The Myths and Harsh Effects of Bush's Economic Class War

It doesn't work because rich people with extra money do not say, "Ah hah! I have an extra hundred grand, I'll open a grocery store!" They toss it in whatever market is handy or buy a second, third, or fourth home.

On the other hand, if there are lots of working people with some extra money, because they have good jobs, or because they have any jobs at all, you can bet your social security that someone will come along to sell them something. And the more they have, the more businesspeople will pop up to seize the opportunity, no matter how much they have to pay in taxes to do so. They will bribe, smuggle, go into war zones to make a profit. Here's what happened in Bush the Lesser's experiment.

The government pumped out lots of money by increased spending, much of it going to the military industrial complex, the pharmaceutical and insurance industry, and, of course, a special big chunk on the wars.

They also cut taxes. Mostly for the very rich. So rich people suddenly had lots of money on hand. They didn't go out and open new businesses, they simply sold the money. That is, they put it in "the financial sector," banks, investment companies, brokerages, insurance companies, real estate funds, hedge funds and the like.

The financial sector suddenly had an influx of money. So they went out and sold it. That is, they went out aggressively to make loans, both to businesses and consumers. The government was hand in glove with them, keeping interest rates low and deregulating or signoring regulations.

There was a real estate bubble. That should have been a warning sign. Real estate is a passive investment. It is a signal that there is a lot of money around with no productive place to go. No businesses expanding. No hot new industries. No genuine growth.

The real estate bubble is now routinely described as the root of our current economic problems.

That's not true. It's merely a symptom.

The problem is that the government, the nation, and the individuals in our country have all taken on massive amounts of new debt. Without investing it anything productive. Even our conquests of Afghanistan and Iraq are not profitable (except for specific war profiteers), they are drains, endlessly creating more debts. Debts which are, bizarrely, kept off the books the way Enron used to do it, or more pertinently, the way George Bush used to do it when he was at Harken Energy.

This is quite accurately reflected in the fall of the dollar against such currencies as the Euro. The dollar is now worth one third less than it was in 2001, pretty much the size of the bubble, one third of the economy.

It is also the primary cause of half of the increase in the price of oil. Since oil is priced in dollars, oil producers have had to raise their prices by fifty percent just to keep even. As our energy policy has been to just keep using oil, that makes the problem self-perpetuating, sending more and more money out of the country.

Here's another statistic to make things scarier still: Amount more Americans earned than spent in 2001: +2.3 percent Amount less Americans are earning than spending in 2008: -0.5 percent (State of the Union 2008: By the Numbers, Reuters, 1/28/2008 the source of many of the statistics included here.) The beat goes on.

The solutions that have been proposed so far are more of what has created the problem.

A check sent to every American, paid for by .... debt. Support for failing financial institutions and for defaulting mortgage holders, paid for by .... debt. Artificially low interest rates, so there will be more lending, creating more debt. All to keep the big bubble from bursting. All in the service of denying the big bubble is actually a bubble.

If America is going to get out of this, we will probably have to do it the old fashioned way, work for it. The way to encourage work, is to make doing business - making things, inventing things, providing services - more attractive and profitable than simply lending money.

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