Why is it that every time I hear President Bush talk about Iraq, the economy, the environment, health care, etc., it always seems the complete opposite of reality? Just yesterday, in Chicago, Bush told an assembled crowd that in 2005, ?the American economy turned in a performance that is the envy of the industrialized world."Now 2005 was many things to America ? a year marked by political scandals, natural disasters, and oil prices approaching $70 per barrel. But just because we partially weathered the storm (both literally and figuratively) without falling into recession, I don?t believe that means the economy is great for most Americans.
So, after I read Bush's words, I wanted to hear the Democratic side of the story. And, indeed, the Democrats did rebut the president, with House Minority Leader Nancy Pelosi claiming that ?Bush was seeking another round of tax cuts for the wealthy while middle-class families struggled to pay their bills." But I didn?t find that answer complete. I think the response should have been a lot more substantive, because the economy is NOT doing well at all for the majority of Americans, and this fact has not yet been clearly demonstrated by the Democrats to make a clear case to the American people of what is really going on.
With that being said, I have a number of questions I would like to ask our leaders about the economy, and although I don?t necessarily have all the answers, I think that we cannot have a clear understanding of our true economic status without them.
1) What about the debt held by the American people?
If the economy is so good, why has consumer debt grown its largest number in history? How are people?s credit ratings, on average, compared to where they were in the late 1990?s? Are people just borrowing money due to the interest rates? How long can people spend money they don?t have?
2) What about the debt of the U.S. Government?
If the economy is so good, why is our budget deficit so huge? When are we going to have to pay back the hundreds of billions of dollars we ?borrowed? to pay for the war in Iraq? Who will be the ones paying the bill? What about our trade deficit? What about the national debt? According to U.S. Government figures, the debt grew by about $1.5 trillion through the eight years that Clinton was president, but already has shot up nearly $2.5 trillion in the five years Bush has been in office. It now stands above $8.2 trillion, and the rate of increase is accelerating, up $300 billion since the end of September ? at a pace now over $1 trillion per year! How long can we deficit spend our way out of recession?
National Debt Sources: here & here
3) Why are we cutting benefits for the poor and middle class?
If the economy is so good, why are entitlement programs being cut? Last year, the Republican Congress drastically cut growth in funding for student loans and Medicaid, plus billions more in other entitlement programs for the poor and the working class. Bush and the Congress even cut veteran?s health care benefits. I heard an Iraq War veteran at the Murtha-Moran event claim that when he returned from Iraq with an honorable discharge, he had NO health care and NO job. So if the economy is so good, why aren?t we giving back to average, hard-working Americans, especially the soldiers, to reward them for our ?envy of the...world? economy?
4) What about the struggles of businesses and working people?
If the economy is so good, then why are airlines tanking? Why is GM in such trouble? Why are corporate health care costs causing bankruptcies for huge companies at the expense of the health care coverage and pensions of millions of Americans? Why are CEO?s getting paid so much money while this is going on? And, if auto companies and manufacturers are laying off so many people, where are these people finding new jobs? If unemployment went down to 4.9% from 5.0%, and jobs grew despite the lay-offs, how many of those ?new? jobs provide the benefits people lost when they were laid-off? Are they only working part time? Have they quit looking for work? Approximately how many of these ?new? jobs are no-benefit, low-wage, part-time jobs?
5) Who is benefiting from this economy?
Who is making all this money to keep our economy strong? Is it money gained from defense jobs? Is it money made by people who made a killing due to their housing estimates going up? Aren?t most homes overvalued? Aren't people borrowing too much equity from their homes? What if the housing bubble bursts like the tech bubble did? Isn't the housing market subject to the same laws of supply and demand as tech stocks, or are housing prices governed by magical fairies that keep values high, while allowing average people to afford increasingly expensive homes? If not, what happens when people decide they can't afford homes and rent apartments instead? Won't housing prices go down once nobody can afford them any more? Won't all that borrowed housing equity be useless when nobody is willing to buy the homes?
6) What are we comparing these numbers to?
Are these economic statistics so wonderful compared to the 1990's, the last few years, or the last few months? As for me, I feel like prices are going up, jobs are harder to find, and my money is becoming more and more worthless. After I finished graduate school in May of 2005, I had to take temp jobs for two months before working without benefits for another four months before finally getting a job with benefits. So, for the nearly six months after graduate school, even though I was working, I considered myself unemployed ? because I didn?t have a job that paid all my monthly bills. Now in my new job, I get taxed like crazy, even though I don?t make much money. So if the Republicans cut taxes, why aren?t people like me seeing the relief? Or does that all go to the wealthy? If I have to pay so many taxes with my modest salary, why should I support cutting the estate tax, which according to the IRS affects only the wealthiest 2% of all Americans?
Source: click here.
These are the questions that I want to ask our leaders. In my view, no discussion of the economy is complete without asking them. Not answering or addressing them will have horrible consequences for our future. Frankly, I don?t believe the President when he says ?the American economy heads into 2006 with a full head of steam,? unless he means that the economy is heading with a full head of steam off a cliff. What I do know is that Virginians led by Mark Warner have faced reality over the last four years, and started to address some of these issues, giving Virginia a modest budget surplus. I wish the U.S. government would do the same, or else we?re all in big trouble. Unless, of course, we happen to be in the top 2%.
The Republican economic philosophy is that if the "investor class" pays no taxes, they will invest more and thus create jobs for the poor schmuck who IS paying taxes. Except the evidence is that the investor class has NOT invested capital in new domestic production but rather in overseas factories and investments, and thus created jobs overseas not here.
The Federal Reserve has pumped paper dollars into the economy creating enormous liquidity which will likely result in an explosive inflation (or deflation, you pick) which will come home to roost any day now. Consumers borrowed on their home equity until there really is no more to borrow, and now they will have to pay this borrowing back, borrowing which resulted in a a phony prosperity and a consumption based "recovery" from the 2001 slowdown, and now that, too will come home to roost.
Look back toward a summer RK post I made, called "Dancing on the Edge of a Cliff." Everything said there still applies. You are right, we ARE very possibly heading for what can be called a perfect storm economically. What happens when the foreigners stop funding our debt? When the Arabs decide to make us pay for our oil in something besides dollars (like gold? or euros?). We now have no reserves to fall back on. What happens when Bush desices to bomb Iran? How will we pay for it? Ha, ha ,ha.