This article is taken from a report to National Board, CPUSA February 2, 2011

Summary of U.S. Economy

High unemployment and slow growth are still the dominant features of the US economy. Growth during 2011 has been at a very slow pace, and slightly improved Q4 figures just released are likely due to temporary factors. While there has been real, if modest job growth in each of the last five monthsⁱ, much of the drop in the official unemployment rate is due to unemployed workers giving up looking for j obs. There is wide agreement that any recovery is likely to be sluggish over the next couple of years. For example, Paul Krugman writes, "...the state of the economy remains terrible... But there are reasons to think that we're finally on the (slow) road to better times."ⁱⁱ

The recovery, at least in terms of economic output, may continue and even strengthen -- eventually. With profits restored at the expense of wages and social benefits¹, business investment could continue to increase. With almost no new housing construction and a growing potential demand from multi-family households, there could be a new housing boom at some point.

But there is still a strong possibility, in the immediate future, of a new financial crisis and resumption of the downward economic spiral of 2008-2009. This danger comes from:

• The overhang of unpayable household debt, particularly in home mortgagesⁱⁱⁱ.

• The global capitalist crisis, most immediately the European crisis, which can destabilize the US financial system, and will reduce the market for US exports.

• Government policy which forced spending cuts at the federal, state and local level, cutting GDP by almost one-half percent in 2011, and are on track to do even more damage in 2012 and future years.^iv 2

The economic effect of the austerity being imposed by the political process in the US and EU has led Joseph Stiglitz to the gloomy conclusion, "...austerity will only exacerbate the economic slowdown. Without growth, the debt crisis -- and the euro crisis -- will only worsen. And the long crisis that began with the collapse of the housing bubble in 2007 and the subsequent recession will continue."^v

The economic crisis has enabled the strongest capitalists to consolidate their positions and their profits at the expense of their competitors, and especially at the expense of the working class. Corporate profits are at an all-time high, surpassing even the record set before the recession^vi. The right-wing corporate offensive is enabled by Republican control of the House and their effective veto power in the Senate. The series of crises last year over the budget and the debt ceiling have resulted in agreements that will be hard to change, and tend to lock in deep cuts to individual and social spending for the working class, and preclude significant public policy response to the challenges facing the country.

The essence of the outcome of the crisis is the continued seizure of wealth and power by the ruling class. This is even more overt in EU, where the new Prime Ministers of Greece and Italy have been essentially chosen by the ECB without even the show of an election. The austerity measures being imposed in Europe have caused massive unemployment and economic collapse in the weaker countries. Earlier this week in Brussels, 25 EU countries agreed to disastrous austerity policies and to surrender control of their economic policy.^vii In the US, more cities, most recently in Michigan, are put under the control of an unelected, banker-friendly administrator. And citizens united is replacing one man one vote with one dollar one vote.

The contradictions that caused this and the previous 2 recessions are not being resolved. Attacks on the working class, growing inequality, growing power of financial capital, tendency toward increasing public and private debt, and growth driven by unproductive speculation -- all deepen the contradictions. The result is an extended period of instability and class struggle in global capitalism, and especially US capitalism.

New Normal For the working class

The economic crisis is resulting in an intensification of trends that became dominant politically and economically in the US particularly with the election of Reagan in 1980. The result may be a qualitatively new situation, a "new normal" for the working class and the 99%.

Many of the characteristics of capitalism's new normal are those of capitalism's old (historical) normal. It is becoming clear that the so-called golden age of capitalism, at least for the US, Western Europe and some countries in Asia, was the exception, not the rule. From roughly the end of World War II to the mid-1970s, a combination of strong working class movements, competition with an influential and growing socialist block, and other temporary factors allowed economic growth to raise the living standards of a significant section of the working class to that formerly reserved for the middle classes.

