I always love it when pundits try to explain the economy. It’s like hearing Brian Boitano analyze college football. It seems that many have forgotten the business cycle. We had a recession in the early 90′s, and six years of economic growth. It was followed by a small recession at the end of the Clinton administration and the beginning of the Bush years. Who’s to blame for these ups and downs? No one, that’s right. It’s called market fluctuations. Bonnie Erbe dabbles in economics in her “Bush tanked the U.S. economy” piece.
Here’s a lesson Bush never learned and one that probably could have kept this country out of recession: You can’t fight an expensive war AND cut taxes simultaneously without sending the U.S. economy into the tank. That is just what Bush has done.
After the tax cuts in 2001 the Unites States economy has been in a boom growing for six years. Evidently Bonnie thinks the economy should grow forever. Why does she believe this, I’m not so sure. Maybe she watched too many Disney movies as a child and thinks we should live “happily ever after.” Wait… there’s more.
There are other contributing factors, of course. The housing bust has hurt this consumer-driven economy mightily. Americans felt richer and borrowed heavily against home equity at the height of the boom. These factors kept corporate profits and the economy growing.
But the bust that has now followed was highly predictable. Real estate always runs in cycles. The last real-estate boom lasted an incredibly long five years. The president should not have been piling up irresponsible debt, knowing the crash would come at some point.
Cycles!!! She admits that real estate market goes in cycles, but what about the economy? If the current housing market is the catalyst for the recession (which hasn’t come yet, I may add) then how is this Bush’s fault?
Let’s clear up this one persistent myth. In the 90′s the Clinton administration drastically reduced the US military budget. The Cold War was over and this was an appropriate measure. However, the economy wasn’t booming because of the surplus. The surplus was the result of a gridlocked Congress, internet bubble, Welfare Reform, and lower defense spending (anyone wonder why our intelligence agencies are in shambles). After 9/11 defense spending had to increase, during the recession a lower tax policy was an appropriate response. I am of the mind that the last two administrations deserve none of the credit for economy (good or bad); however Bonnie wants to blame Bush, but ignore the good economy of the last six years.
Democrats have been beating the “squandered the surplus” horse for about four year now. When pressed for a reason the surplus vanished in the late nineties the deafening silence tells the story. I have written on many occasions that the deficit is narrowing, but at this point I don’t think it’s something to worry about. The long term problems with Social Security and Medicare are a larger threat to the economy. However there appears to be no one in Washington prepared to deal with the problem.
The Economic Report of the President shows the federal deficit for 2004 was 3.6 percent. A narrowing of more than 1 1/2 percentage points in such a short time is itself a story.
The U.S. deficit is worth comparing, for starters, with the data for European nations. In the Maastricht Treaty of 1992, European leaders set a deficit goal of 3 percent of GDP. EU member countries have had trouble meeting that target since.
A shortfall of 2 percent of GDP is also news in the U.S. context. Sure, there was the surplus in the second half of the 1990s. But 2 percent is below the average for the federal deficit between 1980 and 1995.
The 2006 elections are coming up and if a person is voting on the economy there’s really no choice. Democrats are stuck campaigning for large government programs, and economic isolationism. Both of these ideas are bad for the economy and for the “middle-class” the party claims to champion. The economist Greg Mankiw sums up the economic stance of the Democrat party quite eloquently in his blog.
So Lamont seems to think the U.S. economy is suffering and the primary reason is competition from poor workers in China.
This rhetoric scares me. Wages, benefits, and labor and environmental standards are primarily a function of the level of economic development. Complaining about poor countries’ low wages and benefits is essentially blaming the poor for being poor.
The economy must be doing bad, with Bush, Iraq, the homeless, poverty, two Americas, Katrina, Plamegate, gas prices, public sentiment, and endless bad news no wonder 2/3rd of the country thinks the economy is bad. The only problem is that it is not true.
“Holy Katrina! The economy weathered two major hurricanes and in spite of that showed accelerated growth,” said Ken Mayland, president of ClearView Economics. “I think what this shows is that fundamentally the economy was and is in really good shape.”
The expansion in gross domestic product in the July-to-September quarter, the strongest since the beginning of the year, also exceeded many analysts’ expectations. Before the report was released, they were forecasting the economy to clock in at a 3.6 percent annual rate.
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