Economy is Bush's downfall.
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| Wed, 08-11-2004 - 11:20am |
Sometimes I sympathize with President Bush. Really.
Last week's dismal report on job creation -- a scant 32,000 jobs created versus 240,000 expected -- left our re-election-seeking president little wiggle room on the economic front.
"Economic growth is strong and getting stronger," Bush told a gathering of minority journalists after the jobs number was released.
It can't be easy to have to defend your economic policies when all evidence suggests that average Americans are worse off today than they were four years ago.
Here are just a few of the numbers:
-- When Bush took office on Jan. 20, 2001, the Dow Jones industrial average was at 10,587.59. It closed Tuesday at 9,944.67.
-- When Bush took office, the unemployment rate was 4.2 percent. It's now 5.5 percent, according to the Labor Department.
-- When Bush took office, U.S. consumer debt totaled almost $1.7 trillion. It's now $2.038 trillion, according to the Federal Reserve.
-- When Bush took office, bankruptcy filings during the previous year totaled almost 1.3 million, down 5 percent from a year before. By Dec. 31, 2003, bankruptcies had hit a record of nearly 1.7 million, up 5.2 percent from 2002, according to the American Bankruptcy Institute.
-- When Bush took office, the federal budget had been balanced for three straight years and was, in the 2000 fiscal year, running a surplus of $236 billion -- the largest in U.S. history. The White House is projecting a record budget deficit this year of $445 billion.
All this must be placed in context, though. When Bush came to power, the U.S. economy was at the tail end of a dot-com-fueled bubble that couldn't have been sustained under any circumstances. A recession, most economists believe, was all but inevitable.
Then there was Sept. 11.
A tough hand
"Every president is dealt a hand of cards," said John Shoven, a Stanford University economist and senior fellow at the conservative Hoover Institution. "Bush inherited a pretty tough hand."
The average American is indeed worse off now than four years ago, he said. But Shoven gives Bush "a passing grade, maybe a B-plus," for his handling of the economy.
"Overall, the economy has performed pretty well given the shocks it has faced," he said, adding that credit for this "has to be significantly shared with Alan Greenspan," the Fed chief, who boosted a key interest rate Tuesday by a quarter-point.
Jared Bernstein, senior economist at the liberal Economic Policy Institute in Washington, agreed that Bush was dealt a tough hand when he took office.
"What he failed to do, though, was take decisive action to ameliorate the problems he inherited," Bernstein said.
The president's key economic error, he said, was to attempt to stimulate the economy by skewing the benefits of three tax cuts toward wealthy Americans.
According to Citizens for Tax Justice, a liberal-leaning Washington think tank, nearly 40 percent of the benefits from Bush's tax cuts will go to the richest 1 percent of Americans, those earning on average $1 million a year.
By contrast, only about 17 percent of the benefits will go to the 60 percent of the population earning $45,000 or less.
"The tax cuts made no sense as a stimulus measure," said Bob McIntyre, director of Citizens for Tax Justice. "If you want to stimulate the economy, you have to give money to people who don't already have it."
Bernstein said a crucial problem for many Americans today is that wages are significantly lagging behind inflation.
Prices up 3%
During the past 12 months, average hourly earnings increased by 1.9 percent, according to the Labor Department. Consumer prices, meanwhile, have risen by about 3 percent.
"The middle-income family is definitely worse off than four years ago," Bernstein said.
He noted that it would take extraordinary growth -- about 400,000 new jobs a month between now and November -- for Bush to avoid the dubious distinction of being the first president since Herbert Hoover to see a net decline in jobs during a term of office.
"We are more than a million jobs below where we were at the employment peak in March 2001," Bernstein observed.
Even Shoven at the Hoover Institution had to acknowledge the seriousness of the job-loss situation. "It's bad," he said.
People I spoke with in random encounters this week conveyed a clear perception that things are tougher for them economically than when Bush first took power.
"Real estate's through the roof, gas prices, tolls, food, movies, cigarettes -- everything's gone up," observed Ron Cairns, 40, a Redwood City electrician. "But wages have stayed the same."
