Economists may quibble about whether we are entering a recession. But for many Americans, the answer is clear. In December, unemployment increased three-tenths of 1 percent, the largest increase in a single month since Sept. 11, 2001. A recent NBC/Wall Street Journal poll shows 56 percent of Americans think we are heading into a recession. And, after adjusting for inflation, the average income for households in the bottom four-fifths has fallen since 2000.
Make no mistake about it: This recession belongs to George Bush. His war in Iraq, his tax cuts for the wealthy, and his refusal to plug newly discovered tax loopholes, have all taken the United States from the 10-year projected budget surplus of $5.6 trillion that he inherited from the Clinton administration to a projected deficit over the same period of more than $2.4 trillion. That’s a swing of $8 trillion.
The debt accumulated during Bush’s term nearly matches the combined total debt of his 42 predecessors. This president has borrowed more money from abroad than all 42 of his predecessors combined, including nearly $450 billion in U.S. Treasury securities held by China.
Our enormous trade deficit has recently caused the dollar to hit an all-time low against the Euro and drop below the value of the Canadian dollar, thus exacerbating inflation concerns. Bush’s budget deficit, and his refusal to aggressively enforce our trade agreements, are both substantially responsible for our trade deficit.
The Federal Reserve Board has a potent weapon to prevent recession — cuts in interest rates. The upcoming recession would have been avoided if the Federal Reserve Board had been able to cut interest rates sufficiently. However, Bush’s giant budget deficit, combined with his trade deficit, means that sufficiently large interest rate cuts may trigger inflation.
George Bush has made us allergic to the only available recession antidote.
George Bush will do everything possible to escape responsibility for the recession that he has caused. He will claim there is no recession. He will blame Democrats. He will blame the business cycle. He will blame the alignment of the planets.
He will even say that the key to avoiding recession is to adopt more tax cuts for the wealthy.
I believe the United States needs to exit Iraq, roll back tax cuts for the wealthy and corporations, cut the deficit, and enforce trade treaties. Doing all this would allow major interest rate reductions without triggering inflation, and provide a basis for long-term growth.
In the meantime, we will try to ameliorate this recession with a stimulus package and as much interest rate cutting as the fed dares under the present circumstances.