The global capitalist crisis of the 1970s, followed by the Reagan-Thatcher offensive by the capitalist class against the working class, began the process that is re-emerging as the dominant feature of class relations in capitalist societies globally -- a tendency toward absolute impoverishment of the working class, a growth in inequality, and a reduction of social mobility. Note that this is a tendency, not a rigid law. It is uneven, and it means different things in the US, in Greece, in capitalist Russia, in India.

For thirty years, dominant capitalist economic theory has advanced "Labor market flexibility" as a pre-condition for a "successful" economy. Workers must renounce any claims on employers -- claims to job security, benefits, training. They must renounce social claims -- health care, pensions, education. Workers must be available 24/7. They must predict what jobs will be available in the future, find and pay for training for those jobs, relocate to wherever the jobs are. The recent New York Times article on production of Apple's products in China give a picture of flexible labor force that capitalism is demanding everywhere^viii. Society collectively, through government services, is expected to provide the physical infrastructure as well as the social environment including education and training, demanded by mobile, multinational capital. But by its very mobility and multinational character, capital has the power to deny to society the resources needed to supply that environment.

A recent article by Robert Reich reports, "More than 20 percent of the American workforce is now “contingent” – temporary workers, contractors, independent consultants – with no security at all." In 1980, he reports, pensions and retiree health care were the rule for medium and large companies -- now they are virtually nonexistent.^ix According to a new report25% of US workers have low-wage jobs -- significantly worse than any other rich (OECD) country^x. US workers have the lowest levels of employment security, paid vacations, paid sick days, or paid parental leave. The wave of austerity being imposed in Europe seems designed to bring workers there down to the level of US workers, rather than the reverse.

Nowhere is the new normal economy more evident than in communities of color in the US. Median household wealth for Black and Latino households is close to zero, which means no cushion against job loss or other emergency. Recent reports of pervasive, systematic discrimination in mortgages against African American & Hispanic families. One report states,"Racially discriminatory practices in mortgage lending (known as 'reverse redlining') were so systematic that top bank officials as well as federal and state regulators knew, or should have known, of their existence and taken remedial action."³ Criminal discrimination in home sales and mortgage lending -- enabling super profits for the banks -- are just the tip of the iceberg. Cutbacks in government employment, one of the few areas where African Americans have had the opportunity for relatively stable jobs, have been devastating.

The destruction of the wealth of the African American and Latino communities in this crisis has been accompanied by a fall in wealth in white households. There is a bass for unity and struggle. The policies that hurt African Americans hurt everyone, demonstrating the necessity and potential for unity because of breadth of crisis.

The 2012 elections

The 2012 elections will largely be determined by the economy. If (and it is a big if) current trends continue to election day, President Obama will be able to point to a positive direction for the economy. But there will be no dramatic improvement in the reality that most people experience, and the dangers cited earlier, which include deliberate sabotage by the Republicans, could make the economic situation even worse by Fall. People will only vote if they think it will make a difference. And how people vote will depends on their perceptions -- including perceptions of the economic record of the past 4 years, the causes of the crisis, and which solutions will be best.

The Republican narrative and substance

Even while they have been attacking one another on superficial issues, the Republican candidates share a common economic narrative. And the media focus on the personal attacks and circus atmosphere have diverted attention from the real effect of Republican policies and from the urgent legislation that needs to be accomplished now, including renewing federal unemployment benefits and other routine government business.

What is the common Republican narrative?

• Their message on jobs: Government spending destroys jobs; government jobs aren't real jobs; government deficits destroy jobs; government regulation destroys jobs; worker protection destroys jobs; environmental protection destroys jobs; unions destroy jobs; health care destroys jobs; Obama destroys jobs. Rich people create jobs; privatization creates jobs. In economic-speak, their jobs message boils down to the old Reagan supply-side, trickle-down economics -- according to the Washington Post, Republicans believe that "...reducing taxes and shrinking the government’s role in the economy will free up capital that entrepreneurs can invest, creating good new jobs."^xi

• Their message is: People are unemployed because they are too lazy to work, or are living it up on their unemployment checks, or demand too much pay, or are on drugs, or have failed to get enough education.

