Towns, cities face drastic service cuts

Crises of overproduction have occurred with destructive regularity throughout the history of capitalism. During these cyclical crises, the ruling class systematically tries to force the working class to bear the brunt of the fallout.

In the current crisis, the systematic attacks on the working class and oppressed are painfully clear. Millions of families are being forced from their homes by foreclosures. Massive layoffs have begun across all sectors of the economy.

It is the workers who are being forced to pay the toll for a crisis that the bankers and bosses caused. This crisis has brought to the forefront class antagonisms that the superrich have long sought to obscure.

Now come the latest attacks: plans for even more drastic cuts in city and town services across the U.S. Programs that were never adequately funded during the so-called “boom” times are now faced with devastating funding cuts during the economic bust.

These intensifying cuts are threatened in areas ranging from infrastructure development in poor rural communities to social service programs in poverty-stricken major cities. The cuts are being targeted at services that many workers and oppressed populations depend on for survival, whether in rural towns or urban areas.

Intensifying cuts in services such as HIV/AIDS programs, outreach to the homeless, meal delivery programs for homebound elderly, community health clinics that serve the uninsured—all will have an increasingly deadly impact on oppressed communities.

These criminal cuts in needed services are part of the ruling class’s intensifying war against the working class during this time of crisis. They are likely to be further exacerbated in the coming months as capitalist politicians of both parties seek to address ever widening budget shortfalls by taking more away from the workers, especially those who have already fallen into deep poverty.

Most of the money in city and state budgets comes from tax revenue and municipal bond issuances. Tax revenue is declining as plummeting property values mean less money in property taxes and slowing economic activity results in less sales tax revenue. At the same time, the market for municipal bonds is rapidly deteriorating.

Historically, investors have been more than willing to buy municipal bonds issued by U.S. cities, states and towns because most of them have been insured against default by financial institutions known as monoline bond insurers.

But currently, these monoline bond insurers, such as MBIA and Ambac Financial Group, have balance sheets soaked in red ink and are under default pressure themselves as bad bets on mortgage-backed securities come home to roost. Cities looking to sell bonds in order to raise cash are finding that the number of buyers is rapidly dwindling.

The municipal bond market is just one of the latest sections of finance capital to succumb to the financial contagion that is emanating from the U.S. and quickly spreading around the globe.

It is hard to believe that as recently as last summer, the masters of finance capital were proclaiming that growth in the financial alchemy of securities, derivatives and other instruments had made the global capitalist system more stable and less prone to crisis.

Following the dissolution of the Soviet Union, as new markets have been opened up to imperialist exploitation, global financial markets have grown by leaps and bounds. Financial instruments have been invented to package and sell all kinds of debt to a growing pool of institutional investors. The mistaken belief was that by spreading risk out among many players, it would neutralize the damage from defaults and make the financial system less prone to collapse.

Then-Federal Reserve Board head Alan Greenspan said confidently in 2005, “The use of a growing array of derivatives and the related application of more-sophisticated approaches to measuring and managing risk are key factors underpinning the greater resilience of our largest financial institutions.”

Now fast forward to 2008. It is these very same securities and derivatives that are wreaking havoc on the global financial system and threatening to reduce the large “resilient” financial institutions to a heap of ruble.

The growing interconnectedness between streams of finance capital has greatly increased the risks of contagion. Trouble that started in debt tied to subprime mortgage loans quickly spread into many other debt markets, including credit cards, student loans, auto loans, municipal bonds, corporate bonds and so on.

The current crisis is daily proving that the global capitalist system is becoming increasingly more unstable.

In his book “A Critique of Political Economy,” Karl Marx’s closest collaborator, Frederick Engels, wrote that “each successive crisis is bound to become more universal and therefore worse than the preceding one.” He predicted that the end result would be “a social revolution such as has never been dreamt of in the philosophy of the economists.”

In this lopsided world, where the number of billionaires grew to almost one thousand in 2007 while almost 900 million people went hungry, the inherent contradictions in the capitalist mode of production cannot be denied. With the growth of worldwide class solidarity, the social revolution is sure to come.