Economic Policy and the Bush Administration

I think this is the worst government the US has ever had in its more than 200 years of history. It has engaged in extraordinarily irresponsible policies not only in foreign and economic but also in social and environmental policy. This is not normal government policy. Now is the time for people to engage in civil disobedience.

George A. Akerlof, Koshland Professor of Economics at UC Berkeley and 2001 Nobel Laureate in Economics

There is less concern about distributive issues, about unemployment, welfare, education and safety nets [...] Underneath this there is an anti-distributive agenda. You can't look at the proposed [$695bn (£428bn)] dividend tax cut without seeing this. There are ways of integrating corporate and personal income tax while maintaining progressivity, like in Europe. Their attempt here was to destroy progressivity under the name of a structural agenda. [...] It is not just that they do not pay much attention to it but they are positively engaged in increasing inequality.

Nobel Laureate Joseph Stiglitz, fmr. World Bank Senior Vice President and Chief Economist

The group with incomes over $1 million — which consists of about 226,000 tax filers in 2003 — would receive roughly as much in benefits as the 127 million tax filers with income below $140,000. Stated another way, the top 0.2 percent of tax filers would receive nearly as much from the tax cut as the bottom 95 percent of filers combined.

Joel Friedman and Robert Greenstein of the Center on Budget and Policy Priorities, qtd. in Walter Williams's Bush's High Crimes Against the Nation

About 1.7 million more people fell below the poverty line last year, bringing the total number of poor in the country to 34.6 million. The poverty rate edged higher than 12 percent for the first time in five years, rising to 12.1 percent from 11.7 percent. It was the first time in a decade that the number of poor people has increased for two straight years. More broadly, median household income dropped 1.1 percent between 2001 and 2002, to $42,409.

Boston Globe, 27 September 2003

You know, Paul, Reagan proved deficits don't matter. We won the midterms. This is our due."

Vice President Dick Cheney, to fmr. Treasury Secretary Paul O'Neill, interrupting O'Neill's warning to Cheney that growing budget deficits posed a threat to the economy. (Chicago Tribune, 12 January 2004)

To put the deficits in perspective, five years from now the average family's share of the national debt will be more than $84,000, compared to a projected $500 per family when Bush took office. The picture for America's children is grim. Large, sustained deficits eventually suck up national savings, meaning less money for education and training of young people and workers and lower investment in other economic sectors. As deficits continue, huge chunks of taxpayer dollars will be diverted from education and health programs to service the national debt. Interest rates will rise and living standards will decline.

Center for American Progress, The Effects of Big Budget Deficits on Family Finances

How Will Bush Deal With the Deficits? Connecting the Dots to Iraq (CommonDreams.org, 05 January 2004) Un-American Recovery (Washington Post, 24 December 2003)

Since July the average hourly wage increase for the 85 million Americans who work in non-supervisory jobs in offices and factories is a flat 3 cents. Wages are up just 2.1 percent since November 2002 -- the slowest wage growth we've experienced in 40 years. Economists at the Economic Policy Institute have been comparing recoveries of late, looking into the growth in corporate-sector income in each of the nine recoveries the United States has gone through since the end of World War II. In the preceding eight, the share of the corporate income growth going to profits averaged 26 percent, and never exceeded 32 percent. In the current recovery, however, profits come to 46 percent of the corporations' additional income.

Conversely, labor compensation averaged 61 percent of the total income growth in the preceding recoveries, and was never lower than 55 percent. In the Bush recovery, it's just 29 percent of the new income coming in to the corporations.

Analysts say future budget outlook gloomy (Salon.com, 20 December 2003) Hunger and homelessness increase in U.S. (Salon.com, 18 December 2003)

Dec. 18, 2003 | WASHINGTON (AP) -- Hunger and homelessness increased in many of America's largest cities this year, with growing demand for emergency food supplies for families with children, the elderly and even people with jobs, a survey by U.S. mayors finds.

The report by the U.S. Conference of Mayors, released Thursday, found that requests for emergency food assistance rose 17 percent overall from last year in the survey of 25 large cities. Requests for emergency shelter assistance increased by 13 percent, the report showed.

Most of the cities expected that requests for emergency food assistance and shelter would rise again over the coming year, the study said.

Food needs for the poor grew in nearly nine out of 10 of the surveyed cities.

Death By a Thousand Cuts (Mother Jones, November/December 2003 issue)

After being deserted by industry, a Southern mill town now finds itself abandoned by government. Welcome to Henderson, North Carolina, where Bush economics is hitting home.

A New Kind Of Poverty

America is a country that now sits atop the precarious latticework of myth. It is the myth that working people can support their families

Why America's plutocrats gobble up $1,500 hot dogs (Guardian/UK, 05 November 2003)

The men and women in the ballroom had paid a minimum of $1,500 (£900) for their hot dogs, and almost all of them had contributed much, much more. The single night brought the Republican party a total of $14m. Mr Bush has so far raised $83m for his primary campaign, more than all nine Democratic contenders put together, even though he does not have an opponent inside his party.

This financial superiority flows from the simple fact that the president's backers are far wealthier than those of his rivals. More of them give the maximum contribution to a presidential campaign of $2,000, and more of them are chief executives who vie with each other to become honoured Republican "Rangers" or "Pioneers", by putting together $200,000 and $100,000 "bundles" of contributions from their employees and friends.

