“…niggaz are coastin’ the SL but can’t post bail…” – Jay-Z / “Dead Presidents Pt 1“
As many questions as the President’s bicycle trip during a red alert evacuation of the White House and Congress raised, perhaps the most important is “On what other issues is the President out of the loop?” In presenting the administration’s spin on the incident, White House Press Secretary Scott McClellan went out of his way to stress that protocol was followed, even repeating the word “protocol” thirty-six times. This explanation, however puzzling in this case, could also be applied to the economic situation this country is weathering. Is the President as disconnected from his traditional responsibilities as he is from new ones?
In the years after the fall of the Soviet Union, the President of the United States has been known as the most powerful man in the world. While true that the President holds more power than any single other person, his overall share of influence has been falling with each passing year. The rise of globalization has caused a shift from elected officials to corporations, their shareholders and international bond traders. This isn’t an especially new idea, Tom Friedman wrote about it in The Lexus and the Olive Tree in 2000, and before Bill Clinton got “serviced” by Monica Lewinski, he was forced to “service” the bond markets in his first few years in office through an economic policy heavy on deficit reduction. Gone were the days of the CEO going to his investors and personally explaining why his turnaround plan would succeed if given the enough time, just as a third world finance minister could no longer get all the holders of his nation’s debt on a conference call to convince them not to rush to dump their bonds. Globalization and the internet combined to disperse access to equity and debt markets, but the other edge of the sword gave power to individual investors to ruthlessly pursue their own interests.
Five years after the stock-market peaked, the U.S. economy is still sputtering. We’re running a $615 billion budget deficit, a $617 billion trade deficit, and borrowing almost $2 billion every day from foreign banks to pay our bills, and $300 billion (more than $1 billion per week even now) is being used to pay for combat operations in Iraq and Afghanistan. Hundreds of billions of dollars in ostensibly stimulative tax cuts have utterly failed to stimulate. Of course there has been growth, but in fits and starts that have failed to reach many areas, both geographic and demographic. Employment is at virtually the same level it was when the recession began, lower if government jobs are excluded. While the President is busy exporting democracy, the United States is simply falling behind key competitors.
During the 2000 campaign and on countless occasions since, the President has used a variation of the following phrase:
I don’t believe the proper role of government is to try to pick and choose winners when it comes to tax relief. See, I don’t think there’s a right American or wrong American when it comes to those who pay taxes. I think if we’re going to have tax relief all Americans ought to get tax relief.
Of course, it’s a huge applause line at the Potemkin village town-hall meetings he’s been holding since before he was President, and is, like so much else in our alternate reality, a toxic combination of non-sequitor, misdirection and out-and-out lie. Running for office at a time of federal budget surplus, Bush proposed tax cuts to “give the people their money back.” Once in office and faced with a surplus morphing into deficit, Bush renewed his calls for tax cuts to stimulate the economy, calls met with action in the Republican-controlled Congress. In addition to cuts in income tax each year of his term, Big Business benefitted from additional givebacks. Government’s role has nothing to do with winners and losers, but Bush’s economic policies (almost exclusively tax cuts) have done nothing but pick winners and losers:
Since 2001, President Bush’s tax cuts have shifted federal tax payments from the richest Americans to a wide swath of middle-class families, the Congressional Budget Office has found…
And to find corporate winners and losers chosen by the government, one need only look at a list of Bush campaign contributors:
The 50 companies that most favored Republicans with their political donations delivered an average 44 percent return on investment over the last four years, while the Standard & Poor’s 500 Index fell 4.1 percent, assuming dividends were reinvested.
Quite a series of wins for corporate America and the wealthiest among us.
The reward for the bottom 90% of American wage-earners is higher state and local taxes, a brutal job market, falling wages, rising insurance and energy prices, and more of the same on the horizon. In other words, a series of losses.
When George H. W. Bush was President, he was tagged as out-of-touch when he visited a supermarket and had no idea what a gallon of milk cost, but the current President is just as aloof when he travels the country touting “robust growth.” The actions that he says are helping the economy did little good and considerable harm. The tax cuts that were sold as incentives to invest were instead pocketed as profits. American companies announcing layoffs see their stock value increase, and productivity gains usually split with workers now find their way only to the business’ bottom line. And with taxes lower, less of that profit is funding the federal government, leading to the increased deficits. All the while, the President points to some nebulous light at the end of the tunnel, courtesy of his perpetual-motion machine-like tax cuts.
In The World Is Flat (his follow-up to The Lexus and the Olive Tree) and his recent New York Times columns, Friedman continues