WeeklyWorker

23.09.2021

A political system test

Joe Biden is attempting to reverse US imperial decline through a neo-Keynesian turn, argues Jim Creegan

A major test of American capitalism’s capacity for self-reform is now taking place in the US Congress. Two mammoth infrastructure bills initiated by Joe Biden are wending their way through the procedural labyrinth of the two chambers (which I will try to walk readers through below, at risk of losing their attention).

The more modest of the two is a $1.2 trillion proposal for the renovation of the country’s physical infrastructure: highways, bridges, transportation, utilities and rural broadband. This legislation was passed in the Senate with the support of all Democrats. Because it was also backed by Republican Senate leader Mitch McConnell, and another 18 of his party’s senators, it is called the ‘bipartisan’ Infrastructure Bill. It awaits approval in the House of Representatives.

The other, far more ambitious bill - still in the drafting stage - aims to jump-start the transition to clean energy and to enhance what the administration calls the country’s “human infrastructure”. It was introduced by Biden, and is opposed by every Congressional Republican. On the climate side, it proposes to draw 80% of the country’s energy from non-fossil sources and reduce carbon emissions by 50% before 2030; to spend billions on the development of electrical vehicles, the construction of energy-efficient buildings and the weatherisation of houses.

The “human infrastructure” part includes payments of $3,000 or more to families for each child in the form of yearly tax credits, and seeks:

Bernie Sanders is also attempting to include certain provisions of the separate Protect the Right to Organize (PRO) Act, aimed at making it easier for workers to unionise, and imposing federal fines on employers for labour-law violations.

The second bill carries a price tag of $3.5 trillion. To the question Republicans reflexively ask whenever new social spending is proposed - ‘Where are you going to get the money?’ - Biden has given an answer that for decades dared not pass the lips of politicians in either party: tax the rich. The Democrats propose to pay for the bill without more government borrowing. And to the perennial GOP bogey that more government services will mean higher taxes on the middle class, Biden has responded by pledging not to increase taxes on any individual or family earning less than $400,000 a year. He instead intends to raise the top marginal rate on private earnings from its current 37% to 39.6% and the corporate tax rate from 21% to 28% (though not to the 35% in effect before Trump’s 2017 tax cuts). He also aims to increase the capital gains tax and to compel hedge fund and private equity managers to pay the ordinary income tax rate on fees from clients, instead of the lower capital-gains rate they now pay.

In addition, a bigger chunk of inherited wealth would go to the government: a provision of the bill would tax large bequests in such assets as stocks and real estate (not, as now, only when the assets are sold by the inheritor - hence avoiding being taxed at all from generation to generation if not sold - but at the time of the testator’s death), based not, as now, on the value of such assets at the time purchased, but upon their accrued value since their original acquisition. Accumulated wealth, not merely income, would be assessed: the owners of great fortunes would be taxed each year on the value that has accrued to their total assets, much as homeowners are now assessed yearly on the estimated current value of their property. Biden also aims to double the corporate tax on foreign earnings to 21% in conjunction with an international agreement to impose a global corporate minimum tax of 15%, thus reducing capital flight to foreign havens.

The two pieces of legislation - the narrower physical infrastructure proposal and the much bigger clean energy and ‘human infrastructure’ bill - were originally presented as a single White House initiative. But in response to Republican complaints that the ‘human infrastructure’ piece was not really about infrastructure at all, but an attempt to expand the welfare state - not to mention introduce ‘socialism’ - Biden divided his proposal into two separate bills. He calculated that his smaller, $1.2 trillion project - viewed favourably by a ruling class that depends upon physical infrastructure - could attract enough Republican support to pass the Senate, giving him an opportunity to burnish his credentials as a bipartisan deal-maker.

In exchange for their support, McConnell and the 18 Republican senators who followed his lead demanded that Biden withdraw his proposal to fund the bill by taxing the wealthy or cracking down on the rich and corporate tax evaders who form a core Republican constituency. The Democrats were quick to oblige. The initiative will now be funded from several sources, among them ‘repurposing’ federal monies intended for unemployment relief that some states declined to accept as too generous to workers.

