House Speaker Kevin McCarthy is showing his hand. McCarthy spoke at the opening of the New York Stock Exchange this week, calling on the handmaidens of the “investor class” to support the Republican party’s demand for massive cuts in domestic social spending in return for approving an increase in the federal debt ceiling, and thereby avoiding a crash of the financial markets.
Grasping the economic dynamics in any detail can be difficult. Simplified, any failure of the U.S. government to honor the massive debt it has generated over the years would devastate already shaky markets in the U.S. and globally, risking severe consequences, including worldwide economic depression. McCarthy in effect offered Wall Street a bargain – Let us slash non-military spending, and we won’t make a ruckus over the debt ceiling. While this sort of quid pro quo should qualify as blatant extortion, it’s an offer that most Wall Streeters won’t be inclined to refuse. A good part of their income relies directly on government interest payments on the securities they hold and use for collateral in other lucrative forms of financial speculation.
How can we be sure that social welfare cuts are on the way? In the first place, McCarthy is proposing a freeze on current spending at the level of the last fiscal year (ending in September 2022), in effect cutting $130 million from the omnibus budget bill passed in December of ’22. Further, for the next decade discretionary spending will be limited to a mere one percent per year; since inflation is (officially) running at over 6%, the limit would require additional massive cuts to discretionary spending. Finally, since both Democrats and Republicans are loathe to cut military spending, the only place left to cut will be domestic social programs – precisely those programs in health, education, housing, mental health, and income support – which, inadequate and underfunded though they generally are, are essential to the well-being of close to half the U.S. population, and arguably fully 100% of our most vulnerable.
But surely the Democrats will fight cuts to social welfare spending tooth and nail, won’t they? After all, they’re the party of “the people,” aren’t they? Don’t count on it. President Biden has already said he is willing to meet with McCarthy to discuss spending cuts, even while insisting that he won’t engage in any quid pro quo deal-making. Seriously, Joe? Is that what passes for defending the interests of poor and working people these days?
The Southern Miss School of Social Work 