PRINCETON ECONOMIST PAUL KRUGMAN
OPINES ON THE 7 PERCENT SURGE

From the New York Times:

But — you knew there would be a but — there are still some reasons to wonder whether the economy has really turned the corner.

First, while there was a significant pickup in business investment, the bulk of last quarter's growth came from a huge surge in consumer spending, with a further boost from housing. These components of spending stayed strong even when the economy was weak, so there shouldn't have been any pent-up demand. Yet housing grew at a 20 percent rate, while spending on consumer durables (that's stuff like cars and TV sets) — which last year grew three times as fast as the economy — rose at an incredible 27 percent rate last quarter.

This can't go on — in the long run, consumer spending can't outpace the growth in consumer income. Stephen Roach of Morgan Stanley has suggested, plausibly, that much of last quarter's consumer splurge was "borrowed" from the future: consumers took advantage of low-interest financing, cash from home refinancing and tax rebate checks to accelerate purchases they would otherwise have made later. If he's right, we'll see below-normal purchases and slower growth in the months ahead.

The big question, of course, is jobs. Despite all that growth in the third quarter, the number of jobs actually fell.

Click here.

The bottom line here, for me anyway, is that neo-liberalism, which supposedly aids business development by favoring the rich at the expense of consumers DOESN'T WORK! Bush and his ilk are destroying America's consumer base without which business cannot survive. He can manipulate numbers and statistics all he wants, but in the long run the only possible result of his economic policies is to turn the United States into a third world country. That's the reality of "compassionate conservatism:" no chicken, no pot, no car, no garage, no forty acres, no mule.

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