• They say: We need a business executive to run the country like a business.

• Newt Gingrich is champion of the openly racist welfare queen argument that worked so well for Nixon and Reagan. Gingrich offered to attend an NAACP convention to explain why African Americans "should demand paychecks instead of food stamps," and he has described President Obama as "the most successful food-stamp president in American history."^xii

• Romney says "Barack Obama has been replacing our merit-based society with an entitlement society.”^xiii. According to Robert Borosage, this entitlement vs opportunity theme will frame the Romney campaign.^xiv

Terri Albano summed up the Republican narrative in PeoplesWorld.org: "Instead of Wall Street/corporate greed, Republicans say government programs are the cause of unemployment and poverty, vilifying, through racist caricatures, programs that have social value."^xv

The message that comes through is that you -- i.e. you the Republican audience, you the employed "middle class" white hard-working voter, -- face rising taxes, your children will have to pay a crippling government debt, and the country is going to the dogs, all because of runaway government spending for generous benefits that support people -- especially Black people -- too lazy to work. That message certainly came through in Romney's recent statements implying poor people, with their safety net, are doing at least as well as "middle class" Americans.^xvi Gingrich fired back by calling the safety net a spider web that "traps people in dependency." ^xvii

These lies can be, have been, and should continue to be answered point by point. But I think we also have to make a class-based argument similar to the one Trumka made in 2008 when he confronted racist reluctance by some workers to vote for Obama. The 1% have been grabbing more and more of the pie, and leaving us to fight over the crumbs. We can play their game, and argue over the size of the crumbs we each get, or we can stick together and fight for a real slice.

There are few working class families who do not have a member, a relative, a friend or a neighbor who needs or has needed food stamps, EITC, unemployment insurance, Pell grants, S-CHIP or Medicaid, housing assistance (including home mortgage tax deductions) or other government assistance. In fact, half of all Americans now live in homes where at least one person is collecting a federal benefit.^xviii

Gingrich's attack can be stood on its head. When tens of millions have fallen victims to capitalism's dysfunctional greed, it should be a matter of pride to be the food stamp president -- to defend and expand the aid extended to victims of this unnatural economic disaster. The Republicans want to replace a food stamp president with a starvation president. Looking at the kind of budgets supported by all the Republican candidates, it is perfectly accurate to say: First, they come for food stamps. If we let them get away with it and don't speak up, they will surely come for student loans, unemployment insurance, Medicare, Social Security...⁴

Regardless of the talking points in the Republican narrative, their actual economic program is that of the "plunder and loot" section of capitalist class. Romney's history of profiting from vulture capitalism makes him their perfect representative. Their attitude is reflected in both economic and environment policy -- this party is going to go on forever, but even if it doesn't, all the more reason to grab what we can while we can.

Specifics common to the Republican candidates include continued reduction on taxes for the wealthiest; huge cuts in social spending^xix; plundering and phaseout of Social Security and Medicare; continued subsidies for oil and other corporate special interests, while starving development of alternative energy even in the private sector. Ordinary people have no rights as workers -- there are no social rights, only the right of individuals to compete for fewer and fewer crumbs.

One point where their rhetoric matches reality: defeating Obama is the #1 Republican priority. To achieve that, they are willing to attack not only workers and their living standards, but to sabotage the entire economy. They have been pretty successful. Republican obstruction of appointments and legislation, including the American Jobs Act and previous bills, has already contributed to layoffs of hundreds of thousands of teachers and other local and state workers, as well as the continued depression-level joblessness in the construction trades.

Obstruction and sabotage of normal government functioning is a fascist tactic. Blocking nominees was used as part of the economic sabotage campaign that overthrew the socialist Popular Unity government in Chile in 1973. Although the US does not face an imminent danger of fascism, Republicans increasingly show a fascist-like contempt for truth, democratic process, or the national interest. They will do anything to gain power.

