Why Bush Likes a Bad Economyby James K. Galbraith
Almost nine million people are unemployed. Many millions more are underemployed, and most of all, under-paid. Millions more lack health insurance. States are cutting basic public services everywhere, while the taxes (property and sales, mainly) to pay for those that remain are rising. And the gates of opportunity--for instance, to attend college--are closing on millions more.
George Bush did not entirely create this problem. The bubble and the bust of high technology, the obsession with a strong dollar, the debt build-up of American households--these existed before we got George Bush. The late 1990s were a moment of prosperity and that rarest of economic achievements--full employment. But the boom was based on dreams, illusions, and mortgages. These set the stage for a slump that began in late 2000, from which we have not recovered and will not recover soon.
But Bush has done nothing to make our economic problem better and much to make it worse. We have lost around 2.6 million jobs since he took office, and about 650,000 just since the 2002 election. In the face of this, the bulk of the Bush tax cuts went, notoriously, to the very wealthy, whose spending is little affected. Many middle class Americans will get hit by rising property and sales taxes--at the state and local level. And meanwhile, Bush is bent on eroding pay and working conditions, with the most recent outrage being the assault on fair labor standards affecting overtime. As for the minimum wage? Forget about it.
In the near term, it is true that new tax cuts and more military spending may bring another false dawn. The second quarter GDP growth of 3.1 percent was a sign of this. Meanwhile Federal Reserve Chairman Alan Greenspan is doing his best to keep the housing bubble aloft. Greenspan knows about blowing bubbles, but not even he can forever prevent them from popping. Short-term fiscal expansion and continued low interest rates may prevent an early renewal of recession. They will not, however, bring us back to full employment.
The reason for this lies in the financial position of the private sector. American households in the late 1990s embarked on an unprecedented period of sustained spending above their incomes, financed by borrowing that was supported by rising home equity and the stock bubble. This was a remarkable event: For fifty years following World War II, Americans had always spent a little less than they earned. Never before on record here--and rarely anywhere--did an entire population go into a position of dissaving. But it happened. And it could not last.
READ THE REST HEREOne thing that I liked about this article is that it did not view the go-go-go late 90's with an uncritical eye. Therefore, Dr. Galbraith paints the picture of our economy as not being simply in need of "fixing", but a system in need of complete overhaul.
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