Editorial: Through Bush-Colored Glasses

our fiscal mess

President Bush admitted on Friday that times are tough. So much for the straight talk.


Bush went on to paint a false picture of the economy. He dismissed virtually every proposal Congress is working on to alleviate the mortgage crisis, sticking to his administration’s inadequate ideas. And despite the rush of serious problems — frozen credit markets, millions of impending mortgage defaults, solvency issues at banks, a plunging dollar — he said that a major source of uncertainty today is whether his tax cuts, scheduled to expire in 2010, would be extended.

This was too far afield of reality to be dismissed as simple cheerleading. It points to the pressing need for a coherent plan to steer through what some economists are now predicting could be a severe downturn. Mr. Bush’s denial of the economic truth underscores the need for Congress to push forward with solutions to the mortgage crisis — especially bankruptcy reform to help defaulting homeowners. Lawmakers also must prepare to execute, in case it is needed, a government rescue of people whose homes are now worth less than they borrowed to buy them.

Mr. Bush said he was optimistic because the economy’s “foundation is solid” as measured by employment, wages, productivity, exports and the federal deficit. He was wrong on every count. On some, he has been wrong for quite a while.

Mr. Bush boasted about 52 consecutive months of job growth during his presidency. What matters is the magnitude of growth, not ticks on a calendar. The economic expansion under Mr. Bush — which it is safe to assume is now over — produced job growth of 4.2 percent. That is the worst performance over a business cycle since the government started keeping track in 1945.

Mr. Bush also talked approvingly of the recent unemployment rate of 4.8 percent. A low rate is good news when it indicates a robust job market. The unemployment rate ticked down last month because hundreds of thousands of people dropped out of the work force altogether. Worse, long-term unemployment, of six months or more, hit 17.5 percent. We’d expect that in the depths of a recession. It is unprecedented at the onset of one.

Mr. Bush was wrong to say wages are rising. On Friday morning, the day he spoke, the government reported that wages failed to outpace inflation in February, for the fifth straight month. Productivity growth has also weakened markedly in the past two years, a harbinger of a lower overall standard of living for Americans.

Exports have surged of late, but largely on the back of a falling dollar. The weaker dollar makes American exports cheaper, but it also pushes up oil prices. Potentially far more serious, a weakening dollar also reduces the Federal Reserve’s flexibility to steady the economy.

Finally, Mr. Bush’s focus on the size of the federal budget deficit ignores that annual government borrowing comes on top of existing debt. Publicly held federal debt will be up by a stunning 76 percent by the end of his presidency. Paying back the money means less to spend on everything else for a very long time.

The fiscal stimulus passed by Congress, and touted by Mr. Bush on Friday, could juice growth for a quarter or two later this year. But the economy’s fundamental weaknesses indicate that Americans are ill-prepared for hard times. That makes the need for clear-eyed policies all the more urgent. We need them from the president, Congress and the contenders for the White House.

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I will grant that I am not an economist, but I live on Main Street USA, I pay for gas that goes in my car, I buy groceries, I have a mortgage, insurance etc. The realities of life. I bought my home in May 2006 on one of those 2/28 ARM loans because we needed the cash we had on hand to put in new floors add a new laundry room and pantry off the kitchen and upgrade the house. But we knew going in that we were going to refinance a 30 year fixed rate mortgage before the 2 years were up and the ARM kicked in, yes we paid more for this, the initial loan was 8.5% but we did the refinancing and got a 30 year 6.5% loan so now we have an updated larger home worth more money because we added square footage. We had a plan. Right now I am not even sure we would qualify for a new loan as bad as things have gotten, the area we live in does not have escalated home prices, we are not in a resort area, or an area where home prices rose because of speculators like Southern Calif or Las Vegas or even Myrtle Beach.

Groceries are getting expensive but we have a daughter and her 2 kids (our grand kids) that live with us, of course they have to eat, we don't eat out as often and we have learned to shop at stores like ALDI's and Save-alot, or Walmart super stores, and less Krogers, we buy coffee when it's on sale for 4.99 a can and we get 6at a time, better than 7.99 a can, it's not like we are going to quit drinking coffee. Vacations are a 3 day weekend at the beach now instead of a cruise, or a week at Disney World, but times are tough, something our politicians aren't seeing. Not all of us can give 2300 for their campaigns, or go to Ruth Chris weekly for dinner, we are not all lawyers and doctors or hedge fund managers, some of us are normal Americans, disabled veterans, mailmen, store managers, clerks, hospital workers and trash collectors.

Making the Bush tax cuts permanent are the last things we think of, we are worried about who is going to pay for MR Bush's war, our kids or our great grand kids, what about Medicare and Social security? Not all of us have 100 million in the European stock market like Tricky Dick 2, or will make 10 million for our book rights like Bush 43, or get 250,000 for a public appearance, most of us just try and feed our families, the economy has been bad for a long time, millions of Americans quit looking for work about the same time the government claimed the unemployment rate dropped to less than 5% there just aren't any jobs and when the unemployment checks ran out, these people just dropped off the government employment rolls altogether. This is the reality. By the way COLA checks for SSD and SS and VA are NOT keeping pace with reality.

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