...I'm okay with being REALITY-based.




Tuesday, April 29, 2003
      ( 1:40 PM )
 
Economics 101

Let's talk a little economics. I wanted to blog about this yesterday, but the news about Mike Hawash sort of preoccupied me. The Treasury Department came out with figures last night on the expected deficit:

Through the first six months of the budget year,
the government has run up a deficit of $252.65
billion. Analysts expect the final 2003 budget
gap to be well above $300 billion, setting a record.
The Bush administration has cited the need for
increased spending on defense and security, as
well as lower revenues from a sluggish economy,
as the main reasons for the shortfall.

Okay, let me get this straight. In the first six months of this year, the government has borrowed upwards of $250 BILLION. Based on that rate, how can they only be forecasting the whole of 2003 to be only a little over $300 Billion? I expect we may see a deficit nearing $500 Billion by the end of this year. With this kind of deficit, BushCo wants a $700 million tax cut. He won't get that, but he might get his fallback number of $500 million (unless Voinovich et al can remain strong). In addition, he hasn't even begun to give the true bill for not only the war in Iraq, but all the other defense spending he's doing on contracts to rebuild Iraq and whatever else he's going to have to spend money on in the remainder of this year, which could include other terrorist attacks, Afghanistan re-emerging as a war zone, Kashmir, North Korea, and the rest of the issues in the middle east, not to mention the fact that BushCo is still hot on "missle defense" spending. So all this added together leads me to the same conclusion I came to several years ago:

Repbulicans WANT a big deficit. They WANT to be in debt. When the country is in debt, we have to "cut spending." "Cutting spending" is the hallmark of the Republican credo, and it is code for "get rid of social programs for the most needy of our country." Instead of keeping the tax revenue that we have, which is already much lower because of the ongoing (unadmitted) recession we've been in, they prefer to cut that tax revenue even further. This makes it even more necessary for the government to borrow from "investors." Who do you think the investors are? Not Joe America. Our government is in debt to other countries.

"But, Mama," you say, "doesn't being in debt to other countries make us more vulnerable at a time when we are trying to increase our security on all levels?" Why, yes it does. If you think that is the antithesis to what the Administration wants, I will say you are wrong. I think the Administration has no true investment in being secure or safe or taking measures to make this country self-sufficient on the economic front or the energy resources front. If we actually took the measures to get ourselves debt free and dependent on non-fossil fuels, why then we'd have hardly any reason to increase our defense spending budget.

But I digress. Back to "cutting spending." The reason Republican Administrations LIKE running up huge deficits is that not only does it give them the excuse to cut out much needed programs, but it leaves following administrations, especially if they are Democratic administrations with the deficit ball, and then they too have to cut out programs. BushCo WANTS a big federal government when it comes to "homeland security," ie, spying on and imprisoning its own citizens, but when it comes to necessary things like education, welfare for the poor and unemployed, children's health, elderly people's care, all those kinds of things - well, it's not the federal government's responsibility!

The name of the game with this Administration has been "unfunded mandates." First was Bush's "No Child Left Behind" education mandate. It is currently leaving thousands of children behind. States and local districts not only don't have the money to comply with that federal mandate, but they are unable to support the basic needs of schools and school children. Oregon is the worst state in the nation on this right now, with students in several districts having their school year cut by as much as 3 weeks, except in districts where teachers have volunteered to work for no pay. Second was the Homeland Security mandate. States cannot pay for the requirements sent down from the Federal Government to comply with this mandate. The Portland Police Department alone is overspent to the tune of $2million just because of this mandate.

But BushCo's budget doesn't say, let's hold off on cutting taxes right now, we need to pay for what we want to accomplish. No, what his budget says is: let's cut the taxes of the wealthiest people in the country, let's give more loopholes to corporations, let's not allow pharmaceutical companies to be sued if they kill a lot of people, and on top of that, since we're going to be seeing less in revenue, let's cut Veterans' Benefits by $14 billion, let's get rid of Early Head Start, let's forget the whole Medicaid for people who need Aids drugs, and while we're at it, let's just not worry about those old people, they're gonna die soon anyway.

Not only does the Administration encourage the building deficit and is doing nothing practical or of long-term benefit to the millions of out of work Americans, BushCo is also conspicuously quiet on the figures that came out this week on corporate executive pay and benefits. An AP article on Sunday estimated that investors have lost $7 trillion on paper since March 2000 and the nation's unemployment rate has steadily risen from 4.7% in 2001 to 5.8 in 2002 (and we all know that by the accounting method used, that means unemployment is actually somewhere around 11%). YET, the combined salary and bonus packages of the average midrange CEO rose to $1.8 million in 2002, a 10% increase from the year before. For example, while the share price for Tyco International dropped 71%, its CEO Dennis Koslowski's compensation was $76.63 million, an increase of 82%. While the share price for SPX dropped 45%, its CEO John Blystone received $55.90 million in compensation, an increase of 1,141%!!! (yes, I typed that correctly). Source for these figures is Aon Consulting's eComp Database.

So what we have is an increasingly divided economy - the poor are getting poorer and the rich are getting richer. Republicans are quick to dismiss the idea that there is a class system in this country, but it seems obvious to me that not only are they aware of it, they are purposely making the class divide larger. Not only that, but the obvious empire goals of BushCo seem in direct contrast to the economic foundation it's laying in this country. There doesn't seem to be anyone with any logical brains telling the president that he can be as dominant as he wants internationally, but it's all for nothing if his country implodes from the weight of deficit spending and recession. In addition, with the huge push early on for "free trade" and giving the WTO so much power, now that we are one of the most derided nations in the world, how can BushCo think that our trade situation will get any better either?

While the press finds more fantastic eye candy in reporting about Iraq than about the new deficit figures, it can't escape the average American for much longer that the president is running the country in the exact opposite way Joe America would ever run his own household budget. Already today alone, there are reports that Pharmacia will be laying off thousands in Michigan and New Jersey and Ericcson is also cutting thousands of jobs.

It will be interesting to see how BushCo avoids this issue as the election approaches, because there is no way that the economy can improve enough before then to show any kind of recovery. On top of that, it will be interesting to see how the press reports this issue. If the Democratic candidates can keep it on the forefront, it is a winner. Do you know why?

Because it's STILL the economy, stupid.





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