The Economics Studies program of the Brookings Institution has published a study on how mounting US federal debt, now at $36 trillion, could spark a devastating financial crisis in the US and globally.
While it concluded that the chances of such a crisis are low, the fact that such an analysis has been carried out by a major US think tank indicates this issue is causing greater concern. As the report acknowledged, “That the US is on an unsustainable fiscal trajectory is well-established and has long been evident in debt projections.”
Their paper, they wrote, sought to “examine the various channels through which debt can affect the economy to assess the risk that elevated debt will lead to a crisis.”
They defined a fiscal crisis as a “sudden, large and persistent downturn in demand for Treasury securities relative to supply that triggers a sharp and persistent spike in interest rates.”
One of the transmission mechanisms through which such a crisis could pass into the broader financial system is the so-called repurchase or repo market. This is the market in which financial institutions obtain short-turn funds, sometimes just overnight, using Treasuries as collateral.
The use of Treasuries in this way is relied on “heavily” in the financial system, the report noted, and a “sudden loss of confidence would impair liquidity, potentially leading to widespread bank failures, as banks and financial institutions use Treasuries to meet capital requirements.”
Such an event is not “off the charts” but has already happened. In September 2019 there was a crisis in the repo market when interest rates on ultra short loans shot up to as high as 10 percent from their normal level of a fraction of a percentage point and the Federal Reserve was forced to intervene.
The report warned that a crisis in the Treasury market would “most likely” be accompanied by a “dramatic fall” in both the US dollar and equity markets. Given the critical role of the US Treasury market in the global financial system, it “would likely lead to a financial crisis involving widespread bank losses, a collapse in credit availability, and very likely a global recession.”
Such a scenario is well within the bounds of possibility. In fact, the conditions for it emerged in the freeze in the US Treasury market at the start of the COVID-19 pandemic in March 2020. For several days there were no buyers for US Treasury bonds, supposedly the safest financial asset in the world.
A full-scale global meltdown was only prevented by the Fed which intervened to the tune of several trillion dollars to back virtually every financial asset.
As Darrel Duffie of the Graduate School of Business at Stanford University wrote shortly after the immediate crisis had passed, while the Fed accomplished what it needed to do, it was not acceptable that the market was based on “the notion that the Fed is available as the lender of last resort.”
Duffie remarked that the turmoil revealed that the structure of the Treasury market was “overdue for an upgrade.” In the five years that have since passed, nothing resembling that has taken place. In fact, the various financial regulatory authorities are still trying to figure out what exactly took place in March 2020 and what might be done to prevent a recurrence.
The report posed the question as to whether future disruptions could be so large that even the Fed could not respond effectively. It said given the Fed’s capacity to purchase an unlimited amount of Treasuries this was “unlikely.”
“Still,” the report continued, “as the Treasury market continues to grow, episodes of dysfunction might become more frequent, potentially undermining confidence in US Treasuries as the world’s safest asset.”
The report’s authors recognised they were very much in uncharted waters—there has never been a time, except in World War 2, when the US debt to GDP ratio has been as high.
That was in very different conditions. The US was then an industrial powerhouse which formed the economic basis for the post-war boom through which it was able to pay down the debt. Today the US economy is shot through with debt and financial parasitism, dominated by the financial oligarchy whose source of wealth is not the expansion of industrial power but market speculation.
These issues are not touched on in the report, but the authors are aware that their claim that the chance of a crisis appears to be “quite low” rests on somewhat shaky ground.
“We recognise,” they wrote, “there is great uncertainty about the repercussions of debt as a share of GDP rising to levels far exceeding historical precedents, and an analysis benchmarked to historical relationships in the macroeconomy may understate the risks of a fiscal crisis.”
After analysing projections by the Congressional Budget Office on the increase in debt, the report noted that “the required adjustments to fiscal policy to stabilise the debt are sizable.” Moreover, those projections well be an underestimate because they are based on present conditions and not the measures which the Trump administration has planned such as major tax cuts for corporations and the effect of tariffs.
Where is the axe going to fall? There were no explicit policy prescriptions, but the answer was contained in the analysis of the reasons for debt escalation.
“In 2024, Social Security and health programs accounted for 3 percent more of GDP than they did in 2006 while revenues and non-interest spending were about the same. Thus, primary deficits as a share of GDP increased from 2006 to 2024 because spending on Social Security and health programs rose.” 2006 was chosen as the baseline because it was prior to the global financial crisis of 2008 and might be considered as being “normal”.
As with all such institutions providing advice on the running of the capitalist economy, the Brookings analysis essentially rules out as “off limits” for its calculations any consideration of the massive increases in US military spending, or the trillions of dollars handed to corporations and banks in the form of bailouts and subsidies. Also ruled out are the effects on the economy of the provision of virtually free money to companies and banks by the Fed, and, more recently, the payment of interest to Treasury bond holders, now approaching $1 trillion a year.
The focus of policy prescriptions, either explicit or implied, is on expenditure measures that most directly impact the working class.
Among possible triggers for a crisis it listed problems that the Fed is unable to mitigate. These included a depression or war, and political brinkmanship, which regularly takes place over lifting the debt ceiling leading to the loss of credibility. Also listed were the fear of default, a loss of inflation control and concerns that the Fed had abandoned its mandate and was allowing hyperinflation, and a “strategic default” at least on some debt. On the last possibility, Republican Senator Lindsey Graham suggested in 2020 that China should not be paid the $1 trillion it holds in US Treasuries.
The overriding fear pointed to was that investors came to believe that “the US was never going to address its long-term fiscal challenges.” This raised the “serious possibility” of a strategic default on its debt and “the result could be a cataclysmic event.”