This reassertion of Biden’s fabled skill at ‘working across the aisle’, however, only left him facing another dilemma: how to appease the increasingly vocal Democratic Party left. The six members of the progressive ‘squad’ , followed by others in the larger House Progressive Caucus, threatened not to vote for the smaller bill unless it was acted upon conjointly with the larger one. Biden and House speaker Nancy Pelosi initially acceded to this demand, promising not to bring the bipartisan bill to the House floor for a vote until the Senate approved the larger package.

Moderates

Getting Senate approval for the 3.5 trillion measure, however, will be no mean feat. It is true that the Democrats will not need the two-thirds majority necessary to overcome the filibuster to bring the proposal to a final up-or-down vote on the floor of the upper chamber. An arcane procedure known as ‘reconciliation’ - intended to apply exclusively to spending matters - would allow them to pass the bill with a simple majority.

It has thus become known as the ‘reconciliation bill’. The Senate is evenly divided between 50 Republicans and 50 Democrats, but vice-president Kamala Harris, in her capacity as president pro tempore of the Senate, has the right to cast a tie-breaking vote. Since not a single Republican will vote for the bill, it would require the support of all 50 Senate Democrats to pass - support it lacks thus far. Two ‘moderate’ (read ‘corporate-lackey’) Democrats - Joe Manchin of West Virginia, heavily bankrolled by the energy industry, and Kristin Sinema of Arizona - have announced that they will not support the measure in its current form, lamely citing ‘concerns’ about excessive government debt, even though the cost is paid for by increased corporate and wealth taxes. The two can take this position openly because they feel reassured of re-election without primary challenges in their respective states. Almost certainly hiding behind them, however, are other Democratic senators, who may be more hesitant about reassuring their ruling class patrons at the expense of publicly opposing legislation that is widely popular in the polls.

Yet Democratic allies of the two Senate ‘moderates’ were not long to rear their heads in the House of Representatives. Ten of its members, led by Josh Gottheimer of New Jersey - who in 2017 only felt comfortable leaving his posh neighbourhood to attend a party for a political colleague in a working class district with the protection of an off-duty policeman and wearing a bullet-proof vest - are attempting to decouple the two bills, vowing not to vote for the $3.5 trillion measure unless the smaller one is passed and signed into law by Biden beforehand (the Democrats hold only a razor-thin, six-vote majority in the House, so cannot afford to lose more than two votes for any legislation). The publicly stated reason of the 10 is a desire not to endanger the smaller bill, which they say is urgently needed. Their real motive, however, is revealed in the emails exchanged between themselves and the big Democratic donors backing their effort: to claim credit for the smaller bill, while derailing or eviscerating the larger one - especially objectionable to plutocrats for its proposal to raise their taxes.

The non-cooperating 10 took a victory lap when, in exchange for their procedural vote to allow discussion of the larger bill on the House floor, they made speaker Nancy Pelosi promise to schedule a separate vote on the smaller measure by September 27. Yet this concession may prove meaningless, because a number of representatives from the Progressive Caucus have pledged not to vote for the smaller bill unless it is linked to the larger one. If they hold firm - a big ‘if’ - a stand-alone lesser bill could only pass with the support of House Republicans willing to defy Donald Trump, who has denounced both pieces of legislation. This is something most Republicans are loath to do.

In the battle over the reconciliation bill, the leadership and the Democratic left find themselves in a highly unusual alignment, at least for now. The Democratic leadership had locked arms to defeat Sanders in the 2020 presidential primaries, and it did the same more recently in Ohio to beat back the challenge of the black progressive state senator, Nina Turner, in her Democratic primary bid to become the party’s candidate for the House of Representatives.

Turner had refused to endorse Hillary Clinton in 2016 or Joe Biden in 2020. A few weeks before the presidential election, she compared the choice between Trump and Biden to that between a full and half-full “bowl of shit”. Endorsements from high-level Democratic politicians, ads accusing Turner of not being a true Democrat and wads of leadership cash combined to hand the primary to Turner’s centrist opponent, Shontel Brown, who won by six percentage points.

Less expected, however - especially given Biden’s centre-right record - is the extent to which he and leading Democrats borrowed from the Sanders wing, even while uniting to defeat it. This leftward tilt should not be overstated, however. True to his neoliberal past, Biden has refused to use his executive powers to cancel student debt or champion Medicare for all. Neither has he summoned his party to eliminate the Senate filibuster, which, because it requires a two-thirds majority to pass non-spending bills, is the major obstacle to a broader left-liberal agenda.

