The Coming Economic Disaster
The Congressional Budget Office (CBO) compares “standardized measures of federal revenues and outlays. These are designed to separate out short-term effects and various technical issues and focus on the longer-term changes in tax and spending policy. According to the CBO’s estimates, standardized federal revenue fell from 19.3% of the gross domestic product (GDP) in 2000 to a projected 17.0% in 2005. Since U.S. GDP is around $13 trillion, that shift of 2.3 percentage points means that the Bush Administration is taking in almost $300 billion LESS that it would have if tax cuts for the rich had not happened.
In spite of the rhetoric of the right to the contrary, the Bush Administration has not been compensating cuts in federal spending, it has risen by over 1% of GDP. This fact drives many true fiscal conservatives crazy. About ¾ of the increase can be accounted for by a build up of the military. Bush and the GOP Congress have hardly discovered the virtues of public spending on education or the environment for Congress just passed $40 billion in social spending cuts, concentrated on Medicare and Medicaid. But putting the tax cuts for the rich and the cuts to social services for the middle classes and poor together with the increases in military spending you see a huge shift in the federal budget balance from a surplus of 1.1% of GDP at the end of Clinton’s term in 2000 to a deficit of 2.1% of GDP in 2005 under Bush. The Reagan deficits in the early 1980s were larger to be sure but we are still talking about a boatload of real money.
All this deficit causes a long-term increase in the interest on the national debt that grows each year. The tax free debt interest payments mostly go to foreign nationals and the very richest Americans.
So what about the tax cuts? The richest 1% are reaping the benefits while the middle class and poor are doing much worse in terms of real dollars. According to Citizens for Tax Justice, a right wing advocacy group, households with incomes of around $75,000 got an average of only $400 from the 2003 tax cuts. Those with $50,000 saved less than $200 that year; those with $30,000 or less reaped almost nothing. But those with incomes placing them in the top 1% received over $25,000 back. Millionaires who don’t need the money got more back in taxes than about one third of American families have to live on for a whole year – no wonder the mega-rich are enthusiastic Bush supporters!
Now what about jobs? The tax cuts, Bush told us, would stimulate massive spending by the rich and corporations to hire millions of new workers. Not so in reality. According to the Bureau of Labor Statistics, since the recession began in 2001, corporate profits have soared 81% while the wages that corporations pay to non-supervisory workers (that’s over 80% of the workforce) increased just 14%. Guess who has been gathering in the sheaves there?
The job market under Bush is the worse in modern times. The economy, historically, has added about 3 million jobs each year. In 2005, there were just two million added. Employment has continued to fall nearly a year and a half after the official end of the recent recession. The last time that happened was under Bush I in the early ‘90s, when the job market lagged behind the economy by eleven months, so W has beat out his father there, too. Putting the long decline in jobs and the sluggish recovery together and it looks like we are at least ten million jobs below where we should be judging by historical averages.
Fewer folks earning money to spend to create increased economic activity has created a debtor society. The year 2005 saw the first time since 1933 that middle class and poor households finished the year in debt. That was at the height of the Great Depression. Since our economy does not appear to be in a depression now, that is a very strange thing to be happening. By the way, in the Clinton years the average household saved about 8% of after tax income. The new borrowing binge has been in the form of home equity credit.
According to Goldman Sachs, the amount of home equity credit extracted by households in the first five years of Bush’s Administration was around $2 trillion. Most refinancing of home mortgages includes additional principal that families often use to get them through a financial crisis such as a job layoff. Merrill Lynch considers that about 40% of the growth in consumption over the last three years has come from this limited source. It is like a watering hole that is slowly drying up.
If the US were an ordinary country the American bankers would dispatch the International Monetary Fund (IMF) to impose austerity programs, like it did in Mexico in 1995 and Thailand in 1997 (Clinton could be tough, too). Social services spending was all but terminated in those countries and the middle classes and poor fell into a deepening spiral of misery.
You got a net decrease in jobs that provide real dollars to the economy while Bush pledges to make more tax cuts for the rich (even ending corporate taxes on the richest companies). Then he talks of increased spending R&D for non-fossil fuels (right after his Energy Department has begun laying off scientists at the National Renewable Energy Laboratory thanks to cuts in the budget – does that count as another Bush lie or just as another attempt to mislead us? ). The economy is temporarily kept afloat by families mortgaging themselves into deeper debt while the government increases the transfer of wealth to the richest taxpayers through military spending and is perniciously cutting the strands of the social safety net one by one each year.
