates — the course most consistently advocated by the supporters of Modern Monetary Theory — the incipient run on the U.S. dollar into gold will intensify, pushing the U.S. and world capitalist economy sooner rather than later into a “Greater Depression”-breeding stagflation.

Next month, we will explore this question further when we take up the question of how finance capital exercises its dictatorship under the present highly unstable and rapidly evolving economic and political conditions.

To be continued.

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1 It is widely believed that the Democratic Party under the leadership of Franklin D. Roosevelt was responsible for the introduction of Social Security. In reality, the party that deserves the credit is the Communist Party, then the U.S. branch of the Communist International. The growth of the Communist Party during the 1930s, combined with its growing influence in the then rapidly expanding industrial union movement, obliged Roosevelt and the Democrats to finally grant the Social Security old-age pension and unemployment insurance programs.

If the Communist International and its U.S. branch had not moved so quickly to the right after the victory of fascism in Germany, becoming virtual Roosevelt supporters by the middle of the decade, what we now call single-payer government health insurance would probably have been won back in the 1930s. As it was, when Roosevelt first introduced Social Security legislation, it included universal government health insurance. But with Communist Party support from the left assured, Roosevelt dropped his proposal to include health insurance in the original Social Security legislation after the American Medical Association opposed it.

In the 1960s, there was another period of growing radicalization, which the U.S. ruling class was determined to stem. Since workers over 65 are rarely offered jobs by the capitalists, the “employer-centered” health insurance system doesn’t work for them. For their part, the capitalists are less resistant to extending government unemployment insurance in the form of Medicare to people over 65 since such people are generally not viewed as part of the labor market.

However, the Medicare system that came out of the 1960s is severely flawed even for people over 65. Medicare does not cover dental or vision. Private insurance companies are more willing to sell dental and vision insurance to people over 65 than are they for general health insurance. As a result, the Medicare program passed by Democrat Lyndon Johnson’s “Great Society” carefully left dental and vision out of Medicare.

This enables private insurance companies to prey on people over 65 by offering “supplementary insurance” that most older people in the U.S. are forced to purchase. To transform the current U.S. Medicare system into a decent system of health care as a human right and not a commodity, it must be extended not only to people of all ages, it must also be extended to cover dental and vision.

However, Trump and other capitalists want to get rid of Medicare even in its current inadequate form, as well as the Social Security old-age pensions and unemployment insurance. The only question for the capitalists is whether they can get away with this politically. The way Trump and the capitalists, in general, hope to do this is first to cut or eliminate the payroll taxes that finance the Social Security, unemployment insurance, and Medicare trust funds.

In 2020, incomes over $137,700 are not subject to Social Security taxes, though they are subject to the Medicare taxes. In addition, income from dividends, interest and other “investment income” is not subject to Social Security taxes. Therefore, the Social Security tax is highly regressive and Trump is counting on his attempts to cut or even eliminate the Social Security and Medicare taxes to be popular with workers who feel they are being unfairly taxed. Later on, when the misled workers realize that they made a mistake, it will, Trump and the capitalists who are supporting him hope, be too late. (back)

2 In the 19th century, the British Parliament won control of the executive power from the monarchy. Though the prime minister is still formally nominated by the British monarch, the nomination is expected to go to the leader of the strongest party in parliament — or coalition of parties — to form a government. Only under exceptional circumstances, such as the winning of a parliamentary majority by a party committed to socialism, would the monarch be expected to do otherwise. Similarly, Parliament can remove the prime minister at any time through a vote of no confidence. (back)

3 Even though the Republicans like to pose as defenders of “states’ rights” and “local government” against the national government, the GOP opposed any financial aid to the states when the CARES Act was under discussion. Democrats bowed to the Republicans when the act was passed by Congress in March. (back)

4 This reminds some of the operations of “death squads” in Latin American countries where people, generally leftists and trade unionists and peasant leaders, simply “disappear” and are never seen again. This has not been the case so far with Trump’s paramilitary forces, since so far people have “disappeared” only for a few hours and have not been killed. However, it is a step in the direction of death squads. For decades, the U.S. government has supported the operations of death squads in Latin America as part of the struggle against the workers’ and peasants’ movements. It is a natural progression to import the same methods to the U.S. as the economic, social and political crises of United States capitalism grow worse. (back)

5 Richard Nixon created a paramilitary force nicknamed “the plumbers” whose purpose was to prevent the leaking out of operations of the Nixon administration against its opponents. Just as actual plumbers fixed leaking pipes, Nixon’s “plumbers” aimed to “fix” government leaks. The plumbers were made up largely of counterrevolutionary Cuban emigrants who were former employees of the Central Intelligence Agency. At one point, “the plumbers” suggested that the famous Vietnam-era whistle-blower Daniel Ellsberg be “neutralized.” One of the reasons, if not the main reason, that Richard Nixon was ousted from office was that he created “the plumbers,” which operated a private secret police force answerable to him alone. The plumbers operated outside the official police and spy systems that are designed to serve the capitalist ruling class as a whole, not individual politicians. (back)

6 If no candidate wins a majority in the Electoral College, the election of the president shifts to the House of Representatives. However, it is highly unlikely this will happen this year because only Democrat Joseph Biden and Republican Donald Trump have any chance of winning votes in the Electoral College. Therefore, either Biden or Trump will win the Electoral College in 2020.

