According to the Bureau of Economic Analysis (BEA), the US national debt has exceeded 100 percent of the gross domestic product for the first “peacetime” year since 1946, as of late April. This landmark comes as the Trump administration has requested $1.5 trillion for more war spending in its aggression against Iran and worldwide.
This means that if the federal government were to demand, for an entire year, that every worker turn over 100 percent of their wages, landlords 100 percent of their rents, and capitalists 100 percent of their profits, the government would still be in debt.
The source of this debt is US imperialism: endless war, bailouts, and tax cuts for monopolists that leave workers footing the bill. This is a trend irrespective of which of the two mafia parties is in power.
To make matters worse for the masses of people—who will have to pay for the ruling class’ poor budgeting—the Supreme Court has ordered the US government to refund billions of dollars to the monopolies who paid tariff fees to the government because many of the tariffs levied by the Trump administration were found to be illegal. This refund represents “double dipping” by the monopolists and their government; these companies have already made their money back by passing the costs of the tariffs to workers, but they will also be receiving refund checks for themselves in the process. The Supreme Court ruling views the fund generated by tariff fees as a loan taken out by the government from the monopolies; for this reason, the Supreme Court also requires the US government to pay back monthly interest to the monopolists for the duration of the time that the US government has held the tariff fees. The New York Times cites that the fund from the tariff fees, now slated to be refunded to the import capitalists and monopolies, has been accruing $650 million in interest for every month they have been held by the government.
In the current situation, the ratio of national debt to gross domestic product will soon exceed its record of 106.1 percent, set in 1946, in a matter of years. The Congressional Budget Office (CBO) projects it will reach 108 percent by 2033, 120 percent by 2036, and 156 percent by 2055.
The rising public debt reveals the instability and decomposition of US imperialism. When the US government increases its spending and puts more US dollars (USD) into the economy, the new money in circulation is essentially a debt borrowed by the US government with interest payments and future taxes being the collateral. Because the US dollar is the main currency with which commodities are sold internationally, colonies and semi-colonies that are exploited by US monopolists have domestic ruling classes who cater to these US monopolies, receiving their exported capital in the form of US dollars. This arrangement leads to the loss of investment and jobs in the US as well as the loss of wages and profits (so-called “deindustrialization,” or the sacrifice of domestic industrial centers) that could have been taxed to generate government revenue; investment is then redirected to the oppressed nations where the monopolies can take advantage of the cheap labor, raw material, and land secured by imperialist oppression, thereby reaping higher profits than they would have earned in the US.
This process creates a contradiction: the American monopolists must maintain “dollar hegemony” and secure US global domination, providing more dollars for trade, debt payments, and investment and exporting more money capital abroad, which leads to the US importing more commodities than it exports. This cycle generates profit but, in turn, carves out the domestic industrial base required to fund the US government, resulting in more and more debt. In other words, the US imperialist class is condemned to continuously deepen the budget deficit.
Three of the major credit rating agencies have stripped the United States of its AAA rating. Standard & Poor’s downgraded US debt in 2011 after the debt ceiling standoff. Fitch followed in August 2023. Economist Lloyd Blankfein suggests the following possible scenario: if debt continues to climb, the US government could enter into a fiscal crisis that sparks a deep crisis in production, defaulting on the debt and creating a deep depression as credit disappears overnight.
For the ruling class to fund its rapacious appetite for wars for profit and tax cuts, spending for education, health care, and social needs has been cut, including $880 billion from Medicaid, $186 billion from the Supplemental Nutrition Assistance Program (SNAP), and $536 billion from Medicare over 10 years (according to the CBO) and reductions to Supplemental Security Income (SSI) affecting hundreds of thousands of disabled workers.
To tackle the problem of the national debt, both Democrats and Republicans will be focused on this spending, with Social Security and Medicare being next: the Republican Study Committee has proposed raising the Social Security retirement age to 69. Trump’s administration is moving to privatize Medicare by automatically enrolling new beneficiaries in Medicare Advantage plans run by private insurance companies, which “cut costs” by limiting patient choice and rationing care.
As always, the workers are made to pay for the crisis of the ruling class.
Image credit: Tiger Lily on Pexels.
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