Cairns, a Democrat, blamed Bush for most of the current difficulties.
"Everyone's in a state of fear," he said, "worrying about the war and worrying about their next paycheck."
Niles Helmboldt, 37, a San Francisco banker and a Republican, offered an almost identical perspective.
"I'm not as well off as I was," he acknowledged. "My cost of living has gone up, but wages have not kept pace."
Not helping
Is this Bush's fault?
"I don't see his economic policies helping," Helmboldt replied. "It's not a pretty picture."
After it was reported last week that just 32,000 jobs were created in July and that 61,000 fewer jobs were created in May and June than previously estimated, the president did his best to put all the grim news in a positive light.
"Today's employment report shows our economy is continuing to move forward," he said. "And it reminds us that we're in a changing economy and we've got more to do.
"I'm not going to be satisfied until everybody who wants to work can find a job," Bush added. "I'm running (for re-election) because I understand how to take a strong economy and make it stronger."
All evidence to the contrary notwithstanding.


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I agree if the purchases are not necessities. Often medical bills are put on credit, repairs to an essential vehicle, food, warm clothing. When people don't have savings because all their available cash goes to essentials, emergencies are a deadly pitfall. Please don't judge these credit card users with those who purchase "wants" on credit.
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You have no argument here, except you can't blame the poor economy solely on bankruptcies. That is a small contributing factor.
<< don't see how allowing the rich the keep some of their money just as we have allowed the middle class taxpayers too is bad business.>>
They do keep much of their money. The bases of this countries tax has been progressive, ie, those who have been given much blessing should extend a hand to those less fortunate. I see this compassionate POV is changing to a more "me first" attitude; I find such attitudes repugnant and un-Christian. This is what disturbs me. Consider the quote below and this thought: Those who have much get more, those whave little have that taken away.
"The Bush tax cuts have, of course, heavily favored the very, very well off. But they have also, more specifically, favored unearned income over earned income - or, if you prefer, investment returns over wages. Last year Daniel Altman pointed out in The New York Times that Mr. Bush's proposals, if fully adopted, "could eliminate almost all taxes on investment income and wealth for almost all Americans." Mr. Bush hasn't yet gotten all he wants, but he has taken a large step toward a system in which only labor income is taxed."
http://www.nytimes.com/2004/08/13/opinion/13krug.html
"Robin Hood theory, but the only problem with Robin Hood was that he was a thief..."
I suppose you want to return to the days where there were lords and serfs, or as I say to the gilded age. We should know that when wealth distribution becomes bifurcated (no middle class) the country suffers. This is where neo-con ideas are heading. Have you checked what they are doing with their "starve the beast" proposal. Do you agree with this, then fine, otherwise you need to investigate the background of the ideas you put forth.
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You misunderstood what I said. I said something about a $0 credit card balance, which means you pay the card off when it arrives. This is use of another's money for a month and it is a way to track purchases. I understand that sometimes you must run a national debt, but this should not be the rule. I contend, that Bush is deliberately running the country into debt so that in his next term he can start eliminating social security, medicare and all the social programs that have provided a safety net for the needy. If you agree with fine, we can agree to disagree.
Just give us each day our daily bread, protect us from our transgressors and deliver us from evil. Wait is that God or the US government….well it must be the government….cause we have outlawed God.
Talk about 'dramatic'!
But alas, he didn't cut the taxes where he could get the biggest bang for the buck:
From NYT editorial yesterday:
"The main reason for the crippling discrepancy is that the tax cuts were mostly handed out where they did the least good - that is, lavished on the people least likely to spend the largess. The reduction in the tax rates, the largest of Mr. Bush's tax boons, provided only 59 cents of economic stimulus for every dollar of lost tax revenue. The tax cut for dividends and capital gains produced 9 cents of stimulus for every forgone dollar. (Did someone say, "Deficits as far as the eye can see"?) In contrast, the economic bang for a dollar of aid to state governments is $1.24. Yet such assistance accounted for only 3 percent of the total cost of Mr. Bush's fiscal policies."
http://www.nytimes.com/2004/08/12/opinion/12thu1.html?pagewanted=print&position=
BTW, welcome back; hope you enjoyed your vacation in my favorite place. Color me green:-)
Krugman published, in todays NYT, another excellent article on Bush's economic policy.
