Economic Blues: Bush Without a Clue and Democrats Out of Tune

Wall Street banks are an honest audit away from bankruptcy. Housing prices are plummeting at rates not seen since the Great Depression. Mortgage foreclosures are ravaging neighborhoods and knee-capping state and local budgets. Incomes decline even as the cost of food, gas, electricity and health care soars. Family bankruptcies reach new heights. The gurus -- from former Fed Chairman Alan Greenspan to Republican economist Martin Feldstein to former Clinton Treasury Secretary Larry Summers -- are starting to argue about who's to blame for the recession we may already be in.

So President Bush ventures out of the White House on Monday to a Stafford, Virginia, Rotary Club meeting at the local Holiday Inn's Yak-A-Doo's restaurant "with something important to say" about the economy. His message: Don't worry, be happy.

"This economy is pretty good," says the president. Sure, there's "definitely some storm clouds and concerns" -- like "the credit issue and the housing issue" -- but "the underpinning is good, and we'll work our way through this period."

The answer to the storm clouds: Do nothing and they will pass. Don't raise taxes; pass the president's status quo budget that pares a little off of domestic spending while pumping another $200 billion into the wars in Iraq and Afghanistan.

George is as clueless about the economy as his daddy was about the electronic scanner at the grocery store checkout. Stuff just slips up on you when you aren't looking.

Bush still believes that we've had a "pretty good run" -- six years of economic growth, increased profits and higher stock market prices. "People are working, productivity is high... And that means people are more likely to get paid more."

Tilt. "Are more likely to get paid more," but aren't. This economy works only for those on the top, like the private equity billionaires who pay a lower tax rate than their secretaries (an obscenity just enforced by presidential veto). Most Americans find themselves working harder and longer for incomes that don't keep up with the soaring costs of the basics, from health care to college tuition to a secure retirement. The president -- and the Republicans who follow him like children the Pied Piper -- just doesn't get it.

So Democrats blast him. He's "detached from the reality of most middle-class Americans," says Senate Majority Leader Harry Reid of Nevada. "Out of touch," says Sen. Charles Schumer of New York, chairman of Congress' Joint Economic Committee.

And what's the Democratic remedy? Bush should "restore fiscal discipline at home" and stop spending billions on war abroad, says Reid.

"Fiscal discipline?" A balanced budget is the modern Democrats' Holy Grail. Howard Dean says one of the top four things Democrats stand for is fiscal discipline. Sen. Hillary Clinton promises to balance the budget in her presidential campaign ads. Congressional Democrats shackle themselves to "pay-go" rules that demand that spending or tax cuts be "paid for" by tax increases or spending cuts. Democratic pollsters say that committing to budget balancing is a popular metaphor for bringing government under control.

Great stuff, except -- hello? -- the economy is headed into a recession. Deficits will rise as unemployment and other benefits rise and tax revenues decline. Does anyone really plan on cutting taxes or cutting spending as the economy slows?

In fact, the reverse is badly needed. With banks cutting back credit and families tightening their belts, what's going to drive the economy? The falling dollar will make the U.S. a cheap date for foreign tourists, but that will be offset somewhat by the rising costs of imports. If we are to avoid a deep recession, it's time for government to step up.

So choose your poison: Tax cuts or government investment. The president and his fellow conservative Republicans have no doubt. They peddle tax cuts as the remedy for a slow economy in deficit or a rising economy with surpluses. So every Republican candidate was huckstering new top-end tax cuts when housing was still a bubble, the music was still playing and, in the immortal words of departed Citibank President Chuck Prince, everyone was "still dancing".

A better choice would be a big investment agenda -- in new energy (weatherizing homes and apartments, installing solar and wind energy, etc.), and in basic infrastructure like bridges and roads, next generation broadband, and schools and preschool. The advantage of direct government investment -- as opposed to top-end tax cuts -- is that more of the money and the jobs stay in this country, building investments vital to our future. The choice between a safe bridge in Minneapolis, or more speculation in the Euro or the Chinese toy industry, doesn't seem like a hard choice.

But it does require a wrenching change of gears from Democrats who have turned Clinton's commitment to balanced budgets from a clever tactical concession to an enduring economic principle. Learning to carry the new tune might be a useful way to use the holiday.

Comments

[realitytrumpsbull]

Oh, just have Bernanke lean on the keyboard
for a second, there, like he did last time.
Ooopsie! THAT was easy! See? All better now...

