As a result of a corporate-lobby induced dead lock in the US Congress; a crushing austerity programme will now be rolled out across the land. The programme, called Sequestration, will see $1.2trn of cuts to public spending ($85bn this year) beginning this month. The National Debt and deficit of the US have been caused by the tax cuts to serve the 1% and funding wars on behalf of the 1%, so why are the 99% footing the bill?

Sequestration – What it Means

The success of lobbying efforts by the 1% saw the Congress unable to reach a balanced deal on deficit reduction which resulted in default imposition of Sequestration – or a scatter gun austerity programme across public spending. This ten year programme involves $1.2trn of cuts to public spending. This year alone will see $85bn of cuts of public programmes.

The cuts include but are not limited to:

Housing

$1.9bn from public housing subsidies designed to support 125,000 of America’s poorest families with their rent and mortgage payments.

Children and Families

Withdrawal of day care funding for 30,000 of the poorest children

Education

$1.3bn from the education budget

$2.7bn from educational programmes for disadvantaged children

Cuts to the Head Start education programme (for preschool children from low income families) will see 70,000 children lose their services and put 10,000 teaching jobs at risk.

Cuts to the Title I programme (for high school students from low income families) will see over 30 million children (1 in 10 of population) lose their services.

Health

$3bn reduction in payments to Medicare doctors likely leading in a reduction in doctors in the scheme

$350m cut from the Center of Disease Control and Prevention meaning cuts in research, development and distribution of vital vaccines and treatments.

Food

Food Safety inspectors will be sacked and 2,100 fewer food inspection trips by federal investigators leading the Center for American Progress to comment “This means an increased likelihood for tainted food reaching American dinner tables.”

$55m cut from research spending at Department of Agriculture

The Elderly

$43m cut to Food Program for the Elderly for elderly people who can no longer shop for food for themselves.

Jobs

$120m from employment programmes which provide retraining, education and jobs to young people from low income backgrounds.

766,000 jobs to go in healthcare

750,000 jobs to go from the public sector

46,349 jobs to go in education

Defence

Whilst the military industrial complex remains untouched, benefits for armed forces staff get the hit.

$2.6bn cut to the Defense Health Program

$8.1bn from the Army and Navy operational and maintenance budget

The Pentagon must cut $40bn, almost a tenth of its budget, by September this year.

These cuts are likely to lead to a rapid contraction in the US economy and a ripple effect that will be felt around the world, while the lowest income groups in the US hit the skids. How did it come to this?

Debt and Deficit in the US

The debt and deficit of the US can be traced back to the tax cuts and increases in defence spending of Republican governments of Reagan and Bush. Prior to 1982, the US had generally only seen deficits as a result of war or recession, followed by a return to surplus. In that year, under the neoliberal ideology of the Reagan government, large scale and permanent tax cuts were implemented alongside dramatic increases in military spending. Reagan’s Tax Reform Act 1986 saw the top rate of income tax cut from 50% to 28%, while the bottom rate of tax rose from 11% to 15%. This was the first time in US history that a tax cut for the richest and a tax rise for the poorest had been made simultaneously. The top rate of Corporate Tax also shrank from 46% to 34%. The results were unprecedented peace time deficits of an average of $206bn between 1983 and 1992, and a rise in the national debt from £789bn in 1981, to $3trn by 1992. The Clinton presidency saw a reduction in the deficit year on year and in 1998 the US saw its first budget surplus ($69m) since 1969. By 2002, the surplus stood at $236bn. So what went wrong?

The Presidency of George W Bush saw the US move from that $236bn surplus in 2000 to a $1.4trn deficit in 2009, while the national debt topped $10trn.

The Bush Tax cuts were an unaffordable bribe, decreasing tax receipts while increasing spending. Meanwhile, representatives of the Clinton and Bush Whitehouse actively blocked regulation of the derivatives markets which were destined to implode, crashing the global economy, on Bush’s watch.

The fiscal results of the neoliberal economic policies of reducing taxes and deregulating financial markets between 1981 and 2013 has seen the US national debt rise from $789bn (26.2% GDP) in 1981 to $16trn (101.6% GDP)in 2013.

If you are in any doubt as to whom the beneficiaries of this fiscal profligacy were, then it is worth taking a look at the rise in wealth and income equality during the same period.

In 1984, the top 1% if income earners in the US earned 8.4% of the national income. By 1989, this had risen to 13.5%. The share of total income earned by the 1% hit an 80 year high in 2007 at 25%

That is, one in every 4 dollars earned in the US, went to the top 1% of the population, and two of those went to the top 0.1%.

In the face of this abject failure, the 1% has launched an unprecedented propaganda war to ensure that the blame goes instead on public spending programmes for the 99%..

Billionaires for Austerity

The financial crash of 2007/8 was the crisis of neoliberalism and neoclassical economics. It saw the irresistible force of unregulated financial markets crash headlong into the immovable object of profligate government spending bankrolling the 1%.

There was not a libertarian or free marketeer to be found in Wall Street or the White House when it was the banking sector that was looking for welfare. The US Senate passed a $700bn bailout from tax payer to banker on October 3rd 2008. The drafter of the bill, Hank Paulson (Secretary to the Treasury) had been CEO of Goldman Sachs during the period they been flogging the dodgy derivatives which resulted in the bailout being required at all. Therefore one of the chief architects of the crash was the chief architect of the policy which shifted the burden of consequence from the 1% to the 99%.

Their welfare guaranteed; the 1%, their proxy institutions, and commentators decided set out to make damn sure nobody else recieved any. Two of their biggest lobbying forces are the Tea Party and the Fix the Debt Campaign.

The Tea Party presents itself as a grass roots, libertarian movement in favour of small government, pinning the blame for the crisis on government intervention in capitalism, rather than unregulated capitalism. It uses a bastardisation of libertarian ideals to advocate ‘whatever it takes’ measures to reduce the national debt and deficit, making this the number one priority of any government. In reality, this movement was conjured ten years before the crisis, created and funded by the billionaire Koch brothers.

Far from the media story of this working class movement against taxes and big government kicking off with spontaneous tax protests in 2009, the Tea Party website was already up in 2002.

The anti-science ideology of the party was drafted by Big Tobacco operatives in favour of removing responsibility for climate change and environmental degradation from Big Oil. The anti-government ideology was prepared by the Koch Bothers to divert public anger from the 1% to the government and increase support for cuts to public programmes rather than corporate welfare.

The Fix The Debt campaign, led by more than 100 big company CEOs has spent the last three months of the launching a firestorm of ads, plastering the Washington Metro station walls, and off the scale lobbying efforts to make sure Congress failed to reach a grand bargain which would have forestalled Sequestration. The campaign has direct ties to GE, JPMorgan Chase, Morgan Stanley and Goldman Sachs. Peterson is the former chair and CEO of Lehman Brothers and co-founder of the private equity firm, The Blackstone Group; the who’s who list of bailout recipients and crisis causers in 2008. It is the brainchild of Wall Street billionaire Pete Peterson (he invested $500m of his own cash), and the latest in a long run of such schemes to scare the American public into cutting at their own safety nets in order that his goose down mattress might receive some additional fluff.

Whilst presenting themselves as a bipartisan group seeking a ‘balanced deal’ their own lobby materials state their true plan is to use the fiscal cliff to win massive corporate tax breaks paid for by cuts in social security and Medicare. The hypocrisy is breath taking. Twenty four of the corporate leaders of this campaign paid more to their CEOs than they paid in Corporation Tax in 2011.

These awesomely powerful lobby groups have worked to change public and political opinion in favour of austerity for the 99%, rather than fair play by the 1%.

The 1% React to Impending Fiscal Doom

President Obama laid the blame for the failure to reach an agreement on a Republican congress unwilling to see it’ paymasters in the 1% lose a single benefit to balance the books, saying:

“It’s happening because Republicans in Congress chose this outcome over closing a single wasteful tax loophole that helps reduce the deficit. Just this week, they decided that protecting special-interest tax breaks for the well-off and well-connected is more important than protecting our military and middle-class families from these cuts,” Obama said.

Indeed articles like this from David Avella, head of the Republican Training Organisation/Political Action Committee GOPAC calling on Republicans in Congress to hold out for Sequestration as if it were an act of patriotism, and not of corruption.

In an email, Koch brothers’ front group, Americans for Prosperity (AFP), sent congratulations to Republicans and their supporters around the country for helping push sequester cuts AFP says are “an important step forward for economic growth.” The email continued, “Americans for Prosperity thanks Speaker John Boehner and House Republicans for standing up to President Obama and making sure the $85 billion in much-needed sequester spending cuts took effect.”

Pete Peterson was displeased that his campaign had failed to achieve direct cuts in social security and Medicare, saying:

“The sequester fails to stabilize the debt because it only targets discretionary spending, rather than addressing the real drivers of long-term debt, including Medicare and Medicaid health care spending, Social Security, and the lack of sufficient revenue.”

This would indicate that despite the pain about to be inflicted by these cuts, the 1% will not be sitting on their laurels but taking aim at these other vital areas too. They continue in their efforts to consolidate financial, political and structural power whilst the 99% struggle to organise effective resistance in the face of mass propaganda, an aggressive militarised police force and a justice system tilted against them. It is time for the 99% to tune out these voices of the 1%, regain their solidarity and rise.

Take Action

Occupy Wall Street – join with american 99ers to stop the war of the 1%.