“That the nation has managed with seven years of George Bush as president is a testament to its resiliency, although Mr. Bush has brought the nation dangerously close to political and economic disaster. A McCain presidency might be sufficient to push it over the edge.”
Like all Cabinet members, U.S. Treasury Secretary Henry Paulson was appointed by President George Bush. And like his boss, Mr. Paulson seeks to spin unpleasant topics in order to hide reality, and did so during a recent visit to China.
While there, Mr. Paulson told Chinese leaders that while the U.S. economy is experiencing ‘a period of turmoil,’ and there will be ‘more bumps ahead,’ it is fundamentally strong. This is the same argument Mr. Bush has been pushing forward to such groups as the Economic Club of New York. That organization, of course, is comprised of people who benefit greatly from Mr. Bush’s economic policies: wealthy corporate executives. For members of that particular tier, the economy probably is strong; their jobs are secure, which is more than can be said for the people they employ.
It may be worthwhile to take a look at some of the current ‘bumps’ in the allegedly ‘strong’ economy that many U.S. citizens are experiencing.
Much has been written and said of late about the mortgage fiasco; because of sub prime mortgages, many buyers purchased homes way beyond their means. Often they did so in the hope that their incomes would rise before they had to pay the piper, and as an investment. After all, many parts of the nation saw real estate prices skyrocket during the 1990s and the early part of the new millennium.
However, many thousands of those who took that particular gamble walked away from the table with no chips left in their pockets. As Mr. Bush sent more and more jobs overseas, where cheap labor helps to maximize the profits of the rich, these new homeowners were ‘downsized,’ leaving them with high monthly payments and no money with which to comply. And since the particular boat in which they were sinking was filled with many others, there was no one available to purchase their high-end home, thus saving them from financial ruin. Home foreclosures, according to the Mortgage Bankers Association, reached an all-time high during the last quarter of 2007.
For many, home ownership represents the ultimate in achieving the ‘American Dream’ (whatever that is). A man’s home being his castle somehow loses its impact if that castle is a rental property. So as mortgage companies held out the enticing carrot enabling people to purchase not only any house, but a better one than they had previously dreamed of, many people took the bait and signed on the dotted line. Many of them are now in rentals, back with parents or rooming with sympathetic friends as their homes stand vacant, yards overgrown and ‘for sale’ signs fading in the sun and rain. Quite a ‘bump’ in the ‘fundamentally sound’ economy.
Another notable Republican, Herbert Hoover, promised “a chicken in every pot, and a car in every garage.” Now that the pot, or at least the stove on which it must be cooked, is being repossessed, let’s take a peak into the garage.
Many automobile companies, like mortgage companies, make owning their product very simple, at least on paper. A small down payment followed by four years of monthly payments (or five, six and now, even seven years), and almost anyone can proudly drive a new car out of the showroom. This might be leased, or owned: the choice is up to the consumer.
Yet a recent report indicates that the number of Americans who are at least sixty days late on their car payments reached a 10-year high in January. As Americans struggle with ‘downsizing,’ trying to hold onto their homes and put food on their tables, the car payment slips lower and lower in importance. Those who opt for the new and still rare 7-year lease, and other long-term leases, are likely to hold onto their cars for the entire lease period (despite paying up to a quarter more than the car is worth in interest payments). This will reduce sales of new cars, further weakening an already damaged U.S. auto industry.
A spokesman for Chrysler has said that that company does not foresee a rebound in auto sales this year. General Motors’ Vice Chairman Bob Lutz continues to stand by his opinion that auto sales will increase by the end of the year, but did allow that the company may revisit that assessment. Such verbal gymnastics are worthy of the current presidential administration.
A spokeswoman for the American Bankers Association commented that it is not only auto loans that are going bad; delinquencies on credit cards, home equity loans and other consumer loans are also increasing. And people are buying less because they have neither the money nor the credit with which to purchase.
But all is not lost! As Mr. Bush, Mr. Paulson and others who dance to the president’s wealth-inspired tune have stated, the economy is ‘fundamentally sound.’ One needn’t look for facts, those troublesome things that Mr. Bush finds so inconvenient and tedious, and therefore not worth knowing. His proclamations should be sufficient. After all, didn’t Mr. Bush recently say that the unemployment rate was a measly 4.8%? Surely that is an excellent indicator of the economic strength of the nation.
However, one must take a slightly closer look at the figures (remember the old cliché: ‘Figures don’t lie, but liars figure’). The U.S., in conjuring up its unemployment rate figures, assumes for some bizarre reason that after a certain amount of time, unemployed people cease looking for work; they simply give up. Perhaps that is why they walk away from high-priced homes and expensive car leases; they have simply decided not to seek employment any longer. One wonders how they purchase food, but the government seems more interested in skewing national unemployment figures than in assuring that citizens can feed their families.
Anyway, if one were more realistically to assume that people, once thrown out of work, continue seeking employment until they find it, the unemployment figure is slightly different. Mr. Peter Morici, an economist at the University of Maryland, determined that, including the people the government claims for no good reason have stopped looking for work, the unemployment rate is actually about 6.8%. Perhaps that is some of the ‘turmoil’ Mr. Paulson recently discussed.
So as Mr. Bush and various Cabinet members travel the world, telling all and sundry that the economy of the most powerful government in the world remains ‘fundamentally strong,’ that assessment is not shared by poor and middle class Americans. Unfortunately, Mr. Bush has shown a marked disdain for both those groups and that is unlikely to change now.
Republicans in the U.S. have decided on their choice to succeed Mr. Bush. Arizona Senator John McCain, never one to worry about his own mortgage or car payments since leaving his first wife to marry a wealthy heiress, weighed in on the economic situation. On January 10, he said this: “…I don’t believe we’re headed into a recession. I believe the fundamentals of this economy are strong, and I believe they will remain strong.”
By March 7, even Mr. McCain had to bow to the inevitable, although his admission then was still qualified: “The main factor out there is that Americans are hurting right now. And they don’t care too much whether it’s technically a recession or not. So, I would say that it’s very likely. And more and more economists are saying that — that we are probably — quote – ‘in a recession.’”
The National Bureau of Economic Research defines a recession as follows:
“A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”
Yes, Mr. McCain, the U.S. is, in all probability, in a ‘quote’ recession.
Somehow, the nation may survive its current economic woes. That it has managed with seven years of George Bush as president is a testament to its resiliency, although Mr. Bush has brought the nation dangerously close to political and economic disaster. A McCain presidency might be sufficient to push it over the edge. With the Democratic party unwilling, despite controlling both houses of Congress, to confront Mr. Bush in any significant way, Mr. McCain can certainly use his successful methods of fear-mongering combined with rampant jingoism to make the members of Congress follow him like lemmings off the nearest cliff.
And while this his happening, the wealthy in the nation will continue to benefit from the Bush tax cuts, the outsourcing overseas of jobs formerly held by U.S. citizens, and the eventual theft of Iraq’s oil (the Iraqi people proving thus far unwilling to hand it over to their imperial conquerors). No significant change can be expected regardless of who wins the White House in November, but for business as usual, a McCain presidency is the answer. If the Arizona Senator is elevated to the White House, America’s long decline will only be hastened. What suffering, in terms of foreign, imperial wars and domestic economic neglect, will accompany that decline is horrifying to consider.
Robert Fantina is author of Desertion and the American Soldier: 1776 - 2006.