The Economy Slows - The Fat Cats Are Salivating?
With increasing signs of a recession, George Bush is hoping to stimulate the economy. The next time a president dangles a tax treat, it needs to end up in the mouths of those who work hard each day to make ends meet; not in the bank accounts of a few fat cats who are salivating at the thought of another round of tax cuts.
When the Bush administration first responded to concerns that the economy was on the verge of recession, they were quick to point to the stable unemployment figures and steady job growth. Well, as with most of what comes out of the Bush administration, the unfolding facts suggest their analysis may have been wrong…again.
The latest reports seem to support the concerns of numerous economists that a perfect storm may be materializing which could plummet the country into recession. The latest data on unemployment and job growth will undoubtedly put wind in the sails of those who believe the economy is tanking as well as force the Bush administration to once again shift their rhetoric.
First a look at the latest data.
Jan. 4 (Bloomberg) — Hiring in the U.S. slowed more than forecast in December and unemployment jumped to a two-year high, raising the odds that the Federal Reserve will cut interest rates by half a point this month to ward off a recession.
Payrolls rose by 18,000, capping the worst year for job creation since 2003, the Labor Department said today in Washington. The jobless rate increased to 5 percent from 4.7 percent in November, while the Institute for Supply Management said growth in U.S. service industries cooled last month.
“This tells you that the strains from credit problems and so forth that have been developing the last six months are starting to bite and they’re biting in a way that now finally draws consumption into question,” said Neal Soss, chief economist at Credit Suisse Group Inc. in New York.
“It’s not a done deal, but if we’re going to have a recession, it’s too late to do anything about it,” said Stuart Schweitzer, global markets strategist at JPMorgan Wealth & Asset Management in New York. “The Fed can’t prevent a recession if one’s in the making, and we’re pretty close.”
The world’s largest economy grew at a 1 percent pace in the fourth quarter after expanding at a 4.9 percent rate the previous three months that was the strongest since 2003, according to the median estimate of economists surveyed last month. Growth for all 2008 was projected at 2.3 percent.
Keep in mind that a recession is defined as two consecutive quarters of negative growth…or a decline in GDP. The fact that the fourth quarter GDP barely remained in the black, coupled with the beliefs of many that the downturn (fueled largely by the sub-prime lending crisis and it’s impact on consumer confidence and spending) has yet to hit bottom, seems to suggest that negative growth is just beyond the horizon. While we’re not in a recession at the moment, one would be foolish to imagine any indicators of a strong economy in the short term.
Returning to the rhetoric of the Bush administration, it now appears that the powers that be have taken note of the tepid data…a fact that cannot be encouraging to a Republican party that needs every advantage it can find heading into the 2008 election cycle.
WASHINGTON — President Bush said Thursday that he was considering whether to propose a stimulus package to shore up the economy, the clearest indication yet of a growing concern inside the White House over rising oil prices, the subprime mortgage crisis and the possibility of recession.
“I’m concerned about people losing their homes and paying a lot for gasoline,” Mr. Bush said in an interview with Reuters.
Asked if he intended to do anything more to help people stay in their homes, the president volunteered the idea of an economic stimulus package, although he said he had not made up his mind and would probably not do so until sometime around his State of the Union address, which he delivers on Jan. 28.
“In terms of any stimulus package, we’re considering all options,” Mr. Bush said.
But it is a safe bet that tax cuts, long a centerpiece of the Bush domestic agenda, would be a feature of any administration initiative. And it is an equally safe bet that Democrats, who are contemplating their own economic stimulus package, would object, saying further tax cuts are unaffordable.
Mr. Bush has repeatedly said economic fundamentals are strong, a theme he is likely to echo Monday in Chicago when he delivers a speech on the economy. But with polls showing that the economy has eclipsed Iraq as the leading concern among voters, and with Democrats warning of a “Bush recession,” it has become increasingly apparent that inside the White House, there is a growing feeling that he cannot leave the economy to its own devices in his final year as president.
I’m of the opinion that the election year dynamic won’t help the President sell his party’s economic credentials or additional tax cuts. Truth be told, the Bush administration’s tax cuts have had little impact on the average American and the Bush apologist’s efforts to tout their success have never gained traction.
Add in the huge deficit, the doubling of the national debt, and the outsourcing of jobs under George Bush and it’s difficult to imagine voters trusting the GOP to solve what ails the economy. I suspect the Democrats will make the case that the President’s tax cuts were little more than a band-aid placed upon an economy in need of skillful stitching…and a handout to those already basking in the bounty of trickle-down tax strategies.
At some point, the voting public has to realize that perpetual tax cuts have little to do with sound economic policy and more to do with assuring that corporate America will fund the political aspirations of their GOP lapdogs. The next time a president dangles a tax treat, it needs to end up in the mouths of those who work hard each day to make ends meet; not in the bank accounts of a few fat cats who are salivating at the thought of another round of tax cuts.