Biden quickly abandoned any attempt to include a rise in the federal minimum wage from its currently laughable $7.25 to an inadequate $15 per hour in his reconciliation bill. His excuse was that the Senate parliamentarian ruled that it could not be passed by a simple majority under reconciliation, even though Republicans had no qualms about overruling the parliamentarian’s decisions when such decisions interfered with their legislation.

The reconciliation bill’s massive expenditures on public works and social welfare nevertheless represent the most ambitious legislation of this kind since Lyndon Johnson’s Great Society programmes of the 1960s, and are clearly aimed at bringing the US into closer alignment with the more generous western European welfare states. They are an undeniable departure from the neoliberal policies of the past five decades, and cannot be dismissed as trivial or cosmetic. Although Bernie Sanders earlier proposed a bill twice its size, the Biden initiative has obtained the enthusiastic support of the Democratic Party left. Sanders has described it as “momentous”.

It has, on the other hand, been met with near-unanimous opposition from the capitalist class. The country’s two leading business groups - the Business Roundtable and the national Chamber of Commerce - have closed ranks in an attempt to defeat the reconciliation package, against which they are now mounting an intensive lobbying campaign and a multi-media blitz.

Global designs

The most immediate reason for Biden’s initiative no doubt lies in the populist revolt that has upended his career-defining status-quo politics. It seems finally to have dawned on even the most resolute middle-of-the-roaders - including Nancy Pelosi and Chuck Schumer, Democratic leaders respectively in the House and Senate - that the white nationalist passions stirred by the party of Trump cannot be answered merely by anti-racism, defence of abortion and voting rights, gun control and environmentalism. Important as these things are to many, they are unlikely to win the votes of the unemployed steel worker in Ohio or spark the enthusiasm of the Amazon warehouse attendant or the Uber driver.

Party leaders seem to have reluctantly absorbed from Sanders and the ‘squad’ the lesson that the only way of bringing broad layers of working class voters firmly back into the Democratic fold is to link their party’s name, as it was linked in Franklin Roosevelt’s time, to new and tangible material improvements.

During the Covid crisis, ordinary people were awakened for the first time since the 60s to the possibility that the federal government can aid them directly - in the form of direct cash payments and unemployment insurance supplements - and not merely rush to the relief of the bankers, as it did under Obama in the 2008 financial crisis. Despite massive pandemic job losses, the number of Americans living in poverty declined from 11.8% in 2019 to 9.1% in 2021 - the lowest figure since 1967 - due to government aid.

More mainstream Democrats now seem to be resigning themselves to the likelihood that their only chance of victory in the 2022 mid-term elections, and in the 2024 presidential contest, lies along the road of delivering palpable popular gains, distasteful though this turn may be to their monied benefactors. Hence their hurry to pass the infrastructure bills, and the determination of the Republicans to block them from delivering improvements that would make Democrats more popular in the run-up to elections.

Biden’s neo-Keynesian turn, however, has more than a domestic, party-political dimension. Trump’s campaign slogan was “Make America great again!” Biden celebrated his 2020 triumph by proclaiming, “America is back!” Like all serviceable political slogans, these two are conveniently vague. But it is not unreasonable to infer that the first was mainly directed toward Americans and their discontents, while Biden’s is intended to suggest a reaffirmation of America’s global role. He seems to imply that, after a Trumpian isolationist interregnum, the US is once again prepared act as leader of Nato, enlist the support of allies to fight its foes, reverse the growing perception of American decline and fully restore the country to its role of world imperial hegemon.

Biden makes no secret of his ambitions. He often motivates his budget bills by the need to counter Russian ‘aggression’ and, above all, to ‘meet the Chinese challenge’. His move to toughen sanctions against Cuba in response to the Havana street protests - caused in part by US sanctions to begin with - signalled that neither his domestic reformist turn nor his hasty withdrawal from Afghanistan should be taken to signal a more pacific US foreign policy. His recent sale of American nuclear-powered submarines to Australia underscores his determination to mount a new cold war with China, even at the expense of treading on the toes of the country’s long-time French ally, and, more generally, throwing cold water on any inclination of the European Union to maintain a balancing act between China and the US.

