Wednesday, October 19, 2005
The Bush recession that we fiscal conservatives have feared for years is finally fashioning a persuasive impersonation of a jetliner on final approach. It's about to land. The question is will it land softly, crash, or be shot down?
First came profligate government spending on a scale never before seen. "Big government conservatism," the Bushies call it. Pshaw, I respond.
Tax cuts and spending increases never mix well. Especially not when coupled with unjustified, costly wars. The president created a fiscal mess that not only the next generation, but also their children and grandchildren, will be shouldering for decades anon. Tax cuts? Yes.
Unjustified wars and pork for every congressional district nationwide? No.
For a while we floated merrily down our economic Yellow Brick Road, bolstered by strong consumer spending, low interest rates and an over-juiced real estate market. Our jaunt has slowed to a trot and is slowing still to a labored walk according to recent economic news. The housing market hiccup is trending towards a palpable slowdown.
Post-Katrina gas prices, while tapering, are still way above affordable.
Interest rates are rising. Inflation fears are fueling the Fed's intellectual engine and more rate hikes are sure to come.
Other nations at whose economies we used to scoff are now laughing at us. Check out last week's commentary by China Daily, the Communist Party mouthpiece: "... it is time that we should take a serious look at the possibility that the U.S. is going to take us down towards a worldwide recession in one or two year's time. It is well known that the U.S. is the world's biggest economy, taking up about 30 per cent of global GDP, but it is now also the world's biggest debtor country."
And guess, according to the Chinese, who America's biggest debt-holders are? China and Japan! The Greatest Generation of Americans fought alongside the Chinese and conquered Japan in World War II. We used to best Asia's most powerful nations. Gen X'ers and generations beyond will be genuflecting before them while paying down the debt incurred by Bush's prolific spending habits.
Tough times
The slowdown hasn't hit yet, but a growing crescendo of economic experts is predicting tough times next year. The Commerce Department's Bureau of Economic Analysis reported gross domestic product grew 3.3 percent annually from April through June -- amazing, actually, given the disincentive debt devised by the president and Congress. Much of that growth, however, was fueled by the housing boom whose bubble has been summarily pin-pricked by the antsy Fed.
USA Today reports, "The Conference Board's index of coincident economic indicators rose in August, the most recent reading. Coincident indicators show what the economy is doing now. But the future isn't looking bright. The Conference Board's leading indicators, which try to show what will happen in the future, declined in July and August. It's a good bet they will have fallen in September, too."
And when they fall, the rest of us fall with them. It's not too late for the president to bolster consumer confidence by cutting government spending. Or at least setting a timetable for cutting it next year.
Consumer confidence took its deepest plunge in 27 years last month. A timetable for a pullout from Iraq (and the war's $5 billion-plus monthly tab) would reassure spooked consumers. We could use a hefty dose of reassurance.
When you're on final approach and the guy piloting the plane has max'd out on his credit cards and pushed himself and yourself beyond bankruptcy, a little bit of confidence-boosting is a good thing. A lot is even better. The White House is sloughing off economic control to Fed Chairman Alan Greenspan. He may be a wizard, but he's not God. White House spokesman Scott McClellan told reporters last week, "The president has confidence in the Federal Reserve when it comes to monetary policy and their ability to address any inflation concerns."
Again, pshaw. Inflation control is on the president's instrument panel, not the Fed's. A limitless spending spree will assure the country crashes. If Bush takes control of his spendthrift habits, we may still manage a soft landing.
X Bonnie Erbe is a TV host and writes this column for Scripps Howard News Service.