By Mike Whitney
The White House is now in full-panic mode. In fact, the falling stock market has the administration so worried that Bush will deliver a speech later today that will lay out the details of a “stimulus package” designed to rev-up flagging consumer spending. The desperation is palpable. Fed chairman Bernanke’s appearance on Capital Hill on Thursday turned out to be a total bust. Bernanke was supposed to calm jittery investors with promises of rates cuts and easy credit. Instead, his gloomy predictions put the market into a tailspin sending the Dow Jone’s down 306 points by day’s end. Now it’s up to Bush and Co. to pick up the pieces and try to restore confidence in Wall Street.
Since we first reported on the proposed “stimulus package” (Bush’s Voodoo Stimulus Package” informationclearinghouse.info) the size of the rebates have increased dramatically. The Democratic-led Congress was only calling for $250 per taxpayer or $500 per married couple. Under the White House plan, taxpayers could receive rebates of up to $800 per individual or $1,600 per couple. The rebates will accompanied by additional cuts to the Fed Funds rate (estimated 50 basis points) which will provide more liquidity to the banking system and easier credit for consumers.
The administration’s desperate actions should remove all doubt that the main problem facing the economy is inflation. It is not. The moves are intended to forestall a deflationary spiral that is the logical corollary of 7 years of intensive neoliberal policies. Ironically, now that Bush has achieved his goal of crushing the middle class and destroying the foundation of America’s consumer-based economy; he has decided to change directions and shower those same over-extended, subprime people with a $150 billion gift from the government. It makes no sense at all.
The negotiations on the stimulus package have produced the Democrats first victory over Bush. The president has agreed “not to push for a permanent extension of his 2001 and 2003 tax cuts.” Whoopee. Unfortunately, the Democrats don’t seem to grasp how dire the economic predicament really is or they would have asked for much more. For example, they could have made the rebates contingent on troop withdrawals from Iraq or the closing Guantanamo Bay. But that would mean that the Dems actually knew something about the state of faltering economy, which they don’t. They’d rather spend their time groveling for campaign contributions or applying tooth-whitener than following the collapse in the housing and stock markets.
Earlier today, Treasury Secretary Henry Paulson underlined the urgency of the situation on CBS’s “The Early Show” saying:
“What President Bush believes is that we’ve got to do something that is robust. It’s going to be temporary and get money into the economy quickly. It’s going to be focused on consumers, individuals, families — putting money in their pocket. And it’s going to be focused on giving businesses the incentive to hire people, to create jobs.”
Can you sense the panic?
It’s funny in a way. The Bush administration has been warned repeatedly about the disastrous effects of their supply side theories. Of course, they brushed off their critics and carried on with the plundering until they hit a roadblock. Now they’re running around in circles trying to find some way to stop the bleeding. Good luck.
Remember the $2 trillion wars (Iraq and Afghanistan) that could be paid for with “unfunded” tax cuts to the rich?
Remember the cuts to capital gains and corporate taxes that were supposed to “trickle down” to working class Americans creating more jobs and making us all more prosperous?
Remember the low interest rates that were supposed to create Bush’s “ownership society” that, in fact, generated the greatest speculative frenzy in real estate in American history?
Remember Dick Cheney’s brusque assurance that, “deficits don’t matter”?
Remember the myriad corporate giveaways, the lavish “no bid” contracts, and deregulated subprime shenanigans that were supposed to “grow the economy” and strengthen our markets?
The system is failing because it was designed to fail. The impending economic crisis is no accident, but the predictable outcome of deeply flawed policies that are thrusting the country towards a 1930s-type catastrophe.
Still, even disaster has its brighter side; like watching the most-reviled, least-credible President in American history try to stop a crashing market with his miserable offers of “cash rebates”.
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