[drolleen]

Borosage again puts us on the horns of a fake dillema:

He knows the Clintons solved the dillema in the 90's, but he is a Clinton basher first and foremost. (As you can see in his previous posting too).

The Clintons raised the taxes on the rich (is Borosage one? Is that why we need "spending or tax cuts?).

Their tax increases DID NOT hurt the economy.

The Clintons cut entitlements fat: It was welfare to work. Nowadays that would mean stop paying medicare to people earning over 50,000, and start a health care system that is, and I know this is a bad word, gasp, socialized and cheap. That will not hurt the economy.

Both these options will cut more than pulling the troops out of Iraq will cost (actually estimates of the money to PULL OUT troops run nearly as high as the cost of keeping them. It is a moral question, not an economic one).

Spending on public works like FDR did is just not going to work: There are no skills to pull from inside our system. The fake-education of "no child left behind" left no grown-up ahead (of China and India). So we have to sell something new that will bring in new talented people into this country: Government tax benefits for environmental innovations is something we are well placed for - maybe the only advantage we have.

(Tourism? Hah! The fact he even mentioned it is funny. America's income from outside tourism is pittance relative to its imports. It was never an issue.)

In short, even from a Clinton basher I expected a bit more solid evidence or better ideas than that! You did write good pieces in the past...

[fabrom]

Except for a very few voices crying in the wilderness (i.e. Kucinich)the Democrats don't give much more of a damn than do the Republicans. They take care of themselves. They have well paid jobs, full medical coverage, expense accounts, all at our expense. Plus, there are always the payoffs for supporting this or that legislation. They really don't care, folks. And the citizens? Well, we can always find someone to blame for our deteriorating situation. Illegal aliens, terrorists, lack of family values, etc., etc., etc.

[JoeGarcia]

I’ve been off these pages for a while both for health reasons and apathy. What has steamed my butt to write this is a list of “Holiday Talking points” distributed by the Florida Democratic Party. I will not bore you with a rundown for your eyes would glazeth over. The points include the Nicene Creed of the Democrats all broken down into—woe is me—areas that belie the fundamental issue.
A brief example will suffice:
Florida Democratic chairperson Karen Thurman: Would you pass the stuffing?
Karen: Talking about stuffing, do you know since President Bush took office the gross national debt has increased by $3.427 trillion. That’s $41.54 billion per month, $9.57 billion per week, $1.37 billion per day, $56.93 million per hour, $948,907 per minute or $15,815 per second.
Now what do we do about the hemorrhage. When Bill Clinton took office 97 percent of Americans shared 3 percent of the wealth. Democratic redistribution: Eat your one-percent of pi(e).
Under Bush, 98 percent of the people control 2 percent of the wealth --seem succinct.
Democrats won’t argue. Would the Democratic Party accept a contribution from the Business Roundtable?
Rocket science not:
The Democratic presidential candidates race runs the gamut from a female Hubert Humphrey to an establishment bleached Robert Kennedy.
When will redistribution of wealth become a viable issue? When a candidate comes along and tells the pundit and political classes to go to hell and aims their un-bought and un-bossed message straight to the people.
We don’t need tax reform. We need tax overhaul. Chairman Thurman’s “Holiday talking points must be nearly seven-hundred words in length. I could express them in four: Democrats get some balls.
OR, may I suggest a post-holiday message: Democrats we found our balls.
The veil of ingnorance has been shred.

[vietveter]

I feel better now knowing that soon I will have less tax taken out of my unemployment check... what a country!

[PerryWhite]

It's back to Clinton-speak as tax increases are called investments.

[Blutus]

The harvest of deregulation.

Brought to you by the Republican party.

Talk to the banks.

[julianne]

Just as the gutter of money in Washington deflects us from publicly funded federal elections overseen and implemented by sovereign citizens along with all the great enterprises now required for the security of our posterity, so do the powerful financial and industrial oligarchs who own our nation's bank and much of the financial and industrial base of the U.S. (including the media) feed that gutter in a continuum of corruption that is ruining the U.S. economy and killing the middle class with overpopulation and their bullshit "inexhorable processes of globalism." Millions of people are hungry or strarving. Over 80 million are just above the poverty line. You don't need to worry about more or less tax cuts. We already have the very worst disparity of income of all the nations in the Western Industrial democracies. We've already been betrayed and left in the road, thank you. What we need is the revolutionary seizure of the people's currency and financial assets to be brought under our control and in conformity with our Treasury Department and other people's institutions. Concurrent to this we need deep regulation and/or dismemberment of various derivatives, hedge funds, outsourcing, and buy-outs to protect the AMERICAN PEOPLE rather than serving a handful of pathologically acquisitive fascist traitors that live in castles and murderous political hillbillies that front for them.

