Austerity and Illusions: The Debt Ceiling Deal

Photograph Source: wandererwandering – CC BY 2.0

Reaction to the debt ceiling deal made between the Democratic and Republican parties has generated a misunderstanding as to the role of the deal itself, those of the parties themselves and their leadership. As there is no serious organized Left in the United States, let alone a class-conscious movement of the working class, the interpretation of the debt deal will inevitably be colored by the image of the deal proffered by the media and the parties themselves. Politics in the twenty-first century has been completely subsumed into, as Debord argued, the spectacle, but its victory is so complete that it is a lazy one at that. Our task, then, is to examine the reality of the deal and the social relations between the actors and party organizations.

The broad contours of the deal reflect the use of the debt ceiling as a tool for austerity: non-defense discretionary spending is held flat for FY 2024 and held to 1% growth in FY 2025, with topline federal spending held to 1% annual growth for the next six years. Flat and then low growth, especially in times of inflation, is in reality a massive cut to the already threadbare social safety net. SNAP benefit work requirements are cruelly extended to age 55, the student loan payment freeze will end, IRS funding is slashed, billions in COVID funds clawed back, and it speeds up construction of the ecocidal Mountain Valley Pipeline. Interestingly, CNN described the real winners: corporate America. Defense contractors, fossil fuel companies, and the tax sector, along with Wall Street more generally, were bullish on the deal.

On a very surface level, of course the victors are the capitalist class. This is an important, if readily apparent, fact. The social role of the debt ceiling deal, however, is as significant as the winners and losers. That role is a reaction to the social gains made by the working class during the first two years of the pandemic. It is the second prong of reaction by the bourgeoisie and its political representatives; the first being the nearly immediate pushback against even minor restraints on the carceral state during the anti-police violence social uprisings of 2020 sparked by the murders of George Floyd and Brianna Taylor.

The interrelationship between the two prongs cannot be ignored or discounted. Although there were some modest reforms across the country, there were no serious limits placed on police or prosecution in 2020. What was important was the mass outpouring of rage and consciousness raising about the carceral state that could have become an extended mass movement for social change. Media hysteria, immediately debunked by even casual scholarship, bleated about rising violent crime levels (though not far more serious white-collar crime); the undercurrent of racism intermixed with suburban petty-bourgeois angst about the urban working class and the potential restraint on the police – which have always stood as a bulwark of class and racial supremacy in the United States – was used effectively by a bourgeois state loathe to relinquish an effective tool of repression. It is no wonder that the representatives of the capitalist class, the Democratic and Republican parties, were largely united in rolling back the even modest gains made during 2020.

We should see the debt ceiling deal in the same context. Pandemic aid measures passed during 2020 and 2021, done out of necessity to prevent economic collapse and social explosion, created a modern social welfare state in the United States. By all measures, poverty fell by nearly 50% in those two years, and childhood poverty was cut in half. Stimulus checks, SNAP benefits, and expanded unemployment insurance, combined with momentary foreclosure and eviction moratoria and free, efficient socialized health care provision around COVID-19 temporarily transformed the life of working-class Americans. The political will to implement measures long known to be beneficial and on sufficient scale to be so suddenly appeared from the highest levels of a panicked capitalist class that needed a moderately secure and healthy working class to continue commodity production and consumption during a worldwide pandemic.

There was, of course, immediate screeching from a portion of the business sector that the new social safety net had made it impossible to find workers (besides those that had died or become permanently incapacitated due to COVID). Power had shifted, even modestly, in the direction of the American working class, which no longer had to choose to work for meager wages in alienating and exploitative conditions. This led to the two important, and for the American ruling class unacceptable, changes: the first was a rapid rise in wages across-the-board, and the second, perhaps more dangerous shift was broad expansion of government social spending which had proven incredibly effective in full view of the public and which had been done with few or no means-tests but on the basis of cross-societal access to those social programs.

The debt ceiling deal, then, is absolutely linked to the final rollback of the 2020-21 expansion of the social welfare state. Biden and the Democratic Party had already allowed the vast majority of pandemic-era social welfare programs to lapse; the debt deal between Biden and McCarthy only codified what the American capitalist class has wanted since the economy stabilized – the evisceration and historical erasure of the social safety net expansion. The debt deal makes it impossible for even those programs that remain to meet the needs of a terribly impoverished US working class. For not only would robust government social spending and provision of social programs have potentially emboldened working Americans, but it would have created an example that might have been expanded or replicated (actual socialized healthcare provision, social housing, universal basic income, etc.). The cost (nearly $1 trillion), which could have been easily met by deficit spending and higher taxes on the wealthy (or cuts to the almost $1 trillion-a-year military budget), must also have worried a ruling class that is especially sensitive to tax increases. It had to go; it went with the final handshake between Biden and McCarthy.

