Are state deficits “necessary”?

The intense fear expressed in Washington and in financial markets around the world of simply balancing a fucking budget should grab your attention. It’s not like the capitalists are being asked to commit suicide as a class. So why the profound resistance to simply balancing Washington’s budget? If the state is running a deficit, it is spending more than it is directly extracting from the economy, i.e., from the total output of the capital. A balanced budget means the fascist state can spend no more than it directly extracts from the economy through taxes and other revenue.

So what is all the fuss about and how can we determine whether this deficit spending is necessary?

Thinking the Unthinkable on the Shutdown

There is a recurrent theme in this shutdown. Let’s see if you are perceptive enough to pick up on it (courtesy Zero Hedge blog):

#6 Richard Bove, VP of research at Rafferty Capital Markets: “If they seriously default on the debt, what we’re really talking about is a depression”#7 Chinese vice finance minister Zhu Guangyao: “The U.S. is clearly aware of China’s concerns about the financial stalemate [in Washington] and China’s request for the US to ensure the safety of Chinese investments.”

#8 The U.S. Treasury Department: “A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse”

#9 Goldman Sachs: “We estimate that the fiscal pull-back would amount to 9pc of GDP. If this were allowed to occur, it could lead to a rapid downturn in economic activity if not reversed quickly”

#10 Simon Johnson, former chief economist for the IMF: “It would be insane to default, but it’s no longer a zero-percent probability”

#11 Warren Buffett about the potential of a debt default: “It should be like nuclear bombs, basically too horrible to use”

#12 Bloomberg: “Anyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.”

If the shutdown is not ended soon and the debt ceiling raised, all hell is going to break loose. These seem to be shared assumptions of both Democrats and GOP, hence public debate (propaganda) takes place within their parameters. The crisis as a mere political event begins with the assumption that any reduction in the debt must end in default, which is predicted to unleash such calamitous events as to be unthinkable.

Is the partial shutdown of the federal government a “manufactured crisis?”

This is the charge made by some on the Left who oppose it.  Many point to the relatively small scale of the impact — estimated by a Forbes magazine writer to be less than 13% of federal expenditures. Others point to the focus of the shutdown on non-military expenditures, which must strike the programs that most closely appear to maintain the working class — which have been labeled “nonessential”. Deliberately excluded from the shutdown are the very mechanisms of state repression that capitalist class employs to maintain their rule.

According to this line of thinking, the folks in Washington really aren’t in a crisis. Rather, the shutdown is an opportunity taken to further impoverish the working class. For this section of the Left, the shutdown is a purely political event driven by ideology, not by economic laws: We have a bunch of neoliberals who have decided their particular ideology is the proper way to organize society and they want to impose this vision on society by means of the state power they control.