"You don't raise that kind of money at barbecues and backyard sales. You raise it from big business," said Charles Lewis, who runs the Washington watchdog the Centre for Public Integrity.

The egalitarianism of the evening also stood in marked contrast to the reality of contemporary America, which in hard economic terms is a more divided and unequal country than at any time since the "gilded age" of the late 19th century.

The richest 1% of Americans now own well over 40% of their nation's wealth. It is a skewed distribution that sets the US apart from other modern industrialised nations. In Britain, widely viewed in America as the embodiment of social stratification, the richest 1% owns a mere 18% of the wealth.

[...]

Nearly half the benefits of Mr Bush's $1.35 trillion tax cut in 2001 went to the richest 1%, while 60% of this year's cuts will go to taxpayers with incomes of more than $100,000, according to the tax policy centre run by the Urban Institute and the Brookings Institution in Washington.

Mr Bush also fought hard to repeal an inheritance tax that affected only the wealthiest 2%, as well as cutting capital gains tax and trying to abolish the tax on dividends.

The Bush cabinet also stands out for its big money background. Every member is a millionaire and, the Centre for Public Integrity says, its total net worth is more than 10 times that of the Clinton cabinet.

[...]

For outsiders, the absence of class-based politics is the enduring mystery of American society. Among US analysts it is a matter of ideological disagreement.

David Brooks, a commentator at the conservative American Enterprise Institute, believes the divide is cultural rather than economic. It is the divide between the urban, cosmopolitan and liberal culture of the coasts where there are "sun-dried tomato concoctions" on restaurant menus - what he calls Blue America - and the conservative, church-going, gun-owning, patriotic and mainly white culture of Red America.

Red America eats meatloaf and votes for George Bush because it identifies with his cultural values. Its people are not envious of the top 1% of the population, Mr Brooks argues, because in Red America they never meet them. Instead, they consider themselves lucky to live in their own modest communities where prices are so low they see little they cannot afford.

"I didn't find many who assessed their own place in society according to their income," he reported. "They don't compare themselves with faraway millionaires who appear on their TV screens. They compare themselves with their neighbours."

Divide

Paul Krugman, a Princeton economist and Mr Brooks' liberal counterpart on the comment pages of the New York Times, argues that this cultural divide is more manipulated than natural, and serves to mask the society's ingrained inequity.

"There has been a tremendously successful campaign to shift the focus from economic elitism to cultural elitism," Mr Krugman said. "Because the president uses short words and talks tough, he is seen as an ordinary guy."

Certainly, most Americans appear to take Mr Bush at face value - as a plainspoken, homespun Texan, rather than the scion of a wealthy East Coast family. It is hard to imagine his real social background passing so unremarked in a British election campaign.

His party has also toyed with the cultural imagery of class, in one instance arranging for party loyalists to wear street clothes and workmen's hard hats at a rally for the Bush tax cuts.

The memo sent out to would-be demonstrators stressed that "If people want to participate - AND WE DO NEED BODIES - they must be DRESSED DOWN, appear to be REAL WORKER types etc."

Long queue at drive-in soup kitchen (Guardian/UK, 03 November 2003)

Last year alone, another 1.7 million Americans slipped below the poverty line, bringing the total to 34.6 million, one in eight of the population. Over 13 million of them are children. In fact, the US has the worst child poverty rate and the worst life expectancy of all the world's industrialised countries, and the plight of its poor is worsening.

The ranks of the hungry are increasing in step. About 31 million Americans were deemed to be "food insecure" (they literally did not know where their next meal was coming from). Of those, more than nine million were categorised by the US department of agriculture as experiencing real hunger, defined by the US department of agriculture as an "uneasy or painful sensation caused by lack of food due to lack of resources to obtain food."

[...]

Melissa Pardue, a specialist on poverty at the market-oriented Heritage Foundation, reflects the beliefs of many in the administration when she argues welfare reform has not gone far enough. "The impact of the recession would have been far greater without welfare reform," she said. "The people who continue to be affected are not working. People who choose not to get a job are not going to see more income. It's all the more reason to give greater incentives to looking for work."

Der Spiegel interview with George A. Akerlof, Koshland Professor of Economics at UC Berkeley and 2001 Nobel Laureate in Economics (Spiegel Online, 29 July 2003) Why Deficits Matter (Washington Post, 20 July 2003)

This year's deficit is projected to be $455 billion. That's $455,000,000,000. Over the next five years, the administration estimates, the cumulative deficits will total $1.9 trillion. That's $1,900,000,000,000.

As Federal Reserve Board Chairman Alan Greenspan told the Senate Banking Committee last week, "There is no question that if you run substantial and excessive deficits over time, you are draining savings from the private sector, and other things equal, you do clearly undercut the growth rate of the economy."

As Budget Deficit Grows, Greenspan Speaks Softly (Washington Post, 20 July 2003) Laurence J. Kotlikoff and Jeffrey Sachs: An economic 'menu of pain' Prize fighter thumps Bush: Faisal Islam meets Joseph Stiglitz, the Nobel laureate who took on the IMF and is now turning his guns on the American President Stephen Byers: I was wrong. Free market trade policies hurt the poor: The IMF and World Bank orthodoxy is increasing global poverty

Additional resources

This site may contain copyrighted material the use of which has not always been specifically authorized by the copyright owner. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.

Last modified: Wed May 12 00:15:07 CDT 2004