THE U.S. ECONOMY: DANGER — TRAIN WRECK AHEAD

Posted on September 14, 2003 by Dave Pollard

Even more troubling than Bush’s political blinkers in Iraq is the stunning recklessness of his economic program, which has in less than three years turned a $280 billion surplus in the last year of Clinton’s reign into a record $650 billion deficit forecast for 2004, and a forecast $5.6 trillion surplus for 2011 in Bush’s inaugural speech into a forecast debt that Newsweek’s economist conservatively estimates to be $7.4 trillion by 2013. This is a staggering reversal, five times larger than any such reversal in history, and it was caused by an unpropitious mix of unforseeable events and utterly irresponsible spending — notably massive tax cuts for the rich and rash war adventures in the Mid-East. What is most distressing is that Bush’s team continues to cling to the discredited (by virtually every mainstream economist in the country) Reaganomic belief that a huge tax gift to a tiny handful of billionaires will somehow ‘trickle down’ to the average American and reverse the economy’s precipitous slide.

It’s even worse than that. There is every indication that the metrics used to measure economic health and danger are now obsolete and horribly flawed: While these old measures suggest the recession is over, poverty and layoffs are skyrocketing and it is increasingly clear that the ‘recovery’ is not only not ‘trickling down’ to mainstream Americans, it is being made on the backs of those Americans. Productivity is ‘improved’ by the charade of laying off millions of American workers, exporting millions more jobs to third world countries (more on this in my blog tomorrow), and hence recording increased profits and pushing the already wildly overpriced stock market to levels of sheer delusion.

There is inevitably going to be a train wreck, and it’s going to hurt everyone. Expect to see interest rates start to soar, and to see foreign countries abandon the US dollar in favour of currencies with much stronger fundamentals. Only the fact that so much of the US’s debt is held by foreigners in US currency (who therefore have a vested interest in keeping the US dollar strong) has delayed the inevitable precipitous decline in the dollar. Then the dominos will start to fall — the US stock market, the housing market, followed by further massive layoffs and the kind of inflation that third world countries with wildly inflated currency and unsustainable debt levels are used to seeing. Since we’re all connected, the rest of the world’s economies will also slip back into deep recession.

There is some ironic good news in all of this. The tax cuts will have to be cancelled early, since they are simply unaffordable. MidEastern wars and invasions will also be unaffordable, so expect to see the troops come home quickly and unceremoniously. The vacuum there will be probably be filled by warlords and fundamentalists, but that’s inevitable anyway the way Bush is operating, so at least no more American lives and dollars will be wasted on a naive effort to force democracy on countries that won’t be ready for it for generations, if ever.

And best of all, the untenable and ridiculous economics of Reagan will finally be put to rest forever, and Bush will be acknowledged, in time for the 2004 election, to be the most irresponsible — and the worst — president in American history, a lesson that will hit home so hard that we should be spared another neocon, and another Republican con game, for at least a couple of decades.

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7 Responses to THE U.S. ECONOMY: DANGER — TRAIN WRECK AHEAD

Indigo Ocean says:

September 14, 2003 at 11:18

“the untenable and ridiculous economics of Reagan will finally be put to rest forever”I hope you are right. I fear however that the Orwellian newspeakers will manage to twist the situation into an indication that the spineless liberals forced them to pull out before the job was done and that what is needed is a commitment of more money – money which can only be generated through even bigger tax cuts to the owners of Haliburton and Lockheed. Your prediction presumes a goodwill that I do not believe exists. The proponents of trickle down don’t actually believe they are helping anyone other than the rich. They just have to sell it that way to the middle class voter. President Bush has more of an allegiance to the wealthy Frenchman than to the poor American. He serves the invisible, global Wealth Nation that elected him as their president. And when they are done with him they will try to elect another of their member. So long as money determines elections, so long as buying one presidency (the American one) can influence the global flow of resources so profoundly, there is nothing that will “teach” them to stop pursuing trickle down economics. They need a revolution of the heart, and we need one of the guilliotine.
Susan says:

