Yesterday’s NY Sun asked a good question about why the Bush Administration isn’t getting more credit for the current economic good times and pushing harder for its economic agenda. And speculated that Treasury Secretary John Snow should have been replaced by now:
To the untrained eye . . . Mr. Snow is not being pushed as the administration’s finance spokesman, even though there are a number of crucial economic issues being debated. According to Washington insiders who did not wish to be quoted, Mr. Snow agreed last fall to resign, and was expected to step aside earlier this year. A Treasury spokesman declined to comment on the issue. It appears that the White House has simply been too busy to find a replacement. Among those mentioned to possibly take his place is Chief of Staff Andrew Card. The administration may have concluded that the timing for advancing Mr. Card’s career was poor, and decided to wait for a bit.
Crank-
You gotta help me out here, since you and I apparently don’t live in the same country. What “current economic good times” are you talking about, and what, exactly, is the administration’s “economic agenda” short of simply spending like a teenage girl @ Bloomie’s with daddy’s credit card?
I understand that there’s room for all ideologies in the US of A, so I don’t question you on things that are basically opinions (like your post regarding wiretapping). But here? Inflation (both reported and not), massive debt, negative savings rate, an economy propped up on consumer spending, a plateauing housing market. Crank, I simply can’t follow you here.
Well, growth, low unemployment and relatively good times for the markets.
Spending isn’t really the treasury secretary’s job, but I’d agree with you that the Administration’s overall record on spending has been awful – there have been a few victories in that area if you bore down in the numbers, but they’re outweighed by everything else.
By the economic agenda I mean mainly (1) more push for ‘ownership society’ programs, ie creating private ownership of retirement and health care benefits and (2) making the tax cuts ‘permanent’ (ie, they won’t expire but will need to be repealed by the next Dem president).
I think you’ll find if you really look closely at all the metrics available, that the “growth” and “good times for markets” are an offshoot of the fountains of liquidity the Fed’s been supplying. Supplying in a very directed manner. I.e., At housing, equity markets, and certain commodities.
For instance — one example among thousands — compensation for associates in our own industry was stagnant from 1999 until this spring. Yet, as we NYers know, the cost of living skyrocketed during that same time. Much as this attorney enjoys living in Queens, that’s an after-the-fact discovery. I moved acros the river cause I couldn’t afford to stay in Manhattan.
I know that’s anecdotal, but there’s no need to bore you or anyone else with economic analyses one can find on the Web. They’ll be better-explained than I could do, too.
Economic conditions are at least arguably good, so the administration ought to be arguing that more than they are. On the other hand, to a large degree, people judge the economy not by statistics, but by how their own lives look, and to many Americans, that may not look as good as the numbers indicate.
It’s always true that people judge the economy largely by their own experiences. That’s why Kerry didn’t get very far arguing we were in the worst economy since the Depression. That won him the votes of the people on bread lines, but . . .
Still, it can’t hurt to hammer away at the things that are going well. Unlike in the Clinton years, Bush can’t expect the media to do that for him.
My personal experiences are irrelevant to the facts:
1. High inflation. While the government-created core CPI (which excludes energy & food) is only slightly up, we all know there’s *massive* inflation in energy, commodities, food, housing, education.
2. The largest national debt in world history. And the highest the US has ever had in terms of % of GDP as well.
3. A negative savings rate. Negative!
4. An economy that depends to an unhealthy degree on consumer spending, including spending financed by home equity loans and second mortgages on grossly inflated home prices . . .
5. Even though many of those homes are “bought” via interest-only loans & ARMs, leaving the home “owners” in a situation where they have no equity . . .
6. And the housing market has plateaued, and very well may bottom out.
7. China (our nominal enemy) and Japan, among others, are our largest creditors, and the health of our economy depends on those nations’ central banks to keep purchasing our bonds, to monatize the debt.
Listen fellas, this is not partisanship here. I don’t care if this is, or isn’t, Bush’s fault, nor do I let Clinton or Reagan or Carter or anyone else off the hook. They were part of the same game.
But to say that our economy is “healthy,” “colorably healthy,” moderately healthy of anything else is just wrong. Wrong.
Our economy is profoundly unhealthy, and if everyone continues to lie to himself in this regard, it’ll be too late to change things.
Mike, you make many good points. However, regarding economic strength: Equity market performance, unemployment, GDP growth, productive gains… Jury is out on inflation, despite recent rate moves, long term rates are low. So the quants and their machines are not seeing it yet. I share your concern with the CPI, borders on useless in my opinion. But we are not seeing broad price inflation. Few industries have been able to pass though the increasing costs they face i.e. raw materials and energy costs. There are many economic issues, low saving rate is definitely one. China holding US debt is not. As you pointed out re bipartisan economic failings, the Chinese are playing our game. Pulling the plug on US Govt funding would have a nasty effect here. And it would lead to bloody regime change there.
True enough. But trusting our economic health to the country that brought us charming episodes such as the Great Leap Forward (into starvation) and the Cultural Revolution doesn’t strike me as a strategy that Macchiavelli or Sun Tsu would’ve advised.
But perhaps that’s more a geopolitical concern than an economic one.
Additional point, there is a fair amount of speculation that Walmart business is turning down, and they are adjusting inventory accordingly. Recent selloffs in truckers YRCW and MRLN are, following this line of reason, the canaries in the coal mine. If you accept Walmart as a reasonable indicator of consumer behavior this is a red flag re the US economy.
Mike, your variables aren’t really meaningful. Debt vs. GDP is comparing stocks to flows; we have record debts and record GDP and by any metric our debt ratios are not unhealthy (although nobody approves of the spedning growth). Inflation is low; cherry-picking out of the commidites and housing strength and leaving out the constantly plummeting prices for technology and hardware skews your argument. Negative savings rates mean little…Japan saved in a legendary manner up to, and straight through, their economic collapse. And predictions of housing collapses are a dime a dozen….and they have been wrong for so long as to be worthless.
The economic success of this, and any, administration can be boiled down to four things: economic growth (best observed in the equity markets, which are an excellent proxy for growth), unemployment, inflation, and interest rates. (You could argue that rates/inflation is one thing).
All the other stuff (trade deficits, savings rates, housing doomsayers, etc…) are important only in that they can have an effect on one of those four things. As of now, the administration gets high marks for growth, unemployment, and low rates.
Inflation could undo all the good work though; the Fed’s rate policy continues and the dollar continues to weaken. So theoretically, we could see higher long term rates, which would squeeze growth and hurt employment. But none of this is evident yet. The economy is, by all accounts, quite healthy.
BJ-
If it’s important to you to believe that things are rosey, there’s little I can do to dissuade you.
Happy sailing.