Obama administration and the Political Economy of Capitalism

Many point to the real accomplishments of the last three years⁵. The Obama stimulus certainly played a role and may have been decisive in stopping the economic free fall that Obama inherited. At its peak, between 3 and 4 million workers had jobs; many unemployed were able to maintain health benefits; education, health and other local services were maintained; and important infrastructure projects were undertaken -- all because of the stimulus. Other economic achievements include health reform, financial reform, improving the student loan system, and numerous appointments to the Supreme Court, the NLRB and the rest of the federal bureaucracy. Additional positive initiatives have been blocked by Congressional Republicans.

There is another view. One example comes from Chris Hedges at Truthdig: "Politicians like Obama are hostages. They jump when corporations say jump. They beg when corporations say beg. And if any elected official so much as murmurs anything that sounds like dissent, the Supreme Court ruling permits corporations to destroy him or her. And they do. We can vote for Romney or Obama, but Goldman Sachs and ExxonMobil and Bank of America and the defense contractors always win." ^xx 6

These glass-half-full vs glass-half empty discussions don't shed a lot of light.

Chris Hedges and similar commentators, for all their sophistication and revolutionary phrasing, show a weak understanding of capitalism, and of what it takes to achieve change. After proclaiming that Romney and Obama are the same, Hedges says, "I am not sure what to call our economic system, but it is not capitalism." Wrong! Corporate ownership and control of government is central to capitalism, and was described by Marx ("The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie. -- Communist Manifesto), and in more advanced form by Lenin (see, for example, State and Revolution). Our understanding of state monopoly capitalism could probably use some up-to-date elaboration. But it is exactly because of that understanding that we can develop an analysis of the strategy and tactics of the present situation.

The Obama administration and Democratic Party economic policies are confused and contradictory, reflecting the various class and social groups that are the base of support, and reflecting the present balance of forces and ideological climate. Dominant in the Democratic Party is a section of monopoly capital, including a section of finance capital, which could be called the more rational section. They tend to realize that the uncontrolled pursuit of maximum short-term profit can undermine the stability and the future of the entire system, of economic growth, of the environment, and what they perceive as the national interest. While pursuing an imperialist foreign policy, they are less likely to choose military action as a first resort.

Due to the peculiarities and anti-democratic nature of our electoral system it is also through the Democratic Party that other social and class interests, including working class, racially and nationally oppressed people and women amongst others, are represented in Congress and in the administration, and have some influence. The challenge of blocking the ultra-right while strengthening the independent political organization of unions and popular forces in the 2012 elections has been elaborated in reports by Sam Webb^xxi and Joelle Fishman^xxii, and discussed at length within the Party.

The outcome of elections matter, even when the choice is Democrat vs Republican. They matter not only in the lives of working people, but in the terrain on which we organize. In 2009 and 2010, bills were introduced in Congress, and mobilized for at the grassroots, that tried to build on the momentum of the 2008 election and more aggressively advance jobs and workers rights. Some were passed. Following the 2010 election, when Republicans made gains in the Senate and took the House, struggles became more defensive in nature. Instead of fighting to extend federal programs to relieve suffering and generate useful, productive jobs, we find ourselves struggling to prevent existing programs from being cut. And that was only a mid-term election.

In the early 1930s, the Communist Party was critical of Roosevelt, saying (with some justification) that his policies were too corporate-friendly. But taking advantage of vague language in the National Industrial Recovery Act and statements by Roosevelt, John L. lewis organized coal miners under the slogan, "The President wants you to join the union!" In his statements and proposals, Obama has put on the national agenda jobs, infrastructure, health care, education, energy, and the idea that social needs are real and a matter for us to solve collectively, not left exclusively to the private sector. Of course, we have and should continue to go beyond the limitations of the administration's proposals, and argue against negative policies, as was the case with the Peoples World editorial^xxiii on the recent State Of The Union speech. But just as John L Lewis and others, including the Communist Party did in the 1930s⁷, we should build from, not tear down, the positive agenda projected by Obama. The Communist Party, along with the labor movement and other peoples organizations, has and should continue to project, organize and fight for programs that will make that agenda a reality.

