The On-Off Economic 'Recovery'

I don’t know why economists and pundits seem so puzzled by the merry-go-round of good news-bad news economic statistics that are announced each week.

You know, one day in the news they’ll be trumpeting that the economy is back, that the Gross Domestic Product rose at an 8.2% clip in the third quarter, that personal income rose 0.5% in November, that company inventories are dropping which means consumers are buying which means that any day now companies are going to start hiring…

And then the next day there will be a report that orders for durable goods dropped unexpectedly in November or that new housing starts dropped in November, and the story of the day will express surprise at such weakness in the economy because damn, didn’t yesterday’s statistics show promise of everything starting to boom?

I don’t think there’s any mystery to it at all.

The economy rose because Bush gave Americans tax rebates and tax cuts early in the year, and people spent them. But the economy continues to stall because Bush gave most of the tax cuts to the rich, who don’t need the money.

I said it BEFORE and I'll say it again: the rich have no pent-up demand, because they can already buy anything that their greedy little hearts desire. Non-wealthy Americans, on the other hand, have been scrimping for years as their wages stagnate, their expenses rise, their jobs are ‘downsized.’ They’ve been making do with old clothes so they can save for their children’s education, nursing along their failing automobiles and appliances because they can’t afford to buy new ones.

Give them a little windfall of a tax cut or a tax rebate, and they’ll give a boost to the economy by spending it. Problem is, now it’s spent, and they’re financially strapped again, though perhaps with a new suit or new washing machine to show for it. Even worse, since their pent-up demand exceeded their tiny tax rebate, they probably spent more than Bush had handed them. After all, credit card debt is still rising, personal bankruptcies are still rising, and our savings rate remains abysmal.

Two-thirds of the US economy is built on consumer purchases, and it is consumers who have managed to keep the economy afloat. They’ve done it through refinancing their houses (as we here at DebtorsPrison did) and by going into credit card debt. All Bush’s tax cut did for the average consumer was to give them a couple months of financial reprieve and tempt them into going a little further in debt to make some of the purchases they had been deferring for so long.

Bush dazzled average consumers with a few hundred dollars in their pockets and a whole lot of talk about how his tax cuts benefited the average person, but it’s all lies. The Bush tax cuts were all about giving more money and power to the rich and doing nothing for the economy. It is even a lie to say that taxes have been cut for the average person, because the under-financing of the federal government has meant all sorts of increases in government service fees, as well as in state, local and property taxes. These increases usually hurt the average person with a tiny tax rebate more than they do the wealthy person with a windfall tax cut.

Bush is hoping that the buying boomlet stimulated by his tiny tax cut to the average person will carry the economy at least to the next election, so he can get away with his deceitful lies about his massive give-aways to the rich.

Lets make sure he doesn’t get away with it.