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From The Socialist newspaper, 1 March 2002

LYNN WALSH, editor of the Socialist Party's theoretical journal, Socialism Today, looks at the problems facing George W Bush just over a year after he became US President.

Bush Drives Tank Through Social Spending

IN THE name of the "war against terrorism", president George Bush is proposing a massive increase in US arms spending. If Congress accepts his proposed budget, it will be the biggest spurt in military spending since Ronald Reagan's 1980s arms build-up against the "evil empire" of the former Soviet Union.

At the same time, Bush intends to extend tax cuts for the super-rich while freezing social spending.

Next year Bush plans to give the Pentagon an extra $48 billion, a massive 14% increase. Together with another $16.9 billion in the Energy Department's budget to finance nuclear warhead production, the total military budget will grow to $396 billion.

That means fuelling the military machine with over $1 billion a day. Bush also plans to spend about $19 billion on "homeland security". Much of this will go to the Immigration and Naturalisation Service and the Border Patrol to clamp down on undocumented immigrants and non-citizens generally.

Military money

The US already accounts for 40% of world military spending, more than the 15 next-biggest states combined. Yet over the next five years Bush wants to spend an extra $120 billion.

In contrast, when UN secretary-general Kofi Annan called for an extra $50 billion to double the advanced countries' foreign aid to under-developed countries to $100 billion this year, the US government abruptly rejected the proposal.

Instead, Bush proposes a paltry $750 million increase in US foreign aid for 2003, including $552 million of military assistance to regimes favoured by the US. At the recent Tokyo conference on Afghanistan, the US pledged a mere $300 million to help reconstruct that devastated country, estimated by the UN to require $10 billion to $15 billion over the next ten years.

Bush's military plans are a bonanza for the big corporations of the military-industrial complex. Procurement - spending on weapons - will soar from $61 billion this year to $99 billion in 2007, a 30% increase over five years. Major items include the Crusader mobile howitzer (a massive field-gun), costing $475 million.

Even critics in the capitalist press ask how such weapons will counteract terrorists - the September 11 hijackers were armed with box-cutters (Stanley knives). Building and operating the missile defence programme could cost $238 billion by 2025, according to a study by the (non-party) Congressional Budget Office.

Feeble facade

THE REPUBLICAN Bush used some Democrat-sounding rhetoric in his State of the Union message, claiming to defend working families' interests. He promised increased spending on two or three social programmes, such as food stamps, family nutrition and health research.

This was flimsy camouflage for a general freeze on social spending apart from mandatory expenditures such as Social Security (pensions) and Medicaid (health insurance for retirees) - and deep cuts in (according to Bush) "ineffective" programmes like youth job training and environmental protection.

Non-mandatory spending will be held to a 2% increase, below government projections for inflation (2.2%). Education, public housing, highways will all be cut. Retirees won't get help with ever-rising prescription payments, and will have to make bigger "co-payments" for their health care.

Despite Bush's earlier promise not to raid the Social Security and Medicare funds, these will now be used to supplement tax revenue. The Republicans no doubt believe that as these funds slide into deficit they will be able to push through privatisation of pension funds. So far, the Democrats seem to have swallowed this blatant manoeuvre without a murmur.

Despite the social spending cuts, Bush's plans will mean a rising Federal budget deficit (a projected $80 billion in 2003). Already, the last few years' boom-time surpluses have evaporated. As the economy slows, tax revenues automatically decline. Inflated military spending will be an enormous burden.

The main source of the deficit, however, will be the gigantic tax cuts Bush is handing to the super-rich. "Almost incredibly," commented the New York Times (6 February), "President Bush wants to accelerate and make permanent previously enacted tax cuts and add new tax cuts on top".

Rich rewards

Last year, most wage earners received a tax rebate of a couple of hundred dollars - a sweetener for the masses. But the real cuts are for those with incomes over $200,000 a year, who will collect over half the total $1.3 trillion tax reduction over the next ten years. Two-thirds of the population will receive nothing at all.

Under the slogan of "security", Bush is pursuing the Republicans' extreme big-business agenda. The US's limited social safety net is being shredded just as unemployment, poverty and homelessness are again rising (and state budgets are also being slashed).

The long-term viability of Social Security and Medicare is being undermined. This is being concealed, moreover, by Enron-style, "off-balance-sheet" accounting. For the first time, this budget drops its ten-year projections into the future, obviously to conceal from people where the George W road is heading.