Socialism and the 2012 elections

The economic crisis has put capitalism on trial. As just one instance in the business press, the Financial Times has a special series, called Capitalism in Crisis.^xxiv

On the other side of the class divide are the polls that show pluralities of young people, African Americans, Latinos, and low-wage workers prefer socialism to capitalism.^xxv Although socialism and capitalism were apparently undefined in the poll, there is obviously a widespread questioning of capitalism and a search for alternatives.

Ironically, the Republican primary has contributed to questioning of capitalism.

With Mitt Romney as the poster child for vulture capitalism, Newt Gingrich asks, "Is capitalism really about the ability of a handful of rich people to manipulate the lives of thousands of people and walk off with the money, or is that in fact a little bit of a flawed system?” He attacks Romney's tenure at Bain saying, calling it the "Wall Street model" where “you can basically take out all the money, leaving behind the workers,”^xxvi

An article from the Wall Street Journal's Washington Bureau, is headlined "Gingrich’s Attacks Spur Debate on Capitalism," and quotes club for growth president and former Republican congressman Chris Chocola as saying, “Attacking Governor Romney for participating in free-market capitalism is just beyond the pale for any purported ‘Reagan conservative.’ ”^xxviiBusinessweek reports that Gingrich's anti Wall Street rhetoric cost the support of a major S. Carolina businessman and fundraiser, who swiched support to Romney saying "You can’t be on both sides of free market capitalism."^xxviii

A successful Republican strategist advises Republicans: "Conservatives should not be defending capitalism. They should be defending economic freedom. And there is a difference. The word capitalism was created by Karl Marx to demonize those people who make a profit."^xxix

The other side of the coin is the attacks on Obama and on anything vaguely progressive as socialist. It recalls the wonderful song by our comrade Bernice Diskin -- the singer tells how every time she stands up to the boss, or the landlord, or the racists, someone calls her a red; so she decides to check out what the reds are all about. From the 1930s until today, anti-communism and anti-socialism have indeed been a path by which some have first looked at and then joined the Communist Party and/or the fight for socialism. This is a factor in the upsurge of interest in socialism, and in the Communist Party today.

All this shows that questioning capitalism has become possible for large sections of the working class.

Of course, the right-wing, pseudo-populist attacks on Romney by other Republicans spread more confusion than light on the question. From Newt Gingrich to Mitch Daniels to Ron Paul, their critiques of specific features of the economic crisis may ring a bell, but their solutions are inevitably to cut taxes for the rich, cut public programs, end government regulation, and give even more power and control over the economy to the same capitalist corporations.

Some ideological issues amongst "critics" of capitalism

Ron Paul -- Ron Paul is not a critic of capitalism, but he has attracted some in the Occupy, anti-war and youth movements with his professed stand on issues, e.g., decriminalizing marijuana, opposition to indefinite detention, opposition to foreign wars. But look at the company he keeps. His embrace of these issues does nothing to broaden the base of those movements -- rather, it pulls participants in those movements away from their natural allies in a broad progressive coalition. On this point, Noam Chomsky hit the nail on the head. Speaking of Paul's willingness to let someone die if they don't have health insurance, Chomsky says, "And it goes across the board. In fact, it goes through the whole so-called Libertarian ideology. It may sound nice on the surface but if you think it through, it's just a call for corporate tyranny. It takes away any barrier to corporate tyranny."^xxx

Repeat -- "it takes away any barrier to corporate tyranny." Ron Paul wants to abolish the Federal Reserve. The Fed is, indeed, largely a tool of the financial industry. But the Fed majority, led by chairman Bernanke, has resisted the European-style austerity measures supported by the most reactionary part of U.S. finance, including bankers' representatives on the Fed. The right wing is attacking the Fed for not following an austerity policy. Paul's economic and monetary policies would imposing severe austerity and leave us at mercy of biggest, unregulated banks, laying the ground for a new and even more severe financial crisis.