It said the fiscal challenges had to be addressed and a “perceived unwillingness” to ever take these steps “would likely lead to a fiscal crisis, even with a Federal Reserve willing to act as a lender of last resort.”
The report did note that there was great uncertainty about “debt as a share of GDP rising to levels far exceeding historical precedents.” But it concluded that analysis suggested “so long as the US maintains its strong institutions and a fiscal trajectory that isn’t vastly worse than the ones currently projected the chance of a fiscal crisis over the next decades appears quite low.”
During an online event to discuss the report, however, David Wessel, a senior fellow at Brookings, drew attention to these lines which he said had been “haunting him.”
Clearly referencing the upending by the Trump administration of what had been economic, political and legal norms and the weakening of US institutions and a worsening fiscal trajectory, he said: “These are things I used to assign a zero probability to that are now somewhat higher.”
Louise Steiner, one of the authors of the report, said she was worried about the chance of a crisis not sparked by the amount of debt, and “not following the law as we used to understand it.”
Jo-Ann Fabrics store in Manchester, Connecticut [Photo: Wikimeida Commons]
US retailers are expected to close 15,000 stores this year, more than double the 7,325 shuttered in 2024 and breaking a record set in 2020 at the height of the pandemic.
Last week, bankrupt fabric retailer Jo-Ann announced it is planning to close around 500 locations this year, over one-half its 850 stores. The cuts will impact 49 states.
Through January this year, there were already 2,000 reported closures, including bankrupt Party City (738) and Big Lots (601). Pharmacy chain Walgreens has closed 333 stores and has targeted 500 more for closure this year.
2024 saw a number of other high-profile bankruptcies, including department store chain Macy’s. Bankrupt furniture retailer Conn’s had 553 store closings last year while bankrupt American Freight closed 353 locations and LL Flooring closed 213 stores. Overall, retail bankruptcies doubled over 2023 going from 25 to 51.
One Jo-Ann employee posted on social media, “The higher-up’s knew all along that stores would be closing, stringing store employees along that maybe... Corporate greed and major mismanagement above the store level in all its glory! Working our patooties off, hours cut, absolutely minimal staffing, customer complaints, that’s what the last year and a half has been! The only store remaining open in MD is Annapolis, and it’s more of a craft store than a fabric store.”
Another posted, “Sad day at Joann’s, I have worked with all my Joann family for 30 years. My heart is sad for all the employees and customers affected by these closings.”
The largest store closings in 2024 were in discount stores and pharmacies. Leading the list was Family Dollar with 700 store closings. CVS Health had 586 pharmacy closures and, Rite Aid closed 408 stores, followed by Walgreens with 259. This has led to warnings of the creation of “pharmacy deserts,” forcing people to travel out of the local area to fill prescriptions.
A number of factors are behind the mass of retail closures, such as the shift to online selling, but depressed spending amid growing social distress is certainly a key driving force.
Overall, January saw tepid job growth with employers adding 143,000 jobs, down significantly from the 261,000 added in November and 307,000 in December. The unemployment rate stood at 4 percent, still relatively moderate by historical standards, but concealing high levels of economic insecurity exacerbated by low-wage jobs and part-time and gig work.
The decline in job creation has been an ongoing trend. New jobs rose 2 million in 2024, down from 2.6 million in 2023 and the record 4.6 million in 2022, following the forced return to work during the pandemic. New job openings stood at 7.6 million in December, down from 12.2 million in March 2022.
After rising for the previous year, retail sales dropped 0.9 percent in January, the biggest decrease since March 2023. Sporting goods, hobby, musical instrument and bookstore sales were down 4.6 percent. Even online sales were down, falling 1.9 percent. Building material store sales fell 1.3 percent. There were declines in other categories as well.
The fall in sales was at least partially due to the unusually cold weather across much of the US and the fires in Southern California. However, other factors probably came into play as well, such as fears of harder economic times ahead with Trump’s looming tariff war and federal job cuts. According to a University of Michigan Consumer Survey for February, one-year inflation expectations reached a 15-month high in early February as households perceived that “it may be too late to avoid the negative impact of tariff policy.”
Another factor in the downward pressure on spending is the growth in consumer debt. At the end of 2024, credit card debt stood at a record $1.21 trillion, according to the Federal Reserve Bank of New York. That was $45 billion more than at the end of the third quarter of 2024 and an $82 billion year-over-year rise, or 7.3 percent.
Credit card debt is made more burdensome by the continued high interest rates, with the typical average credit card interest payment now at around 20 percent.
Matt Schulz from Lending Tree told CNBC, “Stubborn inflation has shrunk a lot of Americans’ financial margin for error from slim to about none, forcing people to lean more heavily on credit card debt.”
Workers are increasingly struggling to make minimum credit card payments and delinquencies are rising. According to the Federal Reserve Bank of New York, levels of serious delinquency, defined as 90 or more days past due, remained stable for mortgages but was up slightly for auto loans and credit cards in the final quarter of 2024. It also reports that 3.5 percent of all outstanding debt is in some state of delinquency.
The continued high rate of inflation is also eroding workers’ incomes, as pay rates struggle to keep up. The official rate of inflation stands at 3 percent, but the effective rate is higher for most workers. For example, the cost of rent and housing, which takes a disproportionate share of many worker’s income, rose to over 4 percent in 2024. In fact, last year saw an 18 percent rise in homelessness. The impact of this was tragically visible by the recent freezing deaths of two young children who were sheltering with their homeless family inside a van in a Detroit casino parking structure.
Adding to pressures on consumers is the increasingly precarious state of employment. Supposedly record pay rises for autoworkers were accompanied by a wave of auto layoffs last year.
