The Fundamentals of Our Economy

John McCain said, infamously, “the fundamentals of our economy are strong”, then, when people mocked the ridiculousness of that statement, tried to do a dance about how he meant how wonderful our workers were. Of course, every time McCain opens his mouth on the economy, he immediately puts his foot in it, most recently by declaring he wouldn’t bail out AIG a day before the Bush Administration decided to do just that, forcing him to back off that stance. As McCain said months ago, he is not “well-versed” on the economy. Which is a pretty amazing admission, considering that he was the Chariman of Senate Commerce Committee – you know, commerce, like buying and selling stuff. So apparently the GOP cared so little about government oversight of the economy that they made an economic ignoramus chairman of the committee responsible for that job -- and Johnny did a heck of a job.
What are the fundamentals of our economy? Why do some people you see on CNBC and FOX Business say things like McCain did?

The plusses of our economy:
GDP is high and growing, albeit slowly
Productivity is high
It’s really big, therefore we export a lot of stuff and exports are growing, thanks to a weakening dollar
Like AIG, we’re too big to fail

The minuses of our economy:
Negative balance of payments
Huge budget deficits
Mounting national debt
The lowest savings rate in the developed world
Mounting personal debt
A pension and health time bomb set to explode in the next decade or so
Rapidly rising inflation
A banking system in disarray

Most of the plusses are less than thrilling, although if all you focus on is the stock market and the profitability of American businesses you own stock in, you could be pleased by the economy. As long as people can afford to buy beer, the McCain family will be able to own six houses and 13 cars.
The minuses have been building for years. The tech bubble of the nineties masked a long-term decline that has finally come to a major disaster following eight years of corporatist government based on the theory that the government should do nothing but help the rich and that bigger is better. The negative balance of payments has been rolling for decades. We import more than we export and in the long run, that is not a sustainable thing to do. How long a run it takes is hard to say with an economy our size. If someone who has $10,000 in savings spend $1,000 more than he earns each year, he’ll be introuble pretty fast. If someone with a million in the bank spends $10,000 more per year, he won’t live long enough to worry about it. The budget deficits started in the Reagan years, took eight years off based on the tech bubble and the increase in the top tax rate and relatively high capital gains taxes during the Clinton years, and exploded under the profligate spending and ludicrous tax policies of the Bushistas.
Regarding the last two, during the Reagan years, when previously unthinkable budget deficits were mounting, the right-wing economists came up with a new theory to explain why they weren’t really so bad – they considered the deficits as a percentage of GDP. It’s an interesting concept, which sort of worked when the Clinton years, coupled with the dreaded tax increases, evened up the books. In theory, a steadily growing economy should, in good times, take in the money needed to catch up with earlier deficits. That is, unless Republicans are in charge and cut taxes in good times and keep them low. This is economic stupidity of the highest magnitude, as tax cuts should be used as a stimulus and if they are always low, then you can’t cut them when needed. Of course, that is merely logic, and Republicans are averse to that sort of thing. As for the balance of payments, this country has been reluctant to even think about what they mean, for fear of reconsidering the concept of free trade being the most wonderful thing in the world. One thing logic tells us – you spend more than you earn and you get poorer. It may be significantly poorer, it may be insignificantly poorer, your quality of life may be temporarily better by having what you bought, but eventually someone has to address the idea of whether this is sustainable. No one ever has and I doubt anyone ever will.
The savings rate and the personal debt sort of go together. The housing bubble did a nice job of masking that, as people borrowed money on their ever-increasing home values to keep their lifestyle rolling along. We see how wonderfully that worked out. It is nearly impossible to fix this problem. Let me repeat that: it is nearly impossible to fix this problem. I apologize for the “nearly”, but I am reticent to use absolutes on economic issues. Our economy has been consumer-driven for a long time. If Americans start saving the way Asians or Europeans do, not only will our economy tank, the world economy could go with it, as U.S. spending has been the fuel for their economies as well. The problem is that many individuals are running out of money and running out of credit and that is scary.
I’ll skip the pension and health time bomb, we all know it is coming. One thing: many of us have been less worried about it because the economic assumptions which led to people thinking Social Security was going broke were based on extremely conservative growth numbers. They were always much lower than actual growth numbers and many of us felt that if those numbers turned out to be true, then Social Security was the least of our problems. They seem to be coming true and, indeed, Social Security is the least of our problems.
Inflation is a disaster for most Americans. Don’t believe the official numbers, food prices and fuel prices, the things you have to have to exist, are exploding. For people on fixed incomes, for people living paycheck to paycheck, this is a nightmare. Again, it isn’t a problem for Bush or McCain, so don’t look for the Republicans to worry about it.
The collapse of the financial sector has been in the news a lot, so you can read about that other places, although I’ll talk some about it next week. It has brought about the most startling political decision in American history, with a form of economic fascism being proposed by a Republican administration.
The fundamentals of our economy are not sound. The economic minister of India has suggested the IMF take control of the U.S. economy, as it does for other countries which have demonstrated no ability to manage it. Perhaps he’s right, for we are headed for bad times in any case, and the rest of the world needs to make sure they don’t go along with us.