Return to the good old days. On the liberal mainstream, we have the idea that what's happening today is a distortion of capitalism. In the good old days of the 1950s and 1960s, the story goes, there was a social contract, productivity gains were shared with the working class, and most workers became middle class, and class struggle was subdued. In economics, Keynsian theory reigned supreme.

Actually, the 1950s and 1960s were the exception, not the rule.⁸ Since then, the economic and political factors inherent in capitalism have reasserted the system's long-term trend toward crisis and decay. We share much with Keynsian progressives in terms of immediate economic program to combthe present crisis. But continued crisis and class struggle will remain for the foreseeable future.

Return to small-scale and cooperative, local production -- This is a concept heard, in a wide variety of forms, especially among young people and in the Occupy movement. On another level, workers' coops -- the Mondragon movement is usually held as an example -- are advanced as the alternative to capitalism.

Local production, local control, workers' cooperatives -- these will play an important part in any socialist society, and can be a part of progressive struggle today. But the decisive battles are on a national and global level for control of the economy. As long as they exist in a capitalist sea, coops, local business, small business are subject to the laws -- and the crises -- of capitalism. We should recall Marx' exposition of a basic contradiction of capitalist production -- the means of production are increasingly social, while ownership and control is in the hands of the capitalist 1%. From iphones and the internet to medical equipment to transportation to public infrastructure, the things that make life possible for the majority of Earth's 7 billion people depend on an interconnected global economy. Much more even than when Marx wrote, we cannot return to a primarily local economy. The key struggle is around who controls the increasingly integrated national and global economy as a whole. In fact, increasing popular power over the whole economy will be necessary to enable implementation of policies that enable a greater measure of local, cooperative, economy.

I would add that the increasingly social nature of economic activity -- the web of contractors, subcontractors, transportation and distribution networks, financing -- means that the bulk of surplus value created by most workers is distributed amongst many capitalists beyond their direct employer. This means that the class struggle must increasingly be fought on the social -- i.e., the political level

including the national political level, in addition to direct confrontation with immediate employers.⁹

Arguing for Socialism

On Labor Day, President Obama said, "We've got roads and bridges across this country that need rebuilding. We've got private companies with the equipment and the manpower to do the building. We've got more than one million unemployed construction workers ready to get dirty right now. There is work to be done and there are workers ready to do it."^xxxi. The President was proposing the American Jobs Act -- a program worth fighting for, but well within the fairly conservative framework of post World War II economics in the US. But there is no more dramatic example of the economic failure of capitalism than the juxtaposition of 20 million jobless workers, with the huge backlog of physical and social work that needs to be done in our country; the juxtaposition of 3.5 million homeless with 18.5 million empty homes^xxxii At the heart of socialist economics is public control, in the interests of all the people, of matching individual and social needs with the human and material resources available to meet those needs.

There is no contradiction between fighting to enact urgent, albeit modest, measures well within the capitalist framework, while building consciousness and movements that go beyond that framework. The economic and social security of our country, now and for future generations, cannot be met without focusing on real needs: useful and productive jobs providing health and education, safe and environmentally friendly infrastructure, renewable energy and clean, efficient transportation, with major research, development and production in the U.S. Such a program is achievable, along with a sustainable budget and rising living standards for the vast majority. It requires only that the unprecedented inequality in our nation's wealth be reversed, and that surplus wealth be applied to the public good instead of financial speculation and the export of jobs.

(Endnotes on next page)