Facing the threat of tariffs, and uncertainty and higher costs in the transition to electric vehicles, automotive companies are retrenching globally. This was underscored by the announcement by German auto parts maker Continental that it will cut 3,000 jobs globally in its automotive research and development operations by 2026. This comes on top of 7,000 job cuts that it previously announced.
Michigan-based automotive seat supplier Lear Corporation cut 15,000 jobs globally last year and projects a similar number for 2025. The company saw net income fall 9 percent last quarter and is seeking further retrenchment ahead of anticipated tariffs and continued uncertainty in the auto sector related to EV production and development.
Last year also saw a global bloodbath in tech jobs. The recent advances in artificial intelligence (AI) presage even more cuts as companies utilize the new technology to replace workers. These cuts have been driven by both the effort to cut costs as well as the deliberate policy by the Biden administration and the Federal Reserve to drive up unemployment in order to forestall demands for higher wages.
The policies of the Trump administration, which is targeting hundreds of thousands of government jobs for elimination, and seeking to launch trade war against nominal allies as well as rivals, can only serve to drive up unemployment and economic destitution further.
Following last year’s general election, in which the fiercely pro-big business, Hindu supremacist BJP lost its majority in the Lok Sabha, the opposition INDIA alliance and particularly its “left flank,” comprised of various Stalinist and Maoist parties, claimed that a chastened government would henceforth be susceptible to popular pressure.
This was a fraud, aimed at containing the swelling but inchoate popular anger over mass joblessness, endemic poverty and the BJP’s relentless communal incitement within the reactionary framework of establishment politics, and their efforts to replace Narendra Modi and his BJP with a right-wing capitalist government. One that would be no less committed than Modi’s to “pro-investor” policies and India’s “Global Strategic Partnership” with US imperialism.
In the eight months since, the BJP government has continued its rampage against working people’s social and democratic rights.
Indian Prime Minister Narendra Modi campaigning during the 2024 national elections [AP Photo/AP Photo]
The budget for the 2025-2026 fiscal year, which Finance Minister Nirmala Sitharaman presented to parliament at the beginning of this month, provides massive subsidies for corporate India, cuts income taxes for a small privileged layer and sharply increases military spending, while slashing social spending for India’s impoverished workers and rural toilers.
Yet Sitharaman, the finance minister since 2019, had the temerity to claim her budget was “by the people, for the people.” In reality, it was a budget for the capitalist oligarchs, the billionaires like Gautam Adani, Mukesh Ambani, and the Tata and Birla families, whose fortunes have grown exponentially over the past quarter-century, thanks to the policies of successive Congress and BJP-led governments. This included the fire sale of public assets, massive corporate tax cuts and other concessions, and the state promotion of precarious contract-labor employment.
As supposed proof of her budget’s “pro-people” character, Sitharaman pointed to an income tax concession extended to those who earn up to Rs. 1,200,000 rupees (US $13,812 annually). Such persons will no longer be subject to any income tax, as long as they file using a specific tax form. Much of the corporate press claimed that this was an income tax “bonanza” to the “middle class.”
This is all smoke and mirrors. The vast majority of Indians pay no income tax, because their incomes are so miserable. In 2024, in a country of more than 1.4 billion people, only 86 million people filed an income tax return.
Until now, the annual income threshold at which one has to pay income tax has been 700,000 rupees ($8,093), more than double the annual median income of Rs. 324,680 (around $3,900). The lower tax threshold, it need be added, will only be available to those who use the government’s “New Tax Regime” (NTR). Introduced in 2020-2021, it provides lower tax rates than the “Old Tax Regime,” but in the name of simplification it eliminates many exemptions and deductions.
Sitharaman and the numerous government cheerleaders in the corporate press have claimed that the raising of the income tax threshold will boost middle class consumer spending and thereby augment India’s economic growth rate. In truth, whatever boost in consumption it delivers will be highly circumscribed, as even the incomes of privileged middle class people have been squeezed in recent years by sharp rises in food prices and other goods.
In response to pressure from both domestic and international capital, the Finance Minister made a budgetary promise to enhance the “Ease of Doing Business” by dismantling or ignoring environmental and other regulations that stand in the way of private profit making. Already the government has gutted the country’s labor laws to an extent that workers in even relatively large enterprises can be fired at will, and employers can now freely hire contract workers instead of permanent workers.
With the Indian economy’s growth rate beginning to falter in the face of global economic headwinds, weak capital investment, and anemic growth in consumer spending, especially among the least well-off Indian corporations, foreign investors and credit rating agencies made it clear in the run-up to the budget that they expected the Modi government to provide significant fiscal stimulus.
Even as they did so, they also exhorted the government to press ahead with “fiscal consolidation,” that is, reducing the budget deficit to GNP ratio through intensified austerity measures, especially targeting price subsidies and other “redistributive” measures.
According to some projections, India’s growth rate could be as low as 6.2 percent during the 2024-25 fiscal year ending in March. While that would be far in excess of the rate of growth rate in any of the advanced capitalist countries, it is widely conceded that India needs an annual growth rate in excess of 8 percent just to absorb the yearly intake of new entrants to the labor force.
The budget was very much written to meet the conflicting imperatives of providing stimulus for big business and squeezing social allocations.
In last year’s budget, the government made a pretense of being concerned about the now years-long phenomenon of “jobless growth,” announcing various subsidies to boost the hiring of new employers, trainees and apprentices. In her February 1 budget speech, the Finance Minister had effectively nothing to say about job creation, although nothing suggests that last year’s measures have made even a small dent in the jobless crisis, leaving tens of millions, including millions of university graduates, unemployed or under-employed.
