There is a trap for the next President in the Bush stimulus plan - but no one seems to be talking about it. The deal appears to be all but done, since Democratic congressional leaders scrambled to sign up to Bush’s plan with “bi-partisan” fervor. Bush has a penchant for turning his own policy blunders into the Democrats’ problems, and this maneuver is no exception. If the stimulus plan is successful, it will drop the blame for the results of 8 years of breathtaking economic malfeasance into the lap of the Democrats.
I believe Bush fully intended to maintain the illusion of a healthy economy until the magic moment of 12 Noon, January 20th 2009, from which point forward the inevitable economic collapse could be blamed entirely on the next President. If he or she happened to be a Democrat, Republicans would then argue that the economy faltered because of Democratic policies. This would set the stage for another Republican takeover beginning in 2010.
The administration has been posting suspect economic numbers for years. Each year it has overestimated the next year’s deficit, and each year it announces that the deficit was reduced (from its own inflated estimate). Government debt is never mentioned, though the ballooning debt makes the U.S. more and more dependent on interest rates charged by foreign lenders. Large deficits increase the debt, erode faith in the dollar, and drive up the interest rates required to maintain the debt.
I suspect that the aversion for economic truth telling has permeated the administration, and that many of the economic indicators that are published are being cooked. Like Enron, the Bush administration has been selling us a bill of goods, but unlike Enron, all Bush and Co. have to do is get past the magic moment, and all will be forgotten. Blame will then shift to the new occupant of the White House. Bush learned this when he inherited a recession from President Clinton.
Somehow, unavoidable truth reared its ugly head a little early. Official prevarication and the exhortations of myriad right wing commentators can no longer convince a weary and frightened public to ignore their own fragile and declining circumstances. On Martin Luther King Day, world markets, faced with a single day of uncertainty about the direction of the U.S. markets, precipitously crashed. The Federal Reserve responded with a desperate and unprecedented three-quarter point unscheduled rate cut.
Informed investors have no faith in the Bush economy. What they had faith in was that the Bush Bubble would not be allowed to burst until the end of his term. That faith has been shaken, and needs to be shored up quickly to restore the illusion of solvency.
Treasury Secretary Paulson described the stimulus plan in a press briefing on January 18th, using the phrase "this year" twelve times, "temporary," five times, and "short term" three times. He is not saying, “We’ll fix the economy,” but rather, “We’ll keep it going a little bit longer.” The Bush stimulus program is a delaying action, pure and simple
According to Paulson, “The long-term fundamentals of our economy are strong.” You have to wonder what he has been smoking – the long term prospects for this economy are clearly unsustainable without dramatic policy shifts. Paulson says the economy is just experiencing a “significant housing correction.” This is the excuse for a remedy dealing specifically and only with getting the economy through 2008. If the underlying causes haven’t disappeared once the magic moment has passed, the response will be, “Well, it wasn’t our fault.”
With the national debt over nine trillion dollars, the President is calling for $150 billion in additional new debt. Bush probably still smarts over the recession he inherited from the Clinton administration (due to the Internet and Y2K bubble- a true short term situation.) The tax rebate which Congressional Democrats forced on Bush was the right approach under the circumstances of 2001. (Though Bush eventually took credit for the rebate, readers may recall that he only reluctantly signed the bill because it contained the first of many tax cuts for the wealthy.)
But 2008 is an entirely different animal than 2001. Since then, Bush, three Republican Congresses, and too many enabling Democrats have wreaked havoc on the American economy. Other than the rebate, the 2001 “stimulus package” never ended; for seven years Republican corporate cronies have been plundering the national treasury. The only thing that a rebate program is guaranteed to stimulate now is inflation. A partial fix would be to immediately redirect some of the Bush tax cuts from wealthy recipients, who are as likely to invest the money overseas, to the poor, who will immediately put the money back into the U. S. economy. That is, if we pass usury laws to get the banks out of their pockets.
Noting that it is Republican policies that got us here, Democrats should insist that the effect of those policies on the economy be reviewed, and that corrective actions be taken before agreeing to a final package. Obviously the goal is to reduce the impact of the Bush Recession on the public, but simply pushing a greater disaster onto the next administration will not lessen the damage.
The Piper will be paid. But President Bush plans to leave the bill on the doorstep of his successor.