House is now in full-panic mode. In fact, the falling stock market
has the administration so worried that Bush delivered a speech
on January 18 laying out the details of a "stimulus package" designed
to rev-up flagging consumer spending. The desperation is palpable.
Fed chairman Ben Bernanke's appearance on Capital Hill the day
before turned out to be a total bust. Bernanke was supposed to
calm jittery investors with promises of rates cuts and easy credit.
Instead, his gloomy predictions put the market into a tailspin
sending the Dow Jones down 306 points by day's end. Now it's up
to Bush and Co. to pick up the pieces and try to restore confidence
in Wall Street.
first reported on the proposed "stimulus package" (Bush's
Voodoo Stimulus Package), the size of the rebates have increased
dramatically. The Democratic-led Congress was only calling for
US$250 per taxpayer or $500 per married couple. Under the White
House plan, taxpayers could receive rebates of up to $800 per
individual or $1,600 per couple. The rebates will be accompanied
by additional cuts to the Fed Funds rate (estimated 50 basis points)
which will provide more liquidity to the banking system and easier
credit for consumers.
administration's desperate actions should remove all doubt that
the main problem facing the economy is inflation. It is not. The
moves are intended to forestall a deflationary spiral that is
the logical corollary of seven years of intensive neoliberal policies.
Ironically, now that Bush has achieved his goal of crushing the
middle class and destroying the foundation of America's consumer-based
economy; he has decided to change directions and shower those
same over-extended, subprime people with a $150 billion gift from
the government. It makes no sense at all.
negotiations on the stimulus package have produced the Democrats'
first victory over Bush. The president has agreed "not to push
for a permanent extension of his 2001 and 2003 tax cuts." Whoopee.
Unfortunately, the Democrats don't seem to grasp how dire the
economic predicament really is or they would have asked for much
now that Bush has achieved his goal of crushing the middle
class and destroying the foundation of America's consumer-based
economy; he has decided to change directions and shower
those same over-extended, subprime people with a US$150
billion gift from the government. It makes no sense at all.
they could have made the rebates contingent on troop withdrawals
from Iraq or the closing of Guantanamo Bay. But that would mean
that the Dems actually knew something about the state of the faltering
economy, which they don't. They'd rather spend their time groveling
for campaign contributions or applying tooth-whitener than following
the collapse in the housing and stock markets.
January 18, Treasury Secretary Henry Paulson underlined the urgency
of the situation on CBS's "The Early Show" saying:
Bush believes is that we've got to do something that is robust.
It's going to be temporary and get money into the economy quickly.
It's going to be focused on consumers, individuals, families -
putting money in their pocket. And it's going to be focused on
giving businesses the incentive to hire people, to create jobs."
Can you sense
in a way. The Bush administration has been warned repeatedly about
the disastrous effects of their supply side theories. Of course,
they brushed off their critics and carried on with the plundering
until they hit a roadblock. Now they're running around in circles
trying to find some way to stop the bleeding. Good luck.
system is failing because it was designed to fail.
Remember the $2 trillion wars (Iraq and Afghanistan) that could
be paid for with "unfunded" tax cuts to the rich?
Remember the cuts to capital gains and corporate taxes that were
supposed to "trickle down" to working class Americans creating
more jobs and making us all more prosperous?
the low interest rates that were supposed to create Bush's "ownership
society" that, in fact, generated the greatest speculative frenzy
in real estate in American history?
Remember Dick Cheney's brusque assurance that "deficits don't
Remember the myriad corporate giveaways, the lavish "no bid" contracts,
and deregulated subprime shenanigans that were supposed to "grow
the economy" and strengthen our markets?
system is failing because it was designed to fail. The
impending economic crisis is no accident, but the predictable
outcome of deeply flawed policies that are thrusting the country
towards a 1930s-type catastrophe.
disaster has its brighter side; like watching the most-reviled,
least-credible President in American history try to stop a crashing
market with his miserable offers of "cash rebates".
Mike Whitney is a well respected freelance writer living in Washington
state, interested in politics and economics from a libertarian
perspective. He can be reached at firstname.lastname@example.org.
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