India’s growing debt trap
In the fiscal year starting April 1, 2025 and ending March 31, 2026, the government anticipates spending Rs. 50.65 trillion ($585.55 billion), as compared with Rs. 47.16 trillion ($561.43 billion) in the current fiscal year.
Close to 31 percent of the budget, amounting to Rs.15.69 trillion ($183.53 billion), is financed by debt with interest payments estimated at Rs. 12.76 trillion ($147.51 billion), constituting far and away the biggest single budget item.
Since capital investment by Indian corporations has been in a freefall over the past decade, the government is more than ever the principal source of new capital investment. The government has earmarked a massive Rs. 11.21 trillion ($130 billion) for Capital Expenditure (CAPEX), a 10 percent hike from the previous year.
This will be spent building infrastructure projects, such as roads, bridges, ports and electricity to facilitate the growth of Indian capitalism, and in the form of private-public partnerships. In practice this means funneling massive amounts of public funds into the pockets of politically well-connected crony capitalists, such as Adani and Ambani, who routinely overcharge for their “services,” use lower quality materials to increase their profits and frequently fail to meet construction deadlines.
For example, as of February 2024, 443 out of 1,902 ongoing projects had reported cost overruns amounting to Rs 4.92 trillion ($56.88 billion), a massive 18 percent increase over the original estimates.
The military budget has been hiked by close to 10 percent to Rs. 6.81 trillion ($79 billion). This comes on top of close to double-digit annual hikes over the past decade.
For just these three items, interest payments on the national debt, CAPEX and the military, the government has budgeted Rs. 30.78 trillion ($355.85 billion). This represents about 61 percent of the total budget, leaving a meager 39 percent for all other expenditures.
This is why the social sector and agriculture have been the target of massive cuts. The budget for the Agriculture and Farmers’ Welfare department has been cut from the Rs. 1.31 trillion ($15.14 billion) that the government expects to spend this fiscal year to just Rs. 1.27 trillion (14.68 million). The budget allocation for the provision of subsidized foodstuffs, such as rice and lentils through India’s Public Distribution System (PDS), is the same as last year, Rs. 2 trillion ($23.12 billion). Due to inflation, this amounts to a massive cut, one that will compel the hundreds of millions of impoverished people who depend upon the PDS to eat even less.
Spending on healthcare and education remain woefully inadequate with an astounding shortage of 2.4 million hospital beds and at least 1.2 million teachers.
A girl stands in her shanty home on the outskirts of in Guwahati, India, Friday, Feb. 10, 2023. [AP Photo/Anupam Nath]
The Mahatma Gandhi Rural Employment Guarantee Scheme (MGNREGS), which is supposed to guarantee 100 days of menial manual work to one adult member of every rural household, is being starved of funds. The allocation for the coming year is stagnant at Rs. 860 billion ($9.94 billion). The daily wages paid to this most oppressed layer of the rural working class reveal the utter cruelty of Modi government. In many of the states, daily wages for extremely strenuous backbreaking outdoor work still amount to a miserable Rs. 200 ($2.31) per day. Even these wages are frequently held up for weeks, even months. At least 65 million rural households numbering about 300 million people depend upon MGNREGS for their livelihood.
The massive increase in military spending is a humongous drain of public funds. Out of Rs. 6.81 trillion ($79 billion), around Rs. 1.8 trillion ($20.8 billion), is allocated to buying new military equipment, such as fighter jets, nuclear-capable ballistic missiles and other weapons systems.
This military spending is directed first and foremost at China, and secondly at New Delhi’s traditional arch-rival, Pakistan. The India bourgeoisie has harnessed itself to US imperialism’s military-strategic offensive against China, in the hopes of securing US investment and strategic favors.
However, for the influential Observer Research Foundation (ORF) think tank, which is financed by India’s Reliance Industries owned by the oligarch, Mukesh Ambani, the military budget is inadequate, or at least must be fundamentally restructured so that much more money is spent on weapons and far less on personnel, especially pensions.
The Modi government has announced a disinvestment (privatization) target of Rs. 470 billion ($5.43 billion). This exceeds the Rs. 330 billion ($3.81 billion) the Modi government expects from its disinvestment receipts in FY2024-25. Disinvestments of government ownership in public enterprises and other assets, such as ports and airports, are another mechanism the Modi government uses to enrich India’s capitalists. For example, the government sold off the government airline Air India to the Tata conglomerate for a miniscule amount in 2021.
Placing the burden of taxation ever more fully on India’s workers and toilers
The budget will further increase wealth and income inequality in India, already among the worst in the world. The revenue of the Indian government is overwhelmingly derived from income taxes and the highly regressive Goods and Service Tax (GST) introduced in 2017. GST is charged for all goods, services and even packaged food items and routinely adds 12 to 18 percent to the price. Although indirect taxes did exist at both the state and federal levels prior to the imposition of the GST nationwide in April 2017, the tax burden on the masses from the GST is nothing less than crushing.
GST and income tax revenues now amount to Rs. 26.16 trillion ($302.43 billion). As compared to this, corporate taxes are estimated at a mere Rs. 10.82 trillion ($125 billion). Since coming to power in 2014, the Modi government has worked systematically to shift the tax burden to wage earners while consistently cutting corporate taxes. In the 2010-11 fiscal year, the corporate tax amounted to 67 percent of direct tax collection, and the remainder was collected as income tax from wage earners. There was no GST at that time. Currently, the tax burden on wage earners and the lowest strata of the population constitutes 71 percent of the total direct and indirect tax collection.