Simple Policy, Hard Decisions

It all seemed so logical and simple. We, and the rest of the civilized world, would root out terrorists, would fight them, would fight those countries who gave them haven, and those countries which supported them. This makes sense – if terrorists are the problem, those who help them are part of the problem. As time has gone by, the enforcement of this doctrine has been more and more difficult. One man’s terrorist is another’s freedom fighter. King George surely had a different attitude toward the Sons of Liberty than we do now. Trying to define Hamas is nearly impossible. When the Russians tried to crush Chechnia, the Chechin rebels were either freedom fighters or terrorists, depending on whose side you were on. It left us paralyzed, between those who seemed to be fighting for independence and a nation-state under attack by rebels using tools which could be described as terroristic.
As bad as those are, the latest problems involving Turkey and the Kurds are far worse. It is very clear that Turkey is being attacked by a terrorist group, the PKK, trying to undermine their government and trying to “liberate” the Kurdish areas of Turkey. They are doing this by crossing the border from Iraq into Turkey and killing Turkish soldiers. It is clear and unequivocal terrorism. The Turks have given parliamentary approval to pursue these people into Iraq. This is where it all gets quite messy for the U. S.
The Kurds are our best friends in Iraq. The Turks are our best friends in the Islamic world – the only stable, secular democracy among Islamic countries. They are a member of NATO and have a government which wants to be part of the western world. In fact, one could say that we are obligated, as a NATO ally, to help defend Turkey against these attacks. Unfortunately, this would cause us to attack Iraq, which means attacking ourselves, which...okay, we’re getting more than a little messed up here. The government of Iraq has little control over Kurdistan. The dirty little secret is that the government of the semi-autonomous Kurdish region has little control over that region. The PKK has effective control over much of the area and stopping them from their goals will be very difficult. Most likely, their first choice would be Turkey attacking the Kurds, which, they probably feel, would unite the Kurds in opposition to the Turks. Yet what choice does Turkey have? The longer they do nothing, the longer they allow incursions by terrorists to result in the death of their soldiers, the worse they look. And if the secular government of Turkey looks weak, a religious party could well look to seize the opportunity. You can hear the speeches now: “See what allying with the West gets us? See how being friends with the U.S. Is worthless?” Thousands are in the streets now, following the killing of 12 Turkish soldiers and the injuring of 17 civilians in a wedding party with a roadside bomb. Meanwhile, the Kurds have made it clear they won’t tolerate any Turkish invasion to get PKK rebels. Iraq has reacted angrily to the threat of a Turkish invasion of the north.
For many months, experts have been warning that the north of Iraq was going to be the biggest problem there. Those warnings are coming true now. The Turks, justifiably, based on our stated policy and their alliance with us, are demanding we help them against the PKK. The Iraqi government is adamantly opposed to that and our best friends in Iraq, the Kurds, are particularly against it. What’s a superpower to do? The best we can hope for is that faced with such an immensely complex decision, Bush and Cheney’s heads explode. More likely, given their previous performance in the region, they’ll attempt to solve the problem by attacking Iran.

Domestic Enemy Number One

At the beginning of each Congressional term, the entire House and the newly elected (and re-elected) members of the Senate take the following oath of office:
I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me God.
With the revelation that the Vice President’s office has been ignoring the order to save documents for the archives (and their ludicrous attempts to explain why they didn’t have to), followed by the President changing the order so it didn’t apply to the VP, years after the fact, followed by the President trampling on the rule of law to make sure Scooter Libby was rewarded for covering for Cheney with his silence, it is clear that George W. Bush is the greatest domestic enemy this country has seen in at least half a century. In particular, his wanton attacks on the Constitution must have the Founding Fathers whirling in their graves, as he is everything they feared in a leader, everything they wrote the Constitution to protect against.
Yet the Democrats in Congress refuse to take action. They huff and puff, issue subpoenas which are summarily ignored by the Bush regime, and huff and puff some more, followed by some serious tut-tutting. Yet nothing ever happens. Just as with the Iraq funding bill, they are afraid of their own shadows, moral cowards unable to rise to the most egregious offenses. If the lies, corruption, and malfeasance have not been enough, if the trampling of the Constitution has not been enough, surely the treatment of the legislative branch, the first branch named in the Constitution, as an irrelevant nuisance by the Bushistas should be sufficient cause for them to rise to the ultimate challenge. Today brings news that Bush has refused to let two aides testify before Congress on the firing of federal prosecutors, daring the legislature to do something. It is time for them to do something. It is time for the House to offer up a bill of impeachment.
Last week a poll was actually taken (American Research Group) on whether Bush and Cheney should be impeached. Without hearing the case presented, without a single argument being given why, 54% of the public was in favor of Cheney’s impeachment, only 40% against. Bush still has a plurality against, but by the slimmest of margins, 46-45 – surely a few minutes of discussion could turn that around. The people are sick of these monsters, yet Congress does nothing. Does the majority party not have the votes to pass impeachment in the House? Then let us see the quislings who would preserve and defend the enemies of our freedom, so we can remove them in 2008. There is a moral need for this -- the people want it, the framers would demand it; is there no leadership to do the people’s bidding? If Nancy Pelosi is fit for her job than she must take the reins now. The approval rating of Congress has fallen to as low as 14% because Democrats and Independents alike see it as pathetically weak. Put each of the monsters in turn in the dock, show that the Constitution still lives. Removal would be wonderful, but a moment of integrity and accountability would at least furnish an historical precedent worthy of our republic. To do nothing dishonors all who have fought for our freedom and rights the last two centuries. Madame Speaker, the people are waiting.