What follows here is a short synopsis of Joseph Stiglitz’ recent bombshell article in Vanity Fair. Check it out on their web site after you read my synopsis, below. http://www.vanityfair.com/politics/features/2007/12/bush200712
The damage done to the American economy does not often make front-page headlines as it should, but the repercussions will be felt beyond the lifetime of anyone reading this page.
1. the tax code that has become hideously biased in favor of the rich;
2. a national debt that will probably have grown 70 percent by the time this president leaves Washington;
3. a swelling cascade of mortgage defaults; a record near-$850 billion trade deficit;
4. oil prices that are higher than they have ever been;
We have not been investing in the kinds of basic research that made us the technological powerhouse of the late 20th century. And although the president now understands—or so he says—that we must begin to wean ourselves from oil and coal, we have on his watch become more deeply dependent on both.
Once Franklin Roosevelt assumed office and reversed Hoover’s policies, the country began to recover. But the economic effects of Bush’s presidency are more insidious than those of Hoover. They are going to be harder to reverse, and likely longer-lasting. Our grandchildren will still be living with, and struggling with, the economic consequences of Mr. Bush.
During the Roaring 90s, many had believed that the Internet would transform everything. Productivity gains, which had averaged about 1.5 percent a year from the early 1970s through the early 90s, now approached 3 percent. During Bill Clinton’s second term, gains in manufacturing productivity sometimes even surpassed 6 percent.
The Clinton years were far from being an economic Nirvana. Mistakes were made, opportunities lost. There should have been more investment in infrastructure. Regulation of the securities markets should have been tightened, and additional steps to promote energy conservation should have been taken. Special interests sometimes shaped the agenda more than they should have. But these boom years were the first time since Jimmy Carter that the deficit was under control. It was the first time since the 1970s that incomes at the bottom grew faster than those at the top—a benchmark worth celebrating.
When George W. Bush was sworn in, the time was ripe for Keynesian economics. It was a time to prime the pump by spending more money on education, technology, and infrastructure—all of which America desperately needed, and still does, but which the Clinton administration had postponed in its relentless drive to eliminate the deficit. Bill Clinton had left President Bush in an ideal position to pursue such policies. He’d left Bush with a multi-trillion dollar budget surplus. “In 2001, President Clinton left President Bush with a projected $5.6 trillion surplus. In just four years, President Bush turned that record surplus into a record deficit of nearly $4 trillion, a $10 trillion swing in the wrong direction.” http://www.house.gov/pelosi/press/releases/March05/BudgetPassage.html
With the multi-trillion dollar surplus he inherited, Bush could well have afforded to ramp up domestic investment in key areas. In fact, doing so would have staved off recession in the short run while spurring growth in the long run.
But the Bush administration had its own ideas. The first major economic initiative pursued by Bush was a massive tax cut for the rich, enacted in June of 2001. Those with incomes over a million got a tax cut of $18,000—more than 30 times larger than the cut received by the average American. The inequities were compounded by a second tax cut, in 2003, this one skewed even more heavily toward the rich. Together these tax cuts, when fully implemented and if made permanent, mean that in 2012 the average reduction for an American in the bottom 20 percent will be a scant $45, while those with incomes of more than $1 million will see their tax bills reduced by an average of $162,000.
The administration crows that the economy grew—by some 16 percent—during its first six years, but the growth helped mainly people who had no need of any help, and failed to help those whose needs were great. A rising tide lifted all yachts. Inequality widened greatly in America, at a rate not seen in three-quarters of a century. A young male in his 30s today has an income, adjusted for inflation, that is 12 percent less than what his father was making 30 years ago. Some 5.3 million more Americans are living in poverty now than were living in poverty when Bush became president. America’s class structure is rapidly heading in the direction of Brazil’s and Mexico’s.