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Thursday, May 04, 2006

Robust or Bust: The Keyhole Economy

NEWSFLASH! The war in Iraq is going badly. It's the albatross that is dragging down the president's approval ratings. At least that seems to be the consensus among the pundits in attempting to explain why the administration's buoyant claims of an improved economy aren't getting any traction with the American people.

But if you take a look at which sectors are cited the most for showing improvements, it's things like GDP, the stock market, and unemployment numbers. These are elements that ignore an expanding sector of society: the poor and the working poor for whom the so-called "robust" economy is a bust.

So while the top earners of society are reaping the rewards of privilege through record profits and lopsided tax breaks and golden parachutes, the middle class and the poor are being squeezed by record high gas prices and suppressed wages (Congress hasn't raised the minimum wage in nearly ten years) and shrinking opportunity. With the wealthy top of society getting more bloated and the struggling bottom shrinking, this expanding economy ends up looking more like a keyhole economy.

It doesn't matter how much the administration talks it up; there are too many Americans for whom calling this economy robust seems more like idle boasting and may as well be happening on Mars. But since when has Bush and his supporters let the truth get in the way of good rhetoric?

"...The U.S. economy has just shifted into fifth gear and is now purring like a Porsche."
Stephen Moore
The National Review
March 14, 2005


A Porsche, Mr. Moore? Why not "cruising like a Cadillac?"
With this week's reports of losses by the "big three" domestic automakers, perhaps Moore wasn't so much abandoning his patriotic principles as he was recognizing that production does not equal sales in a keyhole economy.

In fact, Toyota outsold the big three AND made a profit last quarter. The pundits assume it has to do with the better mileage and more hybrid lines that the Asian auto manufacturers have produced.

President Bush seems to agree. In a January speech at a Virginia trucking company, he said, "When somebody demands an extra good and service in a market economy, somebody is going to produce it to meet that demand." Well, yes. And that someone is the Japanese.

And it's not just cars. Electronic goods and clothing are also some of the leading foreign goods being "snapped up," according to a February article by the Washington Post's Paul Blustein. The Post story was based on a government report released February 10 noting that 2005 marked the fourth straight year that the trade deficit "soared to a record."

So what does that mean for you and me? Well, the trade deficit is supported by loans held by foreign investors; they could call in their marker at any time. "We're borrowing against the future and... our children will have lower standards of living than they would otherwise," said Harvard economist Jeffrey Frankel in the Blustein article, and he warns, "Just because a 'hard landing' hasn't happened yet doesn't mean it won't."

A trade deficit combined with increased domestic productivity means more unsold inventory and wasted worker wages if Americans prefer foreign goods. That torpedoes Stephen Moore's assertion that "Productivity improvements are the key to higher wage rates...for middle class workers."

In fact, census figures from last year indicate "an increase in the poverty rate for the fourth straight year," according to a newratings.com article from last August. (And yes, the trade deficit was also up over the same period.) Proponents of the president's economic policies claim that the poor have not benefited from the so-called recovery because it has not "trickled down" yet.

But with cuts in domestic social programs leaving poorer Americans in a freefall, will the current policies ever put "trickle down" within their reach? The president, in that January speech, does not seem to want to give people a place to land, hard or otherwise. He advocates "reforming the system" of mandatory spending on Medicare and Social Security, and implores bipartisan support for his way of abandoning the needy.

Like the White House meeting of former cabinet officials in January, all he wants to do is convince those who command more respect than he does to spread his misleading, uninformed rhetorical statements. It could be that is why he chose so many Bush I legacy cabinet members and advisors for his administration; somewhere in that odd brain of his he realizes that people just don't respect him or his "decider-ings."

Reforming mandatory spending means an even larger poverty rate for years to come. An expanding economy means more growth for those who already have money and less room to move for a middle class that continues to be squeezed. A robust economy? For most Americans, the economy is a bust, and there will be no credit given to this administration for a keyhole economy that does not support the financial well-being of all Americans.