Saturday, January 12, 2008

Hurtling towards the finish line

On October 11, 2007, Bush said:
"The deficit today is at 1.2 percent of GDP, which is lower than the average of the last 40 years. In other words, we have told the American people that by keeping taxes low we can grow the economy, and by working with Congress to set priorities we can be fiscally responsible and we can head toward balance," said President Bush in a statement to the press. "And that's exactly where we're headed."
Did you read that quote really carefully? Did you catch the 'non-action' words he always uses? He's 'telling the American people', 'can grow', 'set priorities, 'can be fiscally responsible', 'can head toward balance'. Nice, Georgie. You've covered your ass by telling us. So the incoming recession just can't be your fault, can it?

And if we're 'headed toward balance', doesn't that mean we are out of balance right now with your borrow and spend policies?

Well... The US economy can withstand much if we keep the consumer confidence high.....
WASHINGTON (AP) - Consumer confidence fell to an all-time low as worries about jobs, energy bills and home foreclosures darkened people's feelings about the country's economic health and their own financial well-being.

According to the RBC Cash Index, confidence tumbled to a mark of 56.3 in early January. That compares with a reading of 65.9 in December - and a benchmark of 100 - and was the worst since the index began in 2002.

"People are anxious because everything sounds pretty awful these days," said Bill Cheney, chief economist at John Hancock Financial Services Group.
Well, at least we had a good Christmas season?
Credit card usage and other data showed a disappointing shopping season for US retailers after consumer spending rose 3.6 percent over the holiday spending period, the slowest growth rate in four years, media reports said Wednesday.

The figure, calculated from Nov 23 to Dec 24, rose 6.6 percent in 2006 and 8.7 percent in 2005, according to MasterCard's SpendingPulse data.

The report was cited by The New York Times and Washington Post in their online editions.

The US economy has been sluggish all year, and consumer confidence has been eroded by the crisis in the mortgage industry. Tens of thousands of homes have been repossessed by banks after high-risk borrowers could not keep up with interest rates that were jacked up after initial low rates.

The SpendingPulse report cited high fuel and food costs as also working against holiday spending. It was based on credit card purchases made by more than 300 million MasterCard holders and cash and cheque use, the reports said.

About 20 percent of annual revenues for the US retail industry depend on Christmas holiday shopping.

Ah. I'm sure Bernanke is right on this, and Bush is doing a heckovajob:

The White House is exploring a rescue plan, possibly including a tax cut, to aid the ailing economy. Federal Reserve Chairman Ben Bernanke, criticized for not doing enough, pledged on Thursday to keep lowering interest rates. They are expected to drop by as much as one-half of a percentage point when central bank policymakers meet later this month.

The public is giving President Bush low marks for his economic stewardship. His approval rating on the economy dipped slightly to 33 percent in January, from 36 percent in December, according to a separate Associated Press-Ipsos poll. His overall job-approval rating was 34 percent, compared with 36 percent last month.
Um, just an aside, but if you keep lowering interest rates, aren't you in danger of a liquidity trap?:
In monetary economics, a liquidity trap occurs when the economy is stagnant, the nominal interest rate is close or equal to zero, and the monetary authority is unable to stimulate the economy with traditional monetary policy tools. In this kind of situation, people do not expect high returns on physical or financial investments, so they keep assets in short-term cash bank accounts or hoards rather than making long-term investments. This makes the recession even more severe.
But I'm sure Bush is listening to his advisors:
The White House is more sanguine than several of the nation's most prominent economists, who have been urging the federal government in recent days to adopt a much more vigorous fiscal policy to head off the possibility of a damaging long-term recession.

Martin S. Feldstein, a Harvard economist who was an adviser to President Ronald Reagan, has said that he thinks there is a 50 percent chance of a recession next year and that Congress should pass a tax cut that would depend on how much the economy slows. Lawrence H. Summers, who was Treasury secretary in President Bill Clinton's administration, called this week for a temporary tax cut, longer-lasting unemployment insurance benefits and additional money for food stamps. Former Federal Reserve chairman Alan Greenspan has said that he thinks the considerable risk of a recession warrants making emergency aid available to homeowners at risk.

But in an interview this week, Bush's outgoing economic policy adviser, Allan Hubbard, said the White House does not see the need for such measures at the moment. "We just don't see any reason why the economy won't continue to expand," he said.
Well... at least everybody will share in whatever is coming at us:
The increase in incomes of the top 1 percent of Americans from 2003 to 2005 exceeded the total income of the poorest 20 percent of Americans, data in a new report by the Congressional Budget Office show.

The poorest fifth of households had total income of $383.4 billion in 2005, while just the increase in income for the top 1 percent came to $524.8 billion, a figure 37 percent higher.

The total income of the top 1.1 million households was $1.8 trillion, or 18.1 percent of the total income of all Americans, up from 14.3 percent of all income in 2003. The total 2005 income of the 3 million individual Americans at the top was roughly equal to that of the bottom 166 million Americans, analysis of the report showed.

The report is the latest to document the growing concentration of income at the top, a trend that President George W. Bush said last January had been under way for more than 25 years.

Earlier reports, based on tax returns, showed that in 2005, the top 10 percent, top 1 percent and fractions of the top 1 percent enjoyed their greatest share of income since 1928 and 1929.

Apparently Bush thinks another Gilded Age is a good thing, but 1929? Didn't something interesting happen around that time?

Don't think Bush will be too happy about having a really painful recession tagged onto his legacy... But if the recession truly kicks in after January 20, 2009, it can't be Bush's fault, can it?

(crossposted at Rants from the Rookery)