The charity organization OXFAM India in a report released on January 15 highlighted the extraordinary burden of the GST on the masses. It stated:
Approximately 64 percent of the total Rs. 14.83 lakh crore (trillion) in Goods and Services Tax (GST), came from the bottom 50 percent of the population in 2021-22. As per estimates, 33 percent of GST comes from the middle 40 percent and only 3 percent from the top 10 percent.
The majority of Indians do not have regular jobs and make a living in what is termed as the “informal sector,” comprised of small roadside fritter-sellers and other hawkers, daily casual workers, servants and the like. Since no new jobs are being created, especially in the manufacturing sector, which accounts for a mere 15 percent of India’s GDP, more and more youth are compelled to fend for themselves as so-called “self-employed.” So desperate is the condition of the Indian masses that, according to a study conducted by Foundation for Agrarian Study (FAS), the data from the government’s Household Consumption Expenditure Survey in 2022-23 revealed that more than 360 million people are unable to afford daily food, healthcare and housing.
Despite all the talk of the Indian economic growth rate being the “envy” of the world, the Indian economy is in dire straits even from the utterly crass standpoint of bourgeois economists. Capital investment from foreign and domestic capital has plummeted over the past decade. In the 2024 Fiscal Year FDI (Foreign Direct Investment) inflow plunged by 62.17 percent to $10.58 billion, a 17-year low.
So desperate is the need for capital investment, India’s Chief Economic Adviser V. Anantha Nageswaran advocated last year that the Indian economy should integrate itself into China’s global supply chains or promote FDI from China. This even as New Delhi integrates itself ever more fully into the US war drive against Beijing.
The Trump administration shutdown of the US Agency for International Development (USAID) has already had a severe impact across Africa and threatens a humanitarian catastrophe. The agency’s $44 billion budget is less than 1 percent of the overall $6.75 trillion US federal budget. But even this pittance accounts for a substantial portion of famine relief and disease treatment and prevention in the world’s second most populous continent.
USAID’s stop-work order has immediately halted critical HIV research and closed many treatment clinics. Uganda and Nigeria, among the countries hit hardest by HIV, are sending healthcare workers home and have warned of medication shortages which suppress HIV positive people’s viral load and prevent transmission.
A temporary court order supposedly blocked the White House from immediately placing staffers on paid leave and repatriating the vast majority of USAID employees who are posted abroad. Should Trump and Musk have their way in this wrecking operation, the agency with more than 10,000 workers worldwide will shrink to fewer than 300 staff. Only 12 staff would remain in the African bureau and eight in the Asia.
Despite assurances from Secretary of State Marco Rubio that “life-saving” aid would continue, the abrupt cessation of USAID’s work has already resulted in food aid being stranded in warehouses. When the USAID inspector general reported that food was rotting rather than being delivered to hungry people, Trump simply fired him.
Young girls line up at a feeding centre in Mogadishu, Somalia [Photo by Tobin Jones / CC BY-NC-ND 4.0]
Sub-Saharan Africa, a region that has long depended on USAID for crucial health interventions and humanitarian relief, is set to bear the brunt of these drastic cuts. A region of nearly 50 countries and 1.24 billion people, sub-Saharan Africa is home to some of the world’s most devastating health crises, with HIV/AIDS, malaria, and tuberculosis (TB) continuing to claim millions of lives annually. The average monthly salary translates to under $800. According to the World Bank, 85 percent of Africans live on less than $5.50 per day.
As of 2022, one in every five people in Africa, 264 million people, faced hunger, the worst rate for any region globally. A quarter of the population lacks access to reliable water sources. Ongoing conflicts, droughts, surging food prices, social inequality, and lack of infrastructure are all contributing factors. In sub-Saharan Africa, 40 percent of children under five are stunted due to chronic malnutrition. In 2023, Oxfam reported that over 20 million more people were pushed into severe hunger across the continent, equivalent of the entire population of Botswana, Namibia and Zimbabwe combined.
In 2024, USAID provided approximately $6.6 billion in humanitarian assistance to sub-Saharan Africa, with a substantial portion (73 percent) allocated to health and food security programs. USAID, in collaboration with the US Department of Agriculture, deployed $1 billion in funding for emergency food assistance worldwide, including sub-Saharan Africa.
USAID has been one of the largest contributors to food aid programs in Africa. With its withdrawal, millions face starvation, particularly in conflict-ridden regions such as Sudan and Somalia. “Without USAID’s assistance, famine conditions will become a reality in multiple African nations,” warns Chris Newton, a food security expert at the International Crisis Group.
The role of USAID for American imperialism
Reading the headlines in the bourgeois press and listening to Trump’s vindictive declaration that the agency is “run by a bunch of radical lunatics and we’re getting them out” might give the impression that this is one more attack on social spending by this megalomaniac. This would ignore the history of USAID and its immense importance as a weapon of US imperialism from its foundation in 1961, at the height of the Cold War, to the present.
From the time that the United States emerged as the dominant imperialist power, on the ashes of World War II, the ruling class has used foreign aid—so-called “soft power”—as a key adjunct of maintaining its world hegemony. The Marshall Plan (1948-1952) was not envisioned by the United States as an act of generosity to rebuild Europe out of the ashes of the war, but as a strategic move to maintain US economic dominance after the war. The post-war reconstruction of Europe laid the foundation for US global dominance by ensuring European capitalist economies were integrated into an American-led global system, and blocking the threat of social revolution in countries like Italy, France and Germany, with the collaboration of the Stalinist parties.