War on workers

IN THE name of defending the US, Bush is in effect declaring all-out war on working class living standards. The Democrats are screaming. Bush, they say, calls for "bipartisan" support for the "war against terrorism" but pushes through out-and-out partisan domestic policies.

What is their answer? Only a handful of Democrats, like Ted Kennedy in Massachusetts, publicly call for a reversal of the tax cuts. Tom Daschle, who leads the Democrat majority in the Senate, refuses to call for a reversal or even a delay of tax cuts.

While the Democrats will undoubtedly try to dilute Bush's social cuts (while swallowing the military budget whole), they are themselves too closely tied to big business to wage effective opposition to the White House.

As the Republicans' big-business arithmetic becomes clear, there will be a tide of fury among workers and middle-class people who are already beginning to taste the bitter fruits of the 1990s bubble economy.

Politically conscious workers will once again have to grapple with the task of breaking the labor unions and community and campaigning organisations away from the Democratic Party stranglehold and creating a mass party that will speak for the working majority.

"The only way to get respect"

BOSSES IN the US - predictably - tried to exploit the appeal to patriotism after 11 September to bash workers defending their living standards and rights.

Most noticeably in Middleton, New Jersey, last December, school board officials compared teachers to the Taliban when they struck against big increases in their health insurance contributions.

200 striking teachers were jailed when they defied a judge's order to end their action. As they were led off to jail in handcuffs, over 1,000 teachers and other school workers walked out in solidarity.

The teachers remained defiant. One striker, Barbara Bacmeister, told the reactionary judge: "When you give in, you are saying 'Keep stepping on me'. Sooner or later you have to stand up for what's right."

While waiting to be taken to jail, another teacher, Katie Connelly, said: "I'm a soccer mum, I drive a van, and I have a dog. But this is our revolution. The only way to get respect is if you stand up for yourself."

It wasn't lack of resolve that forced the teachers to return to work, only the weakness of union officials who accepted the mediation proposal previously rejected by the strikers.

Disconnected - The Power Behind The Throne

THE METEORIC rise and disastrous collapse of Enron is one of the biggest scandals in US capitalism's history. In the top ten of Fortune 500 companies, Enron fell from a "successful business model" to bankruptcy in less than a year.

Its crash exposes the parasitic, predatory nature of finance capital. It reveals the web of corruption that links big business and the leaders of both the Republican and Democratic parties.

"There is no smoking gun", Bush declares. His government has done nothing wrong, he claims: they refused to bail out Enron. But, in return for millions of dollars of support, they had already done Enron every favour in the book, creating the sleazy, unregulated environment in which Enron could operate.

Enron was a run-of-the-mill Texan oil pipeline company until, in the 1990s, it moved into trading energy "swaps" and "options", a highly speculative commodity market. Enron took full advantage of the disastrous deregulation and privatisation of state and city electricity utilities carried out since the 1980s.

It made fabulous profits gambling on future energy deliveries (eg pushing the price of electricity sky high during California's energy crisis last year).

Greasing the wheels of the political machine was vital to Enron's success. Anybody who was anybody in the political establishment, at state level and in Washington DC, both Republicans and Democrats, got Enron cash.

During the last 12 years Enron spent $5.8 million (4 million) on federal elections, 73% going to Republicans. It supported 71 out of 100 senators, and 188 out of 435 members of the house of representatives. Bush himself received $826,000, until recently jovially referring to his Enron godfather as "Kenny Boy".

Vice-president Dick Cheney and numerous members of Bush's Washington entourage, together with the Texas establishment, received Enron political contributions, or were at one time employed by Enron, or benefited from consultancy fees.

Cash lubrication ensured Enron day-to-day access to top government officials. Crucially, through its friends in high places Enron secured the exemption of energy futures trading from Federal government oversight. The corporation successfully lobbied for further deregulation of energy markets.

It was delighted with Bush's opposition to environmental protection (such as the ban on oil/gas drilling in the Alaskan wilderness) and the US refusal to sign the Kyoto global warming treaty.

If Bush's so-called "economic stimulus" bill had not been blocked in Congress, Enron would have gained about $254 million in tax breaks.

Fabulous profits

WHEN OTHER corporate sharks began to muscle into energy commodities, however, it was harder for Enron to maintain its high profit levels. Kenneth Lay, the chief executive, with other top officials, like Jeffrey Skilling and Andrew Farton, turned to 'creative accounting'.

They set up a series of partnerships, controlled by them but nominally separate from Enron. Registered in off-shore tax-havens, these entities allowed Enron's bosses to avoid US taxes and to conceal huge Enron debts in 'off-balance sheet' satellite companies.

This ruse kept Enron's shares sky high (peaking at $90) and filled the Enron directors' personal bank accounts with fabulous fees and profits. The partnerships, however, were borrowing huge amounts of money on the strength of their Enron shares. When Enron's share price began to slide, as the growth of profits slowed, the whole fraudulent edifice crumbled.

Behind the scenes, Lay and Co. desperately tried to prop up the company through "restructuring", more creative accounting. By October, however, it had become clear that Enron's accounts had been doctored to conceal massive debts and that the corporation faced catastrophic losses.

Lay phoned Washington for help. But how could Bush bail out Enron without provoking a tidal wave of reaction against the Republicans' corrupt rescue of their prime financial backers?

On 1 December, Enron, which started the year as "America's greatest company", filed for bankruptcy. Its shares were worthless.

The Enron bosses, however, had all sold their shares before the crash, walking away with over $1.1 billion between them. Meanwhile, Lay assured Enron workers (who weren't allowed to sell the company shares in the pension accounts) that all was well, even urging them to buy more shares in "their" company.

Enron shares were the basis of their company pension accounts. Not only did most of Enron's 15,000 US workers lose their jobs when it crashed, but their life savings were wiped out.

"The upper-level executives got their money," said one Enron worker. "I was let go by voice mail - I don't think I'll ever trust another company." Many other company pension schemes also invested in Enron shares, and their retirees will also suffer.

Lax accountants

AS ALWAYS, business leaders and politicians are trying to pass the Enron bosses as mavericks, the proverbial splodge of tar that spoils a jar of honey. Yet Enron sprung out of the speculative swamp of the 1990s boom.

They may have been prepared to go further in bending the rules, but Lay, Skilling and their co-conspirators were impelled by the feverish lust for huge, short-term profits that now dominates the whole leadership of US and international big business.

So long as its share price was soaring, big investors asked no questions. The country's big banks eagerly lent the corporation huge amounts for their speculative ventures. There was no shortage of accountants to help them cook the books.

Arthur Andersen, one of the country's biggest accountancy firms, collected $25 million in fees in 2000 alone. As auditors, they obligingly provided a certificate of financial health every year. When the enquiries started, Andersen executives ordered the shredding of any incriminating Enron documents.

The Enron scandal has intensified public outrage at the overwhelming corruption of elections by big-business money. Political leaders have come under increased pressure to implement campaign finance reform. Even Bush, to defuse public anger, now says he'll support the Shays-Meehan bill now before Congress.

Despite the bitter resistance of leading Republicans, most likely a section of Republicans together with most Democrats will provide a majority for this measure.

If passed, however, Shays-Meehan will have only a cosmetic effect. 'Soft money' donations (to parties rather than named candidates) from big business, special interest groups, and the unions, will be outlawed in federal elections. Enron gave about $1.6 million in soft money in the 2000 election.

But soft money will still be allowed in state elections, leaving an obvious loophole. At the same time, the $1,000 limit for 'hard money' donations to individual candidates (which totalled $380m in the 2000 election) will be doubled.

Since 1990 Enron officials gave $500,000 in thousand-dollar contributions for federal candidates. Under Shays-Meehan they could have handed out a million bucks. As with all previous "reforms", lawyers and accountants will not take long to find new ways for big business to bankroll their political stooges.

Growing anger

THERE ARE now more than a dozen Congressional committees investigating Enron's collapse. Federal prosecutors are preparing indictments against some of the key perpetrators. But when both Republicans and Democrats are up to the necks in Enron's dirty money it is hard to believe that they will reveal all and bring all those responsible to book.

That would require a truly independent commission of inquiry, made up of elected representatives of unions, community and campaigning organisations - a tribunal, in other words, whose members have no stake in the rotten system that has thrown up the Enron scandal.

In the aftermath of Enron, US capitalism would be facing a major political crisis - if there were a party that represented working people. Such a party would spell out the real meaning of the scandal, not merely picking a few corporate scapegoats, but indicting the whole rotten system.

On that basis, a radical, anti-capitalist mass party could build massive support for a socialist alternative. Nevertheless, anger and disgust at big business greed and corruption will deepen as details continue to trickle out and will have a profound effect on political consciousness in days to come.

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In The Socialist 1 March 2002:

NHS Crisis

No More War

Striking Against Low Pay On The Rail

Strike back at privateers

Students March Against Funding Nightmare

Bush Drives Tank Through Social Spending

Divisions open up in Israeli society


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