It remains to explicate the second part of this grand spectacle: that of how the actions of the parties should be understood. Biden and the Democrats are portrayed as naïve bumblers, McCarthy as beholden to his party’s hard right. Both allegedly compromised and got a deal that neither loves, but that both are willing to live with. Much of the Democratic Party “left” and the Republican right-wing voted against the deal, along with some Appropriations Committee members displeased with the imposition on their purview.

Party organizations and their role in the maintenance of the bourgeois state and the social relationships of society are largely misunderstood. It is in this context that the general public, at least those mildly Democratic partisans, can claim to believe in the myth of the bumbling party when it is in power. That is, Biden and the Democratic Congressional leadership somehow accidentally missed chances to raise the debt limit last fall and were forced to accept this compromise by Speaker McCarthy. Or, conversely, that McCarthy is a weak Speaker and this is proven by the need for Democratic votes to put the debt ceiling deal over the top (a 347-117 vote in the House, with 165 Democrats and 149 Republicans voting Yes).

As I have shown, the capitalist class wanted to reverse, or at least halt, the expansion of the social welfare state (in the form of non-discretionary funded programs) engendered by the COVID pandemic. The combination of allowing programs to expire and hard caps now imposed by the debt ceiling have and will thoroughly do so. The Democratic Party did not simply forget to raise the debt ceiling; as the esteemed political scientist Thomas Ferguson pointed out long ago, the boundaries of movement for a political party on an issue or issues are where their investor (class) base will allow them to be. While political parties are not mechanical representations of class or donor will and have independent interests (such as being re-elected), they are indeed responsive to the desires of major backers. The choice by the Democratic Party to not put the debt ceiling on the agenda in 2022 was either done with the express or tacit approval of the economic elite.

This is why Biden never seriously considered attempting to use the 14^th Amendment, asking the Treasury Dept. to mint a trillion-dollar coin, issuing consol bonds, or allowing the US to default on some of its payments: the capitalist class was not interested in allowing this to occur, and the Democratic Party apparatus would not gain anything by angering their paymasters. This is also why the debt ceiling has never been abolished (even though only Denmark has a similar law on the books): neither party wants to remove the potential to use the debt ceiling as a cudgel, and their class backers like having it in their arsenal.

Similarly, all the theater on the part of Kevin McCarthy belied the fact that enough Democrats and Republicans would unite as per the wishes of their leadership – and as such American business interests – to pass a debt ceiling deal, allowing for the so-called Democratic “left” and the Republican right-wings to vote as they pleased. McCarthy remains in charge of the House even though the most reactionary members of his party are seemingly displeased at his compromise.

It is also important to note that political parties are more than just state managers; they fulfill a social role in crafting partisan identities, managing the behavior of partisans, and, in the context of the United States, preventing an independent working-class political party from forming and articulating a class agenda. Arguments over the debt ceiling and alleged Democratic ineptitude mean even weak partisans will not bother to ask questions as to why the debt ceiling exists at all, why Democrats never seem to fight very hard against the interests of the ruling class.

It is also worth noting that the so-called left within the Democratic Party, which calls itself social-democratic, is at best a strange form of college-educated precariat with pretentions of being cultural managers (and more often than not they are fully petty-bourgeois with no links to the working class); it is hardly affected by social program cuts and more than willing to remain within a ruling class party that might one day craft policy to aid their careers. Interestingly, much of the “culture wars” in this century have been between those attempted culture managers and their conservative culture manager counterparts on the Republican side (who represent an older, whiter, less college-educated culture).

The working class, and class exploitation, have not disappeared, of course, but neither the Democrats or Republicans have any interest in allowing an independent class consciousness to develop, and the general direction of late capitalism has atrophied historic centers of working-class power to the point of near dissolution. The debt ceiling deal is a further imposition on the vast majority of working-class Americans, but after the deal, very little to challenge it seems to be in the offing.

This content originally appeared on CounterPunch.org and was authored by Peter LaVenia.

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