When will the bubble burst? How long do we have before “austerity” measures are imposed on Americans? Maybe not long. There has been evidence of getting ready for the bubble to burst with its attendant dramatic social upheaval but few have put the visible pieces together to see them for the contingency plans they really are. Some of them are disguised as efforts to control terror and so go unnoticed by ordinary Fox News and CNN viewers.
Here are items to consider as a whole. The Bush Administration has formed a new Army Command for North America (the first in the nation’s history) whose mission is to have plans for containing massive disruptions across the nation. There is a new Department of Homeland Security whose focus is not on securing the nation from natural disasters or for rebuilding the lives and property of ordinary Americans in the wake of such calamities. Americans are being acclimated into accepting “free speech zones” and unprecedented denial of the rights of Free Speech and Freedom to Assemble. There are restrictions on movement through airports including so-called “watch lists” and “no-fly” lists with expansions planned for rail and bus terminals. Freeways have been blocked by Homeland Security to check the identification papers of vehicle occupants in rehearsal for things to come. There is unlawful spying on working class Americans by the government. There are massive federal grants to local police agencies for “anti-terrorism” training and equipment that consists of the same ingredients used for controlling large angry crowds of unemployed and hungry non-terrorists. The Bush Administration claims the right to detain citizens for life without a warrant or writ of habeas corpus. The new PATRIOT Act renewal would extend the power of the President to include extinguishing the citizenship of natural born Americans without judicial review or appeal and exiling them to lawless countries such as Somalia where their fate will be in their own hands. It would include giving the President power to secretly arrest citizens, conduct secret trials with secret witnesses and carry out secret executions all without judicial review or appeal. The are no-bid contracts to Bush/Cheney cronies in Kellogg Brown Root to build over $300 million in mass detention facilities around the country in anticipation of a need in the near future to lock up at least 50.000 additional citizens for an indefinite time. All of this points to a highly publicized effort by the Bush Administration to fight terrorism, but it also coincidentally points to those with the power to see the future setting in motion the foundations for maintaining rigid control over a disgruntled population when all comes crashing down.
So who you gonna believe, Bunkie? Bush or your own two lying eyes?
In spite of the rhetoric of the right to the contrary, the Bush Administration has not been compensating cuts in federal spending, it has risen by over 1% of GDP. This fact drives many true fiscal conservatives crazy. About ¾ of the increase can be accounted for by a build up of the military. Bush and the GOP Congress have hardly discovered the virtues of public spending on education or the environment for Congress just passed $40 billion in social spending cuts, concentrated on Medicare and Medicaid. But putting the tax cuts for the rich and the cuts to social services for the middle classes and poor together with the increases in military spending you see a huge shift in the federal budget balance from a surplus of 1.1% of GDP at the end of Clinton’s term in 2000 to a deficit of 2.1% of GDP in 2005 under Bush. The Reagan deficits in the early 1980s were larger to be sure but we are still talking about a boatload of real money.
All this deficit causes a long-term increase in the interest on the national debt that grows each year. The tax free debt interest payments mostly go to foreign nationals and the very richest Americans.
So what about the tax cuts? The richest 1% are reaping the benefits while the middle class and poor are doing much worse in terms of real dollars. According to Citizens for Tax Justice, a right wing advocacy group, households with incomes of around $75,000 got an average of only $400 from the 2003 tax cuts. Those with $50,000 saved less than $200 that year; those with $30,000 or less reaped almost nothing. But those with incomes placing them in the top 1% received over $25,000 back. Millionaires who don’t need the money got more back in taxes than about one third of American families have to live on for a whole year – no wonder the mega-rich are enthusiastic Bush supporters!
Now what about jobs? The tax cuts, Bush told us, would stimulate massive spending by the rich and corporations to hire millions of new workers. Not so in reality. According to the Bureau of Labor Statistics, since the recession began in 2001, corporate profits have soared 81% while the wages that corporations pay to non-supervisory workers (that’s over 80% of the workforce) increased just 14%. Guess who has been gathering in the sheaves there?
The job market under Bush is the worse in modern times. The economy, historically, has added about 3 million jobs each year. In 2005, there were just two million added. Employment has continued to fall nearly a year and a half after the official end of the recent recession. The last time that happened was under Bush I in the early ‘90s, when the job market lagged behind the economy by eleven months, so W has beat out his father there, too. Putting the long decline in jobs and the sluggish recovery together and it looks like we are at least ten million jobs below where we should be judging by historical averages.