Bush's Own Goal
By PAUL KRUGMAN
Published: August 13, 2004
new Bush campaign ad pushes the theme of an "ownership society," and concludes with President Bush declaring, "I understand if you own something, you have a vital stake in the future of America."
Call me naïve, but I thought all Americans have a vital stake in the nation's future, regardless of how much property they own. (Should we go back to the days when states, arguing that only men of sufficient substance could be trusted, imposed property qualifications for voting?) Even if Mr. Bush is talking only about the economic future, don't workers have as much stake as property owners in the economy's success?
But there's a political imperative behind the "ownership society" theme: the need to provide pseudopopulist cover to policies that are, in reality, highly elitist.
The Bush tax cuts have, of course, heavily favored the very, very well off. But they have also, more specifically, favored unearned income over earned income - or, if you prefer, investment returns over wages. Last year Daniel Altman pointed out in The New York Times that Mr. Bush's proposals, if fully adopted, "could eliminate almost all taxes on investment income and wealth for almost all Americans." Mr. Bush hasn't yet gotten all he wants, but he has taken a large step toward a system in which only labor income is taxed.
The political problem with a policy favoring investment returns over wages is that a vast majority of Americans derive their income primarily from wages, and that the bulk of investment income goes to a small elite. How, then, can such a policy be sold? By promising that everyone can join the elite.
Right now, the ownership of stocks and bonds is highly concentrated. Conservatives like to point out that a majority of American families now own stock, but that's a misleading statistic because most of those "investors" have only a small stake in the market. The Congressional Budget Office estimates that more than half of corporate profits ultimately accrue to the wealthiest 1 percent of taxpayers, while only about 8 percent go to the bottom 60 percent. If the "ownership society" means anything, it means spreading investment income more widely - a laudable goal, if achievable.
But does Mr. Bush have a way to get us there?
There's a section on his campaign blog about the ownership society, but it's short on specifics. Much of the space is devoted to new types of tax-sheltered savings accounts. People who have looked into plans for such accounts know, however, that they would provide more tax shelters for the wealthy, but would be irrelevant to most families, who already have access to 401(k)'s. Their ability to invest more is limited not by taxes but by the fact that they aren't earning enough to save more.
The one seemingly substantive proposal is a blast from the past: a renewed call for the partial privatization of Social Security, which would divert payroll taxes into personal accounts. Mr. Bush campaigned on that issue in 2000, but he never acted on it. And there was a reason the idea went nowhere: it didn't make sense.
Social Security is, basically, a system in which each generation pays for the previous generation's retirement. If the payroll taxes of younger workers are diverted into private accounts, there will be a gaping financial hole: who will pay benefits to older Americans, who have spent their working lives paying into the current system? Unless you have a way to fill that multitrillion-dollar hole, privatization is an empty slogan, not a real proposal.
In 2001, Mr. Bush's handpicked commission on Social Security was unable to agree on a plan to create private accounts because there was no way to make the arithmetic work. Undaunted, this year the Bush campaign once again insists that privatization will lead to a "permanently strengthened Social Security system, without changing benefits for those now in or near retirement, and without raising payroll taxes on workers." In other words, 2 - 1 = 4.
Four years ago, Mr. Bush got a free pass from the press on his Social Security "plan," either because reporters didn't understand the arithmetic, or because they assumed that after the election he would come up with a plan that actually added up. Will the same thing happen again? Let's hope not.
As Mr. Bush has said: "Fool me once, shame on - shame on you. Fool me - can't get fooled again."
http://www.nytimes.com/2004/08/13/opinion/13krug.html
Edited 8/13/2004 11:55 am ET ET by hayashig
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