Another giveaway to the rich by Congress, White House
Unemployed, poor snubbed in economic ‘stimulus’ plan
Published Feb 2, 2008 12:27 AM
The “economic stimulus” plan agreed to by the Democrats in Congress
and the Bush White House is another giveaway to the rich.
There is a mini one-time payment of $300 to $600 to anyone who is employed.
That’s not a significant amount, considering that the average rent for an
apartment in the U.S. is $1,027 a month. (Business Week, Jan. 17)
If you are jobless, you get no payment; a minimum yearly income of $6,000 is
required to get the one-time rebate. The jobless don’t even get an
extension of unemployment benefits, which usually adds 16 weeks of payments, or
food stamps. Adding those to the plan would have put thousands of dollars in
the pockets of the people who need it most.
Unlike the one-time rebate, which won’t happen for months, an extension
of jobless benefits and food stamp increases would put money into the economy
The original plan proposed in the House of Representatives included an
extension of benefits for the jobless and an increase in food stamp money for
the 35 million low-income households eligible for payments. In a logic-defying
statement, top Democrat Nancy Pelosi claimed the Democrats agreed with Bush to
drop those benefits in order to help “the middle class.” (New York
Times, Jan. 24)
The “stimulus” plan also includes more than $50 billion in tax
breaks for businesses.
The mini payment and the tax break for businesses have gotten most of the
publicity. But neither of them is the really big item in the package. Most
significant is a bailout of the banks and mortgage companies and a giveaway of
a housing loan guarantee to the rich.
The details of this part of the plan can’t be found in either the White
House statement or the Democrats’ summary of the plan; the inside story
is hidden in the financial pages of the media.
“The plan tries to make it easier to secure or refinance mortgages for
more expensive homes. First it would allow Fannie Mae and Freddie Mac, for a
year, to buy loans of up to $729,750. The current limit is $417,000. The
package would similarly increase the $362,790 limit on loans insured by the
Federal Housing Administration, while making it easier for borrowers to
qualify,” USA Today reported in its business section on Jan. 24.
The report adds that the plan also shifts the “risk” for financing
the more expensive loans to working people, whose taxes will now be used to
insure the loans for expensive houses.
The plan was falsely labeled a stimulant in order to pass it through Congress
quickly, without any further review.
But could any plan really be a stimulant and stop the spiraling economic
Dangers of the military stimulant
The current capitalist cycle started its upward climb following the stock
market crash in 2002, often referred to as the bursting of the Internet bubble.
The U.S. was in a recession; the economy was stagnant with no recovery in
sight. The massive military buildup that started then, estimated at over $2
trillion over the last five years, was a huge stimulus.
But a military stimulus is not the same as normal capitalist production.
Military expansion by no means guarantees an economic recovery with full
employment. In fact, its expansion may well spell a deepening of the economic
crisis and may be depressing the economy instead.
The cyclical capitalist upturn that began after the crash in 2002 has been one
of the weakest recoveries on record. It has frequently been described as a
jobless recovery, meaning that while profits for the rich recovered, there was
not the usual rise in employment that goes with a rising economy. Unemployment
didn’t increase, but jobs didn’t grow in the way usually seen
during a recovery.
Now the unemployment rate is starting to increase. The official figure, which
by design underreports the levels of joblessness, for December showed a
significant increase to 5 percent.
“An uptick of this magnitude (up 0.3 percent in December),” says
the Economic Policy Institute, “has historically been either a symptom or
a harbinger of recession. Moreover, the increase in unemployment was not
isolated among any one group—joblessness increased significantly among
all demographic groups.” (www.epi.org)
In a recession, the first thing that happens is that people lose their jobs;
the reserve army of unemployed workers grows. The length and depth of the
recession determines the severity of the unemployment, the spread of
homelessness and loss of food.
For the working class—the ones that bear the brunt of a
recession—the most important issue is jobs. For the capitalist, the only
issue is profits. Government “stimulus” plans are aimed at
For anyone but the rich, what is needed is a rescue plan—a guarantee of a
job, no evictions/foreclosures and adequate food. Any plan that isn’t
about jobs, housing and food isn’t responding to the real crisis.
Crisis of overproduction
A recession is most often the result of what Karl Marx called a capitalist
crisis of overproduction. Capitalist overproduction is poorly understood,
partly because the capitalists want to obscure the reasons for recessions and
the misery they cause.
A crisis of overproduction comes because the capitalists, in chasing after
profits, try to get a market advantage by lowering the production cost of each
individual item. This is most often done by introducing labor-saving technology
that can turn out more products at the same or a lower overall cost.
Capitalists are driven to constantly accumulate new machinery, new technology
in order to compete.
Each capitalist tries to outdo the others in revolutionizing the means of
production and lowering the unit price of the products—be they computers
or clothing or corn. But eventually the new technology becomes the norm and
many more products are being produced by fewer workers. This crisis of
overproduction then reveals itself as an inability to sell at an acceptable
rate of profit all that’s been produced. Bankruptcies, layoffs and
Marx showed that all new value comes from the direct application of labor power
in the production process. Unlike raw materials and plant and equipment, labor
power is the only commodity that, in the course of being used up in the
production process, creates new value.
This dual character of labor power—that workers get paid only what it
takes to keep them alive as a class, while at the same time they produce much
more than that in new value—is the basis for exploitation and the immense
profits taken by the capitalists.
Marx also explained why the rate of profit drops as the proportion of
investment in machinery and technology—Marx calls this constant
capital—keeps rising in relation to wages, or variable capital. Variable
capital is the source of profit, but it becomes a smaller part of the total
Overproduction of capital, for Marx, is the over-accumulation of constant
When over-accumulation sets in and profit rates fall, capitalists begin to
shift the investment funds at their disposal out of machinery, technology and
labor and into financial assets. Eventually there is a shortage of profitable
financial investment outlets.
When that happens, capitalist investors often bid up the prices of various
social goods without increasing the real wealth in society or expanding
productivity. The sub-prime loan crisis is exactly such a scheme, aggravated by
The economic downturn that is now unfolding can’t be prevented by acts of
Congress. Short of getting rid of capitalism, there is no means to prevent such
economic disasters. But Marx did show that the workers, through struggle, can
lessen the devastating impact of such crises on their lives and also gain the
consciousness and organization to begin to challenge the system itself.
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