Traveling through the country, I see the results of the economic downturn – from urban Miami neighborhoods to poor rural areas like Collinsville and Bird’s Landing north of San Francisco. In January alone, California employers cut 20,300 jobs from their payrolls. I notice more homeless people sleeping in the Oakland and San Francisco streets, or jornaleros, (day workers) waiting in vain for work! But for those who assume affluence as an axiom of life, such everyday reality seems as strange as science fiction.
Back in 1992, President George H. W. Bush acted stunned when he first saw a scanner read a code on an item at a grocers’ convention in Florida. By this time, the scanner and bar code had become routine in stores throughout the country – for those who went to stores to shop – not for the upper class.
The son of President George W. Bush, looked equally surprised in late February when a reporter informed him that gas prices might rise over $4 a gallon. “Gee whiz,” said the expression on his face. Wait for his tax rebate, he advised the public. These checks amount to a few hundred dollars for people not in the lowest levels of income and are scheduled to be mailed in May.
Bush then ridiculed the idea that the US economy had gone into recession. Well, he hadn’t noticed any change in his life style. With his ubiquitous smirk, he declared: “I don’t think we’re headed to a recession.” Then, sensing some disquiet in the room, he added: “but no question we’re in a slowdown.”
As Bush reassured the public about the economy despite its downturn, more a more knowledgeable analyst reported that the U.S. banking sector is headed for a credit downturn that will be the “worst in generations.” Duncan Mavin’s February 27 Vancouver Sun article quoted Meredith Whitney, an analyst with Oppenheimer &Co. Inc. and Fox News panelist. She predicted “widespread defaults on a range of debts and a national housing price slide not seen since the Great Depression.”
Whitney pointed to massive “dramatic” loan losses by banks that “will be the highest in the past 20-plus years as a result of greater numbers of individual defaulting on mortgages and/or other loans and from [loan balances that] are far higher than they were in the last housing cycle.”
Whitney whom Forbes put as second on its list of top stock pickers for 2007 predicted previously that the subprime loan problems facing Citigroup Inc. would lead to a crisis. Indeed, a worldwide sell-off of banking stocks ensued.
On February 25, Whitney forecast that large U.S. banks’ earning in 2008 will drop by almost 30 per cent. The reasons: mortgages, credit-card balances and other risky loans.
The Bushes haven’t had to deal with shopping for food or houses; nor do their close friends. When they hear about housing prices dropping six per cent across the United States in the last months, they shrug. Whitney predicts “national home prices will decline by a factor of three times such levels.”
A member of my family found it difficult to get a loan. The prospective lender phoned his employers and checked and rechecked his credit before deciding to allow him to get part of the sum he asked for. This drying up of liquidity results from bankers becoming wary of the once solid individuals and businesses that have defaulted in the last year.
On Friday, February 29, leap day in leap year, stocks fell over 315 points on the Dow Jones. Citigroup, the largest banking conglomerate in the world announced it would sell at least $100 billion of its assets so that its stock price doesn’t fall more than expected.
Nobel prize winning economist Joseph Stiglitz claimed that Bush’s Iraq war had drained trillions from the US economy. Five years ago, Bush’s neocon advisers had guaranteed the war would be quick and cheap. In a February 23 London Times article, Stiglitz and Linda Bilmes claim “we have a war that is costing more than anyone could have imagined.” The cost of direct US military operations – not even including long-term costs such as taking care of wounded veterans – already exceeds the cost of the 12-year war in Vietnam and is more than double the cost of the Korean War.”
Defense Secretary, Donald Rumsfeld and Deputy Defense Secretary Paul Wolfowitz had assured Bush that “postwar reconstruction could pay for itself through increased oil revenues.” Rumsfeld thought $50 to $60 billion would cover the costs and some of that would be paid by allies.
Bush has now requested $200 billion more in supplemental war funds for 2008. Stiglitz and Bilmes calculate that if this passes, “Congress will have appropriated a total of over $845 billion for military operations, reconstruction, embassy costs, enhanced security at US bases, and foreign aid programs in Iraq and Afghanistan.”
In 2008, projected war expenses will “exceed $12.5 billion a month for Iraq alone, up from $4.4 billion in 2003, and with Afghanistan the total is $16 billion a month,” an amount equal to the annual UN budget.
These figures do not include other military-related expenses, including the maintenance of US bases throughout the world, the costs for wounded and dead (death benefits to families); nor does it cover intelligence. Stiglitz and Bilmes, after reviewing the Pentagon figures, arrive at costs for Iraq and Afghanistan of “more than $3 trillion. Our calculations are based on conservative assumptions.”
NBC Reporter Ann Curry Ann Curry paraphrased Bush saying “you’re saying you’re gonna have to carry that burden [of the Iraq War]. Some Americans believe… they’re carrying the burden because of this economy.
Bush: Yeah well-
Curry: I mean they say they’re suffering because of this war, spending on the war.”
Bush: “I don’t think so. I think actually the spending in the war might help with jobs…because we’re buying equipment, and people are working.”
Whereas the old military Keynesianism before and after World War II stimulated economic growth, Stiglitz explained, current military budgets work in the opposite way. But not for the great economist in the White House!
With his ubiquitous smirk, Bush not only dismissed the predictions of experts like Meredith Whitney and Stiglitz, but stood firm if not stubbornly for continuing his war in Iraq. For that reason alone, he endorsed John McCain, who boasts of his economic ignorance and glories in the notion of perpetual war.
Like the truly rich, the Bush family doesn’t see or feel material suffering. They may read about such affairs, but never really come into contact with it. When former First Lady Barbara Bush, W’s mother made a celebrity appearance visiting refugees from the Katrina hurricane in a Houston arena, she said she was alarmed because “they all want to stay in Texas. Everyone is so overwhelmed by the hospitality. And so many of the people in the arena here, you know, were underprivileged anyway, so this – this is working very well for them.” (Marketplace, American Public Radio, September 7, 2005) Such statements of imperial arrogance combine nicely with upper-class ignorance in her son, who has cost the country and the world materially and spiritually.
Bush has ruled by throwing hardballs of fear at Congress and the public and then getting Congress to throw money – away – to pay for fear remedies: ongoing war. In 1932, a different kind of patrician, Franklin Roosevelt, eschewed fear-throwing and fostered hope. By November 2008, voters may tire of catching Bush’ and McCain’s fear-filled pitches and overcome, momentarily, lingering racism or sexism and vote for a more prudent candidate. We’ll see!
SAUL LANDAU is an Institute for Policy Studies fellow, a regular columnist for Counterpunch and progresoweekly.com and author of the Counterpunch Press book A Bush and Botox World (forward by Gore Vidal). His new film, We Don’t Play Golf Here is available on dvd through roundworldproductions.