Fewer folks earning money to spend to create increased economic activity has created a debtor society. The year 2005 saw the first time since 1933 that middle class and poor households finished the year in debt. That was at the height of the Great Depression. Since our economy does not appear to be in a depression now, that is a very strange thing to be happening. By the way, in the Clinton years the average household saved about 8% of after tax income. The new borrowing binge has been in the form of home equity credit.
According to Goldman Sachs, the amount of home equity credit extracted by households in the first five years of Bush’s Administration was around $2 trillion. Most refinancing of home mortgages includes additional principal that families often use to get them through a financial crisis such as a job layoff. Merrill Lynch considers that about 40% of the growth in consumption over the last three years has come from this limited source. It is like a watering hole that is slowly drying up.
If the US were an ordinary country the American bankers would dispatch the International Monetary Fund (IMF) to impose austerity programs, like it did in Mexico in 1995 and Thailand in 1997 (Clinton could be tough, too). Social services spending was all but terminated in those countries and the middle classes and poor fell into a deepening spiral of misery.
You got a net decrease in jobs that provide real dollars to the economy while Bush pledges to make more tax cuts for the rich (even ending corporate taxes on the richest companies). Then he talks of increased spending R&D for non-fossil fuels (right after his Energy Department has begun laying off scientists at the National Renewable Energy Laboratory thanks to cuts in the budget – does that count as another Bush lie or just as another attempt to mislead us? ). The economy is temporarily kept afloat by families mortgaging themselves into deeper debt while the government increases the transfer of wealth to the richest taxpayers through military spending and is perniciously cutting the strands of the social safety net one by one each year.
When will the bubble burst? How long do we have before “austerity” measures are imposed on Americans? Maybe not long. There has been evidence of getting ready for the bubble to burst with its attendant dramatic social upheaval but few have put the visible pieces together to see them for the contingency plans they really are. Some of them are disguised as efforts to control terror and so go unnoticed by ordinary Fox News and CNN viewers.
Here are items to consider as a whole. The Bush Administration has formed a new Army Command for North America (the first in the nation’s history) whose mission is to have plans for containing massive disruptions across the nation. There is a new Department of Homeland Security whose focus is not on securing the nation from natural disasters or for rebuilding the lives and property of ordinary Americans in the wake of such calamities. Americans are being acclimated into accepting “free speech zones” and unprecedented denial of the rights of Free Speech and Freedom to Assemble. There are restrictions on movement through airports including so-called “watch lists” and “no-fly” lists with expansions planned for rail and bus terminals. Freeways have been blocked by Homeland Security to check the identification papers of vehicle occupants in rehearsal for things to come. There is unlawful spying on working class Americans by the government. There are massive federal grants to local police agencies for “anti-terrorism” training and equipment that consists of the same ingredients used for controlling large angry crowds of unemployed and hungry non-terrorists. The Bush Administration claims the right to detain citizens for life without a warrant or writ of habeas corpus. The new PATRIOT Act renewal would extend the power of the President to include extinguishing the citizenship of natural born Americans without judicial review or appeal and exiling them to lawless countries such as Somalia where their fate will be in their own hands. It would include giving the President power to secretly arrest citizens, conduct secret trials with secret witnesses and carry out secret executions all without judicial review or appeal. The are no-bid contracts to Bush/Cheney cronies in Kellogg Brown Root to build over $300 million in mass detention facilities around the country in anticipation of a need in the near future to lock up at least 50.000 additional citizens for an indefinite time. All of this points to a highly publicized effort by the Bush Administration to fight terrorism, but it also coincidentally points to those with the power to see the future setting in motion the foundations for maintaining rigid control over a disgruntled population when all comes crashing down.
So who you gonna believe, Bunkie? Bush or your own two lying eyes?
posted by S. Munzel | 9:19 AM
1 Comments:
It's sad that the average American, who gained so much more economic security when the Clinton Administration balanced the budget and created a surplus, is now having the future ripped from underneath him because of the greed of Republicans. They preach fiscal restraint, yet spend like mad to buy votes. In the near future it will be American workers who will have to flee to other countries to find living-wage jobs. Government services will stop as the funding dries up. The rich, however, will never be held accountable for giving back to those workers from whom they have taken so much.
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