September 14, 2003 at 11:59

As much as I opposed the war in Iraq, abandoning that country would be morally indefensible. No matter what we’d like, we will be stuck paying for its rebuilding, and if we get someone like Wesley Clark in 2004, I believe it won’t be too late to turn it around. I don’t agree with some of the veiled racist remarks I’ve seen around the blogosphere that Iraqis are somehown not “capable” of a better life. They’re no different than us–their warlords just don’t work for Worldcom and the HMO industry.Iraq is 50% under the age of 18. To say we should dump all those innocent children to chaos we created just because we aren’t willing to change our tax policies is horrifying. The answer isn’t to run away from our problems and live in an isolated fantasy world, but to grow up and agree to take responsibility for our actions and to properly fund the solutions. Arabs, Israelis and others in the Middle East should not pay the price just because we suddenly realized we made a mistake.
Evan says:

September 14, 2003 at 15:01

Alas, I think you’re overestimating the ability of American conservatives to have their opinions affected in any way by reality.
Dave Pollard says:

September 14, 2003 at 23:33

Susan: the lesson of Vietnam, which we’ve all forgotten so tragically soon, is that extricating ourselves from a country whose people do not want us occupying them is not abandoning them. You can’t keep what you take by force, you can’t change a people’s culture by force, you need to let people decide for themselves, at their own pace, how they want to govern themselves. By withdrawing, we won’t be ‘creating chaos’, we’ll be acknowledging that we have already created chaos, which may or may not be better than the tyranny that preceded it. We have to let Iraqis self-determine the government they want. At this stage that will almost certainly be an ultraconservative Islamic regime in the South, a Kurdish state in the North, a Turkmen state in the NorthEast, and pockets of the country governed by influential local warlords. It will probably take decades of Yugoslavian-style warfare and negotiation between these factions for them to sort out who should run what and who should govern where. We should intervene as mediators and as prosecutors of war criminals, under UN auspices only, if and when we are asked to do so by oppressed peoples, as we did in Yugoslavia. It will be messy, brutal and chaotic, as has the struggle for self-determination in every country in the world, including ours. By occupying and interfering, we are simply delaying this struggle, and the situation of Iraqis today under our occupation is arguably not significantly better than it will be if civil wars wrack the country when we withdraw. If history is any indicator, the UN will eventually help the Iraqis to partition their country exactly as it did in Yugoslavia. We can’t impose ‘solutions’ on the Iraqis to try to short-circuit this time-consuming and agonizing process, any more than we can prevent our children from suffering the agonies of growing up (that’s an analogy, not a suggestion that the Iraqi people are immature, although their political and economic structures are). For us to stay in Iraq and impose our solutions and culture on them would be madness, imperialism pure and simple, and imperialism has never worked, anywhere. Our responsibility is to provide enough money to Iraq to allow the different factions to rebuild the country’s infrastructure, which we destroyed, and otherwise to get out and stay out of their way, their nation and their business. Their people are bright and by global standards quite well-educated, and they’ll figure it out.
Dave Pollard says:

September 14, 2003 at 23:39

Evan: You may be right. I’m counting on the fact that Americans, even some who call themselves conservative, are pragmatic, distrustful of excess, protective of their civil liberties, and intolerant of incompetence. Not a few also tend to follow prevailing trends and shifts of opinion. All of these qualities will, I think, lead a majority of Americans, possibly an overwhelming majority by this time next year, to opt for a change in administration. My real concern isn’t that Bush will be re-elected, but that he will have set the country and world back decades in just four years, and that it will take many more decades to repair the damage.
Dave Pollard says:

September 14, 2003 at 23:51

Indigo: Very articulate response (and I really like your blog, although it doesn’t display right in Netscape, much to my distress). My take on executives of large corporations is that they don’t like each other very much, and I know some very rich Americans who absolutely despise their French elite counterparts (and the feeling is mutual). But you’re right about them working hard to fashion people of their own mind to head both major political parties, and nothing short of a revolution of one kind or another (my Monday post tomorrow describes one that’s guillotine-free) will restore power to the people.
Indigo Ocean says:

September 15, 2003 at 15:39

Thanks for the Netscape heads up. I just spent the last two hours trying to fix it (of which 1 was downloading Netscape, actually) and managed to get part of the right column showing. It looks a little worse in Explorer that way but at least Netscape is showing most of the links now.I was being facetious about the guillotines. I also want a bloodless revolution and look forward to reading your follow-up post.