Yet, for all the complacency and opportunism of his career, Biden seems to have grasped that the US cannot reassert its world-imperial role without a concerted effort by the state to save American capitalism from itself. The country can hardly measure up to its global ambitions amid the fires of the west coast or the floods of the eastern seaboard, and a crumbling physical infrastructure unable to cope with either. It must take the international lead in curbing carbon-emission levels bound to make such events more catastrophic in years to come.

Neither can the government summon to patriotic duty a people made politically cynical due to yawning inequality and diminished future prospects. The resulting alienation from mainstream politics - signified by the rise of the Democratic left and, more powerfully, the Trumpist right - represents the deepest political fracture seen in post-World War II decades. Biden seems to be aware that the reversal of imperial decline requires a recalibration of the internal regime.

Doubtful prospects

Such a retooling cannot succeed, however, unless Biden can convince at least part of the capitalist class that long-term survivability may require some sacrifice of short-term profits. This necessity is underscored by the fact that American imperialism’s chief Chinese rival is a state-led regime with strong growth rates and no hesitation about reining in home-grown businesses that threaten its nationalist project.

Yet the efforts of Biden and the Democrats have shown scant results: they have rather been met with a solid phalanx of capitalist resistance to any increase in taxes upon profits or accumulated wealth, supported by a Republican Party unified in this respect, and a Congressional Democratic Party with some members too servile to corporate interests to provide the solid majority the White House needs to prevail.

The opposition to Biden by two Democratic senators and 10 representatives was only the first sign of distress and the reconciliation bill is now being watered down further in the House. In their efforts to craft a measure that would be supported by corporate Democrats, the House Ways and Means Committee has drafted a version that would, according to the New York Times, “go after the merely rich more than the fabulously rich”.1 It has proposed a tax only on higher incomes - as opposed to Biden’s desired tax on accumulated wealth - that would leave the greatest fortunes untouched, since their owners’ principal gains come not from pay cheques, but from appreciation of asset value. It would also spare the other major source of great wealth: inherited holdings.

The original Senate proposal for a stiffer inheritance tax has been dropped entirely from the House committee version. Another influential House committee ran scared in the face of a ferocious campaign by big pharma against the provision of the bill that would allow Medicare to negotiate with drug companies for lower prices. Two of its Democratic members voted with Republicans against any such provision, thus excluding it from the House version of the bill. Thus the Congressional Democratic ‘moderates’ acted out of immoderate fear of the drug giants, the Waltons, Jeff Bezos and Elon Musk. And this, moreover, is only likely to be the beginning of a further whittling down of the reconciliation bill in the interests of capitalist ‘realism’.

Those Democrats who are, on the other hand, inclined to hold out for the passage of the reconciliation bill in its entirety may soon be confronted by a familiar choice: settling for a few skeletal reforms or getting nothing at all. If presented with a truncated bill, will Sanders and ‘the squad’ make good on their threat to exercise the only leverage they have by voting against it? The final tally will be the first major test of the resolve of the newly arisen Democratic left.

An even bigger question, however, concerns the ultimate stance of the White House and Democratic leaders. Will they tread the well-worn path of taking what little they can get and prevailing upon the left not to act as spoilers by sabotaging the only possible compromise? Or will they, in the weeks to come, pull out all stops to pressure the ‘moderates’ to put aside their objections and vote for a ground-breaking bill? The entire history of Biden and the Democratic leadership suggests they will pursue the former course.

But these are extraordinary times. Biden seems to have intuited that his political future and legacy, along with the prospects of his party, depend upon his ability to be seen as a transformative figure; that only a dose of strong medicine can address the multiple crises, foreign and domestic, now facing the American state, and reverse decades of decline. The fate of the reconciliation bill will therefore be a significant test of the ability of US imperialism to renew itself.

At the time of writing, Biden’s gambit seems likely to fail due to the intransigence of a ruling class too long accustomed to deference and too devoid of common purpose to make any meaningful sacrifice in the broader interests of the system - and a Democratic Party too beholden to that class to risk its displeasure.

  1. The New York Times September 14 2021.↩︎