The objectives established by the Marshall Plan were eventually institutionalized in USAID as a tool for global hegemony. President John F. Kennedy’s administration remarked at the time of USAID’s foundation in 1961, “Those who make peaceful revolution impossible will make violent revolution inevitable.” A thoughtful representative of his class, Kennedy never wavered in defense of US imperialism. Whatever the claims of made to the humanitarian prerogatives of USAID, it was an instrument for imposing pro-corporate economic policies, funding pro-US political movements and counterinsurgency efforts, and undermined socialist and nationalist movements across the developing world.
President John F. Kennedy speaks to participants in the AIFLD, the US-government financed foreign policy arm of the AFL-CIO, in August 1962 [Photo: Abbie Rowe, White House]
It would be useful to briefly sample the thorough account made by William Blum, an American journalist and a sharp critic of US foreign policy, in his book Killing Hope, on the crimes and murders committed in the name of US imperialism by USAID, directly and indirectly:
· In Guatemala, from 1962 to the 1980s, USAID’s Office of Public Safety (OPS) trained more than 30,000 Guatemalan police, many who were engaged in counterinsurgency operations against leftist groups. Tens of thousands of civilian deaths have been documented. Between 1970 and 71, more than 7,000 people were “disappeared” or killed.
· The Phoenix Program (1968-1971) in Vietnam was a USAID-backed operation aimed at eliminating the National Liberation Front’s political infrastructure through mass arrests, torture and extrajudicial killings. CIA official William Colby, who directed the operations, is on record that 20,587 alleged Viet Cong soldiers were killed during this operation.
· In the mid-1970s in Zaire (now Democratic Republic of the Congo), USAID was involved in providing dictator Mobutu Sese Seko military aid to suppress rebel movements over concerns for American mining interests while enriching the would-be dictator. The CIA funneled money through USAID-backed programs ensuring continued US influence. The country was home to one of the largest CIA stations in Africa in pursuit of its Cold War operations in containing Soviet influence while securing resources for US mining interests.
· From 1980 to 1994, USAID contributed to the massive military expansion in El Salvador, backing the ruling military junta. The aid provided through USAID went to promote counterinsurgency efforts propping up the military government who were responsible for death squad activities and mass civilian killings. In the same period in Nicaragua, the USAID-funded Contra war resulted in tens of thousands of deaths.
USAID’s numerous operations throughout the globe across the decades involved counterinsurgency and regime change operations in Latin America, support for African dictators and extraction of resources in the interest of American corporations, implementing economic liberalization policies after the collapse of the Soviet Union and ensuring US corporate access, as well as funding of opposition movements in the Ukraine and Eastern Europe, and the restructuring of the Middle East in the aftermath of the Iraq wars. For the past three years, the largest recipient of USAID funding has been Ukraine, where the agency supports the US-NATO war against Russia, the central foreign policy objective of the Biden administration.
Donald Trump is not targeting USAID because of this bloody record. On the contrary, as his language about “radical lunatics” suggests, he scorns the practitioners of “soft power” only because he believes that military force alone—plus direct bribery of foreign governments and corporations—are the necessary instruments of his foreign policy. Moreover, he regards the most impoverished countries, where much of USAID’s activities take place, as irrelevant, “shithole” countries, as he once described them, whose people should be allowed to starve, sicken and die without the wealthy countries lifting a finger to prevent catastrophe.
Notwithstanding the COVID pandemic that has claimed 30 million lives in the last five years. As of 2023, 733 million people, or one in 11 are facing hunger, especially on the continent of Africa. While the world produces enough food to feed everyone, estimates place nearly three billion who cannot afford a healthy diet. There are at least nine million hunger-related deaths caused each year, most involving children under five. And the recent genocide in Gaza is but a case study for the plight of the working class. In other words, the maladies of Africa and every other region of the world are a byproduct of capitalist rule in its current terminal stage.
The attack on USAID thus signifies the exhaustion of democratic bourgeois rule and the open turn by the ruling elite to the most barbaric methods to assure its political and economic dominance over the globe. The most immediate consequences of this policy shift will be felt in the poorest regions, particularly in Africa.
A catastrophe for those with HIV/AIDS
Approximately 25.6 million people in sub-Saharan Africa live with HIV, making up more than two-thirds of the global total. Despite major progress, the epidemic remains severe, particularly among women and young girls, who are three times more likely to contract HIV than their male counterparts. USAID has been instrumental in providing access to antiretroviral therapy (ART), education programs on prevention, and support for those affected by the disease. According to Dr. Kenneth Ngure, president-elect of the International AIDS Society, “The withdrawal of USAID funding means that the fragile progress we’ve made in preventing new infections will be reversed, and millions of people may be left without lifesaving treatment.”
The consequences of the US aid cutoff are far-reaching and potentially catastrophic. Over two million Nigerians rely on USAID-supported clinics for antiretroviral therapy. Many of these clinics have already closed, leaving patients at risk of viral rebound and increased transmission rates. “People will go untreated, leading to more infections, and ultimately, a worsening of the epidemic,” warns Dr. Rachel Baggaley, an HIV specialist and former team-lead for the World Health Organization’s HIV programs.
The cessation of the US support for these global HIV/AIDS programs, in particular the President’s Emergency Plan for AIDS Relief (PEPFAR) would potentially see the number of HIV infections increase six-fold by 2029. This would also mean a ten-fold jump in AIDS-related deaths (6.3 million) and an additional 3.4 million orphaned children, according to UNAIDS Executive Director Winnie Byanyima. To appreciate the enormity of this figure, it took nearly 30 years to see cases decline 60 percent to a low of 1.3 million new cases in 2023.
