Economic Gloom Following Election 2004

In his latest video, Osama Bin Laden stated that the reason for attacking the WTC was to lure the U.S. into an endless war that would eventually bankrupt it and bring about the collapse of its government as surely as it did in the Soviet Union.

And, under the bizarre presidency of G.W. Bush, it's working perfectly. Today we have the self-destructive combination of political opportunism to win elections at any cost, radical conservative anti-government dogma, Republican red state pork barreling, uncontrolled spending, misplaced fiscal priorities, and, of course, perpetual war spending.

"With last night's passage of the debt ceiling increase, the government's borrowing limit has climbed by $2.23 trillion since President Bush took office: by $450 billion in 2002, by a record $984 billion in 2003 and by $800 billion this year. Just the increase in the debt ceiling over the past three years is nearly 2 1/2 times the entire federal debt accumulated between 1776 and 1980.

A recession, a sluggish economy and five tax cuts in four years -- coupled with soaring defense spending on wars in Iraq and Afghanistan and rising domestic spending -- have turned record surpluses that Bush inherited into a record deficit of $413 billion in the past fiscal year."

Washington Post, Nov. 18, 2004

Raising the debt limit, of course, was held off by the administration until after the election. They were assisted in this by an uninterested corporate media and a strategy of marginalizing the issue as some sort of Kerry-only wonkfest ("Boooring. Let's get back to gay marriage.") So, when it hit the debt ceiling in October, the Treasury started borrowing from retirement accounts, just as it does from Social Security.

The Congressional Budget Office has projected $2.3 trillion in accumulated deficits over the next decade. And that's the best case scenario.

"Economists and budget hawks fear that rising deficits are contributing to the steadily declining value of the dollar, which will increase consumer costs, and that those deficits eventually will drive up interest rates and slow the economy.

By passing such a huge increase in the debt limit, with no strings attached, Congress has effectively given the Bush administration a blank check to continue running large deficits, said Stephen S. Roach, chief economist at Morgan Stanley. "An open-ended license for this kind of fiscal irresponsibility is a recipe for disaster."

"Congressional leaders thus far have shown little appetite to rein in deficits through such authority. This year, under White House pressure, House and Senate Republicans simply opted against adopting a 2005 blueprint for tax and spending policy, rather than accede to the wishes of Senate Republican moderates to reimpose pay-as-you-go rules."

So, in response, the dollar keeps dropping to near record lows in the foreign exchange markets. "Investors' appetite for U.S. assets will eventually dwindle and the United States must reduce its budget deficit to prevent major economic damage", says Greenspan today.

Reuters, Nov. 19, 2004

What can we expect for the economy? Demand for the dollar will drop, further devaluing it. The appeal of U.S. assets to foreign investors will likewise drop. Some of these investors will hang on; others will flee. Either way, interest paid by the Treasury will be forced upward to sustain the investment appeal of government debt. Making these increased interest payments will further deepen the government's financial quagmire. Governmental budgets will have to be cut even more. If capital flight is substantial, we'll see a stock market crash and the disappearance of middle-class retirement portfolios. The probable scenario is a severe recession or even another Depression.

Bush and his squad of power-crazed maniacs are hell-bent on doing Osama's bidding. Prospects for the economy are gloomy indeed.

Thanks to Ron Knox, from whose web rant
some of this is borrowed.

Back to Dan's own interminable rant.