There is, however, a slight but real possibility that since the number of electors is 538, which happens to be a round number, the Electoral College vote could end in a tie. In that case, the election would move to the House of Representatives. Who would become president on January 20 would then depend on the House. However, in the House, it is not one congressperson one vote but rather one state one vote. If the House that emerges from the election has the same composition as the current House, the Democrats woule have a majority but the Republicans would have a majority in the number of state delegations.

In that case, Trump would remain in the White House unless enough Republicans defect to Biden.

The House vote could also tie because there are exactly 50 states in the U.S. union, also a round number, which would open up a legal nightmare. Such an outcome is improbable but by no means impossible. (back)

7 A Supreme Court decision in July has made a movement to demand that the Electoral College elect the person who wins the majority of the popular vote much more difficult. In 2016, there was some talk that the Electoral College might be used to prevent the unqualified Trump from becoming president in the “unlikely” event that Trump prevailed in the election for electors.

One such proposed compromise was that some Republican electors be convinced to vote for another Republican, for example, the African-American general and George W. Bush secretary of state Colin Powell instead of the racist Trump. Then under the proposed compromise, the Democratic electors would vote for Powell as well instead of Hillary Clinton. The Republican and “highly qualified” Powell would then carry the Electoral College and control the White House.

The idea gained no traction, especially after Clinton at the demand of President Obama conceded the election to Trump on election night. But some Democratic electors pledged to Clinton decided to exercise their constitutional power to elect the president by voting for Powell instead of Clinton. However, some states have laws that require electors to vote for the candidate they are pledged to. If they fail to vote for the candidate they are pledged to, they are fined $1,000. The electors who were fined for voting for Powell rather than Clinton then sued in the courts claiming that the state law violates the federal Constitution, which grants them the exclusive power of choosing the president.

Not surprisingly, the Republican members of the court voted to uphold the state law. After all, both George W. Bush and Donald Trump, even without taking into account GOP voter suppression, lost the popular vote but captured the White House through the Electoral College. However, the Democratic Supreme Court justices also voted to uphold the law. Since the Electoral College system under today’s conditions strongly favors the Republicans, the chance that Donald Trump will be “reelected” by the Electoral College to a second term has been increased by the Supreme Court’s decision. (back)9 Because the transition period between November 1932 and March 1933 went so badly, the 20th amendment to the U.S. Constitution was passed in 1933 to move the date that the president begins his or her term from March 4 to January 20. Imagine what could happen if, with an unstable U.S. dollar, Biden were to win the Electoral College but Trump, who has shown contempt for constitutional legality, were to retain all the powers of the presidency until March 4. (back)

8 Because the transition period between November 1932 and March 1933 went so badly, the 20th amendment to the U.S. Constitution was passed in 1933 to move the date that the president begins his or her term from March 4 to January 20. Imagine what could happen if, with an unstable U.S. dollar, Biden were to win the Electoral College but Trump, who has shown contempt for constitutional legality, were to retain all the powers of the presidency president until March 4. (back)

9 As it turned out, the Roosevelt administration insisted that the gold coins be sold to the government at the old mint price of gold of $20.67. It is possible that some very wealthy speculators shipped the gold dollars abroad and melted them down and then sold them for paper dollars on the international market at the now higher market prices of gold.

In addition to making the dollar incontrovertible to gold within the U.S., the administration ordered the Treasury to buy gold bullion on the international market at higher and higher dollar gold prices. The U.S. economy experienced a series of inflationary “mini-booms” followed by “mini-recessions” whenever the Treasury’s gold purchases were paused. Finally, gold was stabilized at the new official price of $35 a troy ounce in 1934. At that point, vast amounts of gold began flowing into the United States Treasury from abroad and the U.S. cyclical recovery from the super-crisis assumed a smooth upward path until the “Roosevelt recession” of 1937-38 . (back)

10 Many important Republican leaders who are not running for office this year have endorsed the Biden-Harris ticket and some even spoke at the virtual Democratic convention. We can assume that many Republicans who are up for reelection but will need Trump’s racist voters in their future elections privately agree with the Republican leaders who have endorsed Biden-Harris but cannot openly say so in public because if they do not support Trump they will lose the votes of the racist Republican “base.” More on this important development next month. (back)

11 The free coinage of a precious metal means the mint will coin in legal-tender currency any quantity of the precious metal that is brought to it. Democratic presidential candidate William Jennings Bryan in 1896 famously demanded that silver be freely coined at a pre-1873 ratio of 16 to one. This demand, if it had been carried out, would have meant that the cheaper silver dollar would have replaced the dearer gold dollar since the value of silver had fallen considerably against the gold in the preceding decades. Gold dollars would either have been hoarded or melted down into bullion and would have vanished from circulation.

The Roosevelt administration in the end rejected any return to the free coinage of silver. But it did carry out a costly and wasteful program of massive silver purchases that enriched silver-mining capitalists. And as Milton Friedman pointed out, to give the devil his due, this created massive problems for China, whose currency was still on the silver standard, by effectively revaluing the Chinese currency against the U.S. dollar by raising the dollar price and therefore the Chinese yuan price of silver. (back)

12 There is still one situation where this could happen. The U.S. government might repudiate or at least slow the payment of some of its dollar-denominated debt if this were the only way an inflationary, interest-rate-raising run on the U.S. dollar into gold could be halted. The continued explosion of the U.S. federal debt increases the chances that the day will come when the federal government will find itself in such a situation. (back)


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