Malaria and tuberculosis
In 2023, there were an estimated 241 million cases of malaria worldwide, with close to 600,000 deaths. Over 90 percent of malaria cases occurred in Africa. The disease remains one of the leading causes of child mortality, claiming the lives of around 450,000 children under the age of five each year. USAID has played a vital role in malaria prevention through its distribution of insecticide-treated bed nets, indoor spraying programs, and the rollout of the first-ever RTS,S malaria vaccine. More than 6.6 million African children were expected to receive it by 2025. Dr. Salim Abdool Karim, an award-winning epidemiologist, warns, “Ending USAID’s malaria programs could lead to a resurgence of infections and set back our fight against this disease by decades.”
The halting of USAID’s Malaria Vaccine Development Program (MVDP) means the progress toward second-generation malaria vaccines has stalled, potentially reversing years of progress. “We were on the brink of a breakthrough,” says Professor Kelly Chibale from the University of Cape Town. “Now, the future of these promising vaccines is uncertain.”
Mycobacterium tuberculosis. [Photo: NIAID]
Tuberculosis remains a significant public health threat, with sub-Saharan Africa accounting for nearly a quarter of the world’s cases. In countries such as South Africa, Nigeria, and Kenya, the burden of TB is compounded by high HIV co-infection rates, which complicate treatment and increase mortality. USAID has been a key partner in developing new TB treatments and ensuring medication access for patients. “Without continued support from USAID, we risk a dramatic increase in drug-resistant TB cases, which are much harder and more expensive to treat,” states Dr. Sharon Hillier, a professor of reproductive infectious diseases at the University of Pittsburgh.
TB treatment requires sustained medication over months. With funding cuts, diminishing stockpiles will soon run out, leading to a resurgence of drug-resistant TB. “Interruptions in TB treatment will inevitably lead to more cases of multidrug-resistant TB, which is harder and costlier to treat,” says Dr. Timothy Mastro, an epidemiologist at the University of North Carolina at Chapel Hill.
The impact of USAID’s dismantling extends beyond direct aid and healthcare services; it has also brought critical medical research to a grinding halt. One immediate consequence has been the suspension of the malaria vaccine research program. Thousands of people in HIV prevention trials have suddenly lost access to treatment irrespective of the ethical concerns raised by abandoning these trial participants. Not only is South Africa’s HIV drug production initiative placed at risk, health experts fear the spread of drug-resistant HIV strains.
For instance, the BRILLIANT Consortium HIV Vaccine Trials, a consortium of researchers across eight African nations was established to advance HIV vaccine research by designing and implementing early-stage clinical trials. In 2023, the consortium received a grant for more than $45 million from USAID for their initiatives. However, these important projects have now been placed on hold. “This setback could mean years of lost research that we may never recover from,” says Dr. Glenda Gray, chief scientific officer at the South African Medical Research Council. (Science, 2025)
Research on novel TB treatments, particularly for children, has been abandoned, leaving thousands of patients without innovative, life-saving care. “Cutting this research mid-stream is ethically and scientifically indefensible,” states Dr. Leila Mansoor from the Centre for the AIDS Programme of Research in South Africa.
According to the New York Times, more than 30 studies have been suspended that included trials in malaria treatment for children in Mozambique, treatment of cholera in Bangladesh, cervical cancer screening in Malawi, TB treatments for children and teenagers in Peru and South Africa, nutritional support for Ethiopian children, and mRNA vaccine technology for HIV in South Africa, to name a few.
Conclusion
The effective end of the fig leaf of US foreign humanitarian aid is not merely the work of Trump and Musk, the billionaire sadists who regard feeding the starving in Africa as a waste of money, just as they resent all social spending within the United States. There is a historical process involved, symbolized by Trump’s selection of Robert F Kennedy Jr. to head the Department of Health and Human Services.
President John F. Kennedy established USAID (along with the Peace Corps and similar efforts) to provide a democratic and humanitarian cover for the defense of imperialist interests around the world. Sixty years later, his nephew is a high-level aide to a president who is dismantling all such pretenses of social reform, both at home and abroad, because American imperialism is bankrupt and can no longer afford them. The ruling elite will rely on brutal violence to defend its interests against the working class, in both foreign and domestic spheres.
And the inaction on the part of the Democrats only largely confirms they know well that the reformist charade is over. They are far more afraid of the mounting class antagonisms within the United States than of anything Trump may do.
There is no doubt that the shutdown of the very limited aid provided by USAID will have devastating consequences for sub-Saharan Africa and other regions of the world reliant on the organization. The loss of funding will not only reverse decades of progress in fighting infectious diseases but will also leave millions without access to critical healthcare, food, and clean water. Without immediate intervention or alternative sources of support, the region faces an impending crisis that could claim countless lives. “The long-term effects of this decision are difficult to quantify, but they will undoubtedly be devastating,” concludes Dr. Hillier. “This is not just a funding issue; it’s a matter of life and death for millions of people.”
US President Donald Trump is demanding concessions from the Ukrainians of the kind usually imposed on defeated enemy states, in exchange for continuing US military commitments in the region.
The media has been reporting the figure of $500 billion-worth of critical minerals demanded by Trump, but a leaked document seen by Britain’s Telegraph newspaper shows the reality is even more extreme. It shreds to pieces the lies that the US and NATO powers have been supplying Ukraine with training, weaponry and financial support out of a concern for “democracy” and preserving its “national sovereignty”. Trump’s plan would transform Ukraine into a vassal state.
Screenshot of Telegraph February 17 article "Trump’s confidential plan to put Ukraine in a stranglehold" [Photo: telegraph.co.uk]
The article, “Trump’s confidential plan to put Ukraine in a stranglehold”, is based on a February 7 draft of the contract the US administration pressed Zelensky to sign, marked “Privileged and Confidential”. Only sections of the document are quoted. Limited screen captures of the document have also been circulating online.
