This is the Bush Economy!
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 Seed Newsvine |
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When G.W. Bush claimed the White House he brought with him a number of Republican economists who thought they had a remedy to cure whatever was ailing the economy in 2001. They problem, as they saw it was the value of the dollar. It was too high. This dampened export demand by making U.S. exports more expensive and also increased import demand because import goods were relatively inexpensive. The solution was simple: lower the value of the dollar to reverse these numbers. This was accomplished by increasing debt. Borrowing puts more money into circulation which lowers the value of all those dollars.
This is exactly what they wanted and is exactly what they got. When the economy heated up it did so because of all the debt spending (both public and private).
The risk to this strategy is that any hiccup in the debt market will cut off the money flow. In the summer of 2007 the debt market didn't just hiccup, it coughed and spewed out a whole range of problems.
As the debt market froze up, so did the consumer spending spree. Now, thanks to the intentionally lowered value of the dollar, oil is at record highs which affects prices in a huge number of sectors. Thus, we see inflation starting to grow without the money in the economy available to fuel growth.
On the plus side, inflation is not likely to surge too much higher because wages are not rising enough to match inflation (oh wait, that isn't much of a plus).
The point here is not to detail the situation the economy is in but to show that it is a condition deliberately brought on by Republican economists who gambled that the U.S. could run primarily off of debt. They never dreamed the debt market would freeze up and for this they should be ashamed.
It should be noted that the debt market was liberalized and deregulated under the Clinton administration but it was the Republican economists advising the White House that put it in fifth gear. The question for this election year is whether John McCain will bring a different economic approach or whether he'll stay with what the party provides and hope that the debt market problems are just a hiccup and not a bleeding ulcer. Change means more than just the person in charge. It also encompasses all of the advisers that the Administration relies upon. Polls show Americans clearly want change. The real question is whether McCain is actually serious about true change or is just using the word to make election year sound bites. We'll be examining the competing economic plans to see how serious these guys really are.
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