January 21, 2008

The Bush Economy, Part 2

More than one month ago, on December 12, I put out a blog on the failings of the Bush economy.(See the archive.) In the past week the failures of his economic policies have been driving down the stock market, and have prompted the head of the Federal Reserve to call for an economic stimulus package as quickly as possible.  Bush's immediate response has been to call for an across the board tax cut. Now, recall that the foolish tax cuts of his first year in office helped to over-heat the economy, and recall that these overwhelmingly favored the very rich. The immediate problem is not that these same rich people need yet another tax cut, but that relief is needed specifically by the middle class. More specifically still, people who bought houses recently need help in paying their mortgages. Rather than give a tax cut to everyone, in other words, Bush should be focusing on those families who are on the brink of going under. If they default on mortgages, the ripple effects will further destabilize the entire economy. What to do?

First, Congress should step in and guarantee mortgages, helping banks and borrowers to renegotiate the terms of their debt. Neither banks nor borrowers gain anything if the mortgage market collapse. Rather than just give some money to everyone, including rich people who already have received a terrific tax cut, and then hope that the economy as a whole will be stimulated enough to help people with big mortgages, why not attack the problem directly?

Second, Bush should admit that the US cannot afford to keep spending $1 billion a day in Iraq. There were strong military and strategic arguments against going into that war in the first place, but they made no impression upon the true-believers who directed policy. Perhaps the Republicans will listen to an economic argument, especially in an election year.

Third, the Democrats should seize this opportunity to attack the Republicans for their mistaken foreign policy and their failed economic policy. During the last week in the Nevada Caucuses we have witnessed some rather pitiful in-fighting, especially from the Clinton side. It is time to tell the American people just how bad a President Bush has been. The Democrats have to attack the neo-conservative policies that have weakened the United States financially and hurt its international image. Obama must move beyond "feel good" unity and hope toward a more detailed vision of what will change and how. And Clinton should stop crowing about her vast experience and start to show the American people that she has the courage to confront the Republicans and hold them accountable for their mistakes. 

Unfortunately, I doubt that any of these things will occur. In an election year Congress is likely to be distracted, and the Democrats may not want to rescue the Republicans. They may calculate that the worse the economy gets, the less chance there is for McCain or Romney or whoever it turns out to be. Nor should one expect that Bush will retreat from Iraq. He will no doubt stubbornly "stay the course," just as Richard Nixon stubbornly stayed in Vietnam, convinced that a victory and vindication would eventually come. Even if Bush suddenly did change his mind, it will take more than a year to get the troops out in an orderly fashion, and that $1 billion a day will continue to hemorrhage out of the economy. Finally, it seems that the Clintons may lower the tone of the Democratic primaries. Bill Clinton in particular has become more aggressive toward Obama. In contrast, McCain and Huckabee on the whole seemed to be take the high road of civility in South Carolina.  (But note the latter has begun to embrace the Confederate flag!)

In short, while the economic woes of the US continue to worsen, there is no clear sign yet of intelligent policy or good leadership from Bush. Meanwhile, the Democrats may squander the opportunity to lead in an internal war of attrition.