According to Telegraph author Ambrose Evans-Pritchard, the paper’s world economy editor, US demands go “far beyond US control over the country’s critical minerals.” They are entirely open-ended. The documents states that the desired agreement between the US and Ukraine would cover the “economic value associated with resources of Ukraine”, including “mineral resources, oil and gas resources, ports, other infrastructure (as agreed)”.
The US is seeking “50% of the recurring revenues received by the GOU [Government of Ukraine] resulting from licenses that have been issued to extract or otherwise monetize Ukraine’s resources subject to this Agreement, with a lien on such revenues in favour of the USG [United States Government].”
This is revenues, not profits, with the US to be paid before any other party. A source close to the negotiations told the Telegraph, “That clause means ‘pay us first, and then feed your children’.”
The same would apply to all “of the financial value received by the GOU from all new licenses issued to third parties for the future extraction or monetization of resources subject to this Agreement, as well as 50% of GOU revenue from new extraction… including any state-owned enterprises.”
The “percentage of the proceeds” to be directed towards the “reconstruction of Ukraine”—defined as “the development, production, and/or transport of natural resources, ports, and other infrastructure”—the “USG will determine” at a later date.
The US would also be granted “a right of first refusal for the purchase of exportable minerals” and have enormous powers over the direction of Ukraine’s commodity and resource economy, including “the exclusive right to establish the method, selection criteria, terms, and conditions” of all future licences and projects.
In a flagrant violation of Ukraine’s sovereignty, the document states, “This agreement shall be governed by New York law, without regard to conflict of law principles”—that is, conflicts with Ukrainian law. The Telegraph notes that the document “seems to have been written by private [i.e., Trump’s own] lawyers, not the US departments of state or commerce.”
These demands would reduce Ukraine to the status of a US colony, plundered to the point of starvation. Evans-Pritchard’s summary states, “If this draft were accepted, Trump’s demands would amount to a higher share of Ukrainian GDP than reparations imposed on Germany at the Versailles Treaty, later whittled down at the London Conference in 1921, and by the Dawes Plan in 1924.”
The US “offer” was placed on Zelensky’s desk while Trump told Fox News, in his usual gangster fashion, “They may make a deal. They may not make a deal. They may be Russian someday, or they may not be Russian someday. But I want this money back.” This was a reference to the “more than $300 billion dollars, probably 350” Trump claimed was handed over to Ukraine by the Biden administration.
Trump’s actions have produced a torrent of articles decrying his “betrayal” of Ukraine. In fact, he is only dispensing with the fine words about “international law” and “national self-determination” used to cloak the predatory ambitions American and European imperialism have had towards Ukraine from the start.
As the World Socialist Web Site has written in the context of the White House’s policy towards Gaza, where Trump has also proposed a US takeover, ethnic cleansing and its transformation into a luxury “riviera” development on the eastern Mediterranean coast:
With the coming to power of Trump, American imperialism is abandoning any pretense that its foreign policy is governed by international law. It is to be replaced with the law of the jungle, in which the strong do what they will and the weak suffer what they must…
Trump’s plan is not a deviation from American foreign policy. Rather, Trump, in the words of Netanyahu, “cuts to the chase.” The American president has dispensed with the endless sacred lies used by imperialism to justify its actions, which everybody is supposed to repeat but nobody believes.
It should be remembered that the fascist-spearheaded Maidan coup in 2014 was launched in response to pro-Russian Ukrainian President Viktor Yanukovych pulling out of an association agreement with the European Union (EU) which would have involved a savage “restructuring” and “liberalising” of the country’s economy.
Throughout the war, the US and European powers have been positioning themselves for lucrative military and economic partnerships, while Zelensky uses wartime powers to advance long-held plans for slashing social protections and workers’ rights.
Trump’s new gambit has outraged the European powers primarily because it would cut them out of this feeding frenzy, dialing the US demands up to the maximum. As the Telegraph’s industry editor Matt Oliver explains, “The US and EU face a looming conflict over Ukraine’s resources because of their strategic significance.”
For Zelensky, who has always been happy to serve as the imperialists’ puppet, Trump’s deal would amount to signing his own death warrant—politically and quite likely literally—in Ukraine.
This means nothing to Trump, who responded to Zelensky’s complaints about ongoing peace talks with Russia by saying his polling numbers were “not great” and “at some point you need to have elections”. As well as striking a blow against his European competitors, his plan for Ukraine represents a major step in America’s trade and military war plans against China.
Evans-Pritchard heavily plays down the significance of Washington’s grab for Ukraine’s resources as being aimed at “a commodity bonanza that exists chiefly in Trump’s head.” The Guardian writes more honestly:
There is one big reason Trump is so keen to get his hands on Ukraine’s critical minerals: China…
With Trump effectively instigating a trade war with China with his imposition of steep tariffs on Chinese goods, US access to critical minerals is potentially under threat. As mentioned earlier, the world is being gripped by an unseemly scramble for mineral wealth. They are the building blocks of the economy of the future, and if the US doesn’t get its hands on them, someone else will.
The US-NATO war against Russia waged through their Ukrainian proxy was ultimately aimed at the same target, with the imperialist powers spending Ukrainian lives to weaken Russia, undermining the position of a potential Chinese ally. This was the policy championed by Biden and the Democrats.
Trump is now demanding an even higher price from the Ukrainians, presenting the Zelensky government with an offer they can’t refuse: accept US military support and vassalage “willingly” or suffer the consequences of a deal worked out between the US and Russia—for which the Russian oligarchy has always been eager. Such a deal would, Trump hopes, create conditions for the planned assault on China.