[darcy]

I have to disagree with one thing in this article: bush isn't "clueless;" he has done exactly as he was instructed to do by the corporate cabal that paid to get him 'elected.'

The problem with bush is that he doesn't work for the American people. He's not our president; he's the agent of global corporations.

[Hoelder]

Chippy looked into the economy's eyes and saw its soul. If you repeat yourself long enough, people will start believing that everything is fine. Sub prime mortgages: just a few rogue under writers that the market will care of, but why are so many big investment houses hit so hard. Those under taxed suits who are paid for their expertise don't have to bear their miscalculation, the firms do. So much about experts and their believe in everlasting growth. Why is it that so many people in power that have social responsibility, are rarely called up on their lack of expertise and right out fired. That includes Chippy as well. The Dollar is falling. And the Chinese love it because their currency is pegged to the Dollar. That means the Chinese get another free ride while the other countries have to take a cut in their exports, the American consumer can still buy lead filled toys for their children at the same price. Wasn't it that a falling currency was actually a tangible sign of inflation. Of course, Chippy does not think so, for him it is an opportunity to export more. More of what? The genetically engineered corn, that some of the starving third world countries reject as a gift or is it the gas guzzlers that nobody wants because they do not comply with anything climate reasonable or is it the technology - oh no, that one is manufactured in South East Asia or our know how, with the current success rate of our educational system their will be soon anything to export or same of the highly trained professionals that return to their country because our prospects are so dim or is it the mere fact that immigrants - the unwelcome illegals that we export or the welcome intellectuals that export themselves because sooner or later who wants to be affiliate with people that drove the US to an isolated lonely space in the international community.

[AZM]

During the Bush regime, our national debt has gone from slightly over $5 Trillion dollars to over $9 Trillion dollars. This country needs a tax cut like it needs a hole in the head(?). We let illegal aliens in to do the work while the rest of us get second mortgages to buy Hummers and pay for vacations. Meanwhile incompetent CEOs get multi-million dollar golden parachutes to just go away, while other CEOs bitch about the minimum wage going up while they backdate their stock options. Yes, economics truly is the 'dismal science'!

[frappe]

Excellent post. Bush and the Republicans are indeed clueless when it comes to macroeconomics. As you suggest, when it comes to economics, the Republicans only seem to have a two word vocabulary: "tax cut".

Finally, America is beginning to see the results of an economic policy designed to favor the few at the top while ignoring everyone else.

As our middle class disappears, the "economic engine" that served to sustain our economy through its inevitable ups and downs can no longer provide the purchasing power necessary to pull us out of the economic hole that George Bush and his clueless band of rubber-stamping, mega dittohead, Republican enablers have put us in.

[Stevelagain]

Yawn, yes, the economy is "terrible", were in a "recession" my mothers sisters 12 year old had to close his lemonade stand.

Of course, if Hillary were president right now you would be praising the Hillary economy. So who's fooling who here?

Kerry tried to pretend we were in a depression and even though he was able to get more people to thing things are "terrible" he still lost because in the end, people DO vote their pocket book.

[Stevelagain]

Wait a minute, here's a NOVEL idea. Remember when the democrats lied to us and told us they would be more fiscally responsible and not spend as much as the republicans? And how when the democrats came to power they decided to spend more the republicans? How about if we force the democratic party to keep it's promise or run them out of office?

That might work. If they thought it was balance the budget or be voted out of office...I sorta think they would....ahhhh....that wouldn't work because democrats don't balance budgets unless a republican house led by Newt G force them to.

[BaltoAman]

The blame lies squarely on the Fed, and this has been a long time coming - since the 80's when Greenspan took over.

The many bailouts perpetrated by the Fed (at YOUR expense) have only done more damage and postpone the inevitable. The market MUST be allowed to correct naturally!

Now we are truly in deep doo doo. Lucky for us Hill-Obam is here to save the day!

Riiiight.