How to Escape the Debt Crisis

The debt ceiling is a major issue right now that is being discussed by virtually everyone in the country. Internationally there is great cause for concern as the US dollar is used for trading and its collapse would have devastating global effects.

The power the United States has on the world economy is massive. Such a shock to the US economy could send the global financial markets crashing into the second dip of the Global Economic Recession which began in 2008.

The government’s limit to borrow is 14.29 trillion U.S. dollars which was reached on May 16. The Treasury Department has warned that would begin to default on those loans if the debt ceiling was not raised by August 2nd.

In August the Treasury is projected to collect 172 billion dollars in revenue. However 306 billion dollars is required to pay all the bills: Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds etc. This short fall is very serious and has very serious effects on not only the US economy but the world as well.

Clearly the main cause of the recent spike in the national debt is a result of the Afghan/Iraq war, George Bush tax cuts, the bank bailouts by both parties and the economic stimulus measures by President Barack Obama.

Barack Obama is asking that Congress take measures to raise the federal government’s borrowing to avoid a debt default crisis. Republicans are asking that the limit not to be raise at all, claiming that government spending is wrong and should not be done.

Christine Lagarde, the managing director of the International Monetary Fund has called for a quick solution that included “fiscal adjustments”. These “fiscal adjustments” are no doubt austerity measures designed to destroy the living standards of the working class. Mainly ruining the health care and education for the vast majority of Americans.

Unfortunately in this very dangerous situation, and many in Washington have been using it for political point scoring and grandstanding. Using this situation for partisan manoeuvring is ridiculous and reckless. Even U.S. Federal Reserve Chairman Ben Bernanke has come out warning that doing so was a “dangerous game”. In this situation we can see shortsightedness of the bourgeoisie who are intent on grabbing what they can for themselves rather than treating the looming crisis with the seriousness it deserves.

Republicans have been refusing to let the debt ceiling be raised and instead have been demanding that the Obama administration instead make massive cuts to social services that would severely harm the American working class. Now despite the adamant Republican resistance to raising the debt ceiling, they themselves have raised it many times before. In fact the debt limit has been raised 74 times since 1962. 18 of those times were under President Ronald Reagan and 7 times under President George W. Bush.

The real solution in this situation as I see it is a compromise. I would suggest making a small increase in the debt ceiling. This would be accompanied by the immediate cessation of the greatest drain on government funds, the military actions in Afghanistan, Iraq, Pakistan and Libya. This alone would save trillions of dollars. It would also be accompanied by a massive tax increase on the top 20% of Americans who extort their wealth from the working class, this way this elite would start paying their share again. This is the plan of action I would propose within the framework of capitalism itself.

I would also suggest just abolishing capitalism altogether.