Of balanced budgets and recession

By Victor Perlo, in People's Weekly World,
16 December, 1995

Balanced budget hoax

Mass pressure forced President Clinton to veto the Republican "balanced budget." However, his budget accepts, in principle, the Republican demand to shrink the social safety net for the people, and reduce taxes on the rich, with the two sides now dickering on where to "compromise."

This whole approach must be rejected. The issue of balancing the budget is a fable, thrust on the nation by establishment propaganda.

The concept of a "balanced budget" has been used for years to rationalize unrestricted cuts by Congress and the 50 states in benefits for the people and to justify measures of incalculable worth to the power elite.

The seven-year goal of balancing the budget is sheer demagogy: there is no intention of sticking to it, save by accident. Congress has enacted laws requiring a balanced budget by a date certain several times -- the most recent being the Graham Rudman Hollings Act -- and none were enforced and all became dead letters.

But even the present combined deficit of 1.5 percent of Gross Domestic Product (GDP) could be readily justified if used to finance government investment in education, health, housing, environment, infrastructure, affirmative action.

Today the combined budget deficits of all levels of government are running at about $100 billion per year -- far less than under Reagan-Bush. After doubling during 12 years of the Reagan-Bush administrations, the federal debt has stabilized at about 50 percent of GDP, much less than in most other industrialized -- read "capitalist" -- countries.

The budget could be balanced in one year, and social outlays increased at the same time, by cutting appropriations for the military and the CIA and by closing the $200 billion of tax loopholes of the rich and their corporations.

We must not be taken in by the phony posturing about "balancing the budget" and, instead, must mobilize to demand reorientation of government spending and revenues in the interests of the people.

Recession danger mounts

Item: The latest Index of Leading Economic Indicators fell sharply, continuing a downward trend since last January. In almost every case in the past, such a prolonged downtrend has accurately forecast a cyclical recession or crisis, with major job losses and unemployment.

Item: The New York Times says the just released employment statistics show a "weak economy." Barrons said they are "unalloyed bad news." Payroll employment rose less than 100,000 for the third month in a row, barely half the increase necessary to keep up with the growth of the working-age population Factory employment dropped 32,000 in November; 220,000 since march. Hourly wages dipped.

Other items: Declining housing starts; declining industrial production; the pileup of unsold goods and weak seasonal retail trade; lower orders for durable goods.

Wall Street hopes the bad news will persuade the Federal Reserve Board to lower short-term interest rates, in this way increasing banking profits and bolstering high-flying stock prices.

However, that would have only minimal impact on the real economic situation. What's needed is a large-scale counter- cyclical rise in spending for people's needs and for constructive investment, a doubling of the minimum wage and decisive moves toward ending racist discrimination.

Read the Peoples Weekly World
Sub info: pww@pww.org
235 W. 23rd St. NYC 10011
$20/yr - $1-2 mos trial sub