The Militant (logo)  

Vol. 74/No. 38      October 11, 2010

3 White House economic aides
quit amid ‘stimulus’ failures
(front page)
As it becomes increasingly clear that the White House’s so-called economic stimulus measures cannot slow the unfolding economic depression, three key members of Barack Obama’s financial team have resigned. The resignations highlight the lack of confidence within the U.S. ruling class of finding a way out of the crisis, in spite of the recent announcement that the recession officially ended in June 2009.

Lawrence Summers, head of the National Economic Council and one of Obama’s top economic advisors, announced September 21 that he will resign at the end of the year. Summers has been a key figure under both Democratic and Republican administrations.

Summers’s departure comes on the heels of the resignations of Christina Romer, who just stepped down as chairperson of the Council of Economic Advisors, and Peter Orszag, head of the Office of Management and Budget.

The Republican Party, while trying to take advantage of discontent over the economic crisis, has no serious plan of its own. An article in the conservative magazine National Review titled “Empty Promise,” noted that the Republican’s Pledge to America has no fundamental difference with what the Democrats are carrying out. Instead, the Review states that the pledge tells “how you’re going to make Big Government work better.”

Neither Democrats or Republicans, nor the tea party, have a solution to the decades-long decline of capitalism. Tea party groups, which reflect resentment by layers of the middle class and some workers who fear the effects of the economic crisis, say what they are against, but little of what they are for except the “free market.”

The New York Times noted that “even after taxpayer bailouts restored bankers’ profits and pay, the great Wall Street money machine is decelerating.”

“Big financial institutions, including commercial banks, are still making a lot of money,” the paper adds. But not as much as they had hoped.

Another indication of Wall Street’s problem is that stock offerings are down 15 percent from last year; the issuing and sale of bonds is down 25 percent.  
Downward rate of industrial profit
Capitalists only invest if they can make sufficient profit. In response to the downward pressure on the rate of industrial profit over the last several decades, bosses’ investments in production-expanding equipment and plants have declined. Instead, they have sought to maximize their profits through “downsizing” and speedup, and by pouring their money into stocks, bonds, derivatives, and other forms of financial speculation.

The Atlanta Journal-Constitution notes that U.S. corporations that laid off workers and cut production over the last few years are “stuffing mountains of cash into their bank accounts. But they are not hiring.”

U.S. companies, including Alcoa, Intel, General Electric, IBM, and Exxon, are sitting on more than $1.8 trillion in cash reserves, up $382 billion from last year, according to the Federal Reserve.

U.S. government attempts to spur bank lending by keeping interest rates low—the Federal Reserve charges banks less than 1 percent interest— have had little impact. The decline in commercial and industrial loans in the second half of 2009 was the largest in any six-month period since at least World War II. Factories are operating at about 72 percent capacity, some 7 percentage points below the 1972-2009 average.

Government attempts to stimulate demand by offering tax credits for home buyers and other programs have failed to reverse the collapse of the real estate bubble. In Florida alone there are more than half a million foreclosure cases in the courts. Banks around the country are still delaying foreclosures in a doomed attempt to prevent a further drop in prices by keeping homes off the market.

In the midst of the deepening crisis, the capitalist-owned news media sometimes grasp at any figure that could indicate that things are not as bad as they seem.

In mid-September many news outlets announced that credit card debt had declined by $12 billion in the second quarter, claiming this meant, “We’re charging less, paying down our debt, living within our means.” Credit card “portfolios,” bought and sold on the market like mortgage packages, are profitable for major banks like JPMorgan, Bank of America, and Citigroup.

What the media ignores is that credit card companies wrote off $21.8 billion of debt as uncollectible; new debts had actually risen by more than $9 billion.

Working people, facing long-term unemployment and lower wages when they do find jobs, are bearing the brunt of the crisis. In New York City, one in 10 families in public housing are one month or more behind on rent, a 50 percent increase from last year.  
Front page (for this issue) | Home | Text-version home