Bye-Bye, Bush Boom

From the New York Times via Common Dreams, Princeton economist Paul Krugman on the failure of Bush's efforts to revive the economy:

What about overall growth? After two and a half years of slow growth, real G.D.P. surged in the third quarter of 2003, growing at an annual rate of more than 8 percent. But that surge appears to have been another blip. In the first quarter of 2004, growth was down to 3.9 percent, only slightly above the Clinton-era average. Scattered signs of weakness — rising new claims for unemployment insurance, sales warnings at Target and Wal-Mart, falling numbers for new durable goods orders — have led many analysts to suspect that growth slowed further in the second quarter.

And economic growth is passing working Americans by. The average weekly earnings of nonsupervisory workers rose only 1.7 percent over the past year, lagging behind inflation. The president of Aetna, one of the biggest health insurers, recently told investors, "It's fair to say that a lot of the jobs being created may not be the jobs that come with benefits." Where is the growth going? No mystery: after-tax corporate profits as a share of G.D.P. have reached a level not seen since 1929.

What should we be doing differently? For three years many economists have argued that the most effective job-creating policies would be increased aid to state and local governments, extended unemployment insurance and tax rebates for lower- and middle-income families. The Bush administration paid no attention — it never even gave New York all the aid Mr. Bush promised after 9/11, and it allowed extended unemployment insurance to lapse. Instead, it focused on tax cuts for the affluent, ignoring warnings that these would do little to create jobs.

Click here for the rest.

The bottom line here is that tax cuts for the rich do not "trickle down" to the rest of us: neo-liberal economic philosophy is a sham. It is true that throwing money at the rich will create some short term overall economic gain, but it's a lot like maxing out your credit cards--party now, pay (dearly) later. Bush is setting up a situation with his tax cuts that will eventually put Congress in a position such that they have no choice but to cut important social services, and I'm not simply talking about the National Endowment for the Arts; I'm talking Medicare, Medicaid, and Social Security, programs that keep large segments of the population from dying in the streets. Of course, the rich, who are rapidly becoming the super-rich, don't have to worry about cuts in social services; after all, they're rich.

I wrote a somewhat lengthy post on the lies of neo-liberalism last summer. Here's an excerpt:

These long years of pro-business, pro-greed, anti-labor, anti-regulation rhetoric have slowly resulted in an overall degrading of consumers' ability to continue purchasing. The credit industry has managed to artificially extend consumer demand, but that cannot last. In other words, the hopes created by the short term economic gains of neo-liberal reforms have always been false: neo-liberal reforms, in the long run, bleed rank and file Americans dry; without masses of able consumers to create economic demand, the economy must collapse, as it is doing slowly now.

Neo-liberalism is like cocaine. It feels good for a time, but after a while, you’re willing to sell you own mother just to get a few more lines. Once you do, you quickly snort it all up. Feeling like shit when it’s gone, desperately craving more, you look for somebody else’s mother to sell.

Click here for more (and just ignore the lead excerpt on deflation, or read it if you like; the stuff on neo-liberalism is below that).

$$$$$$$$$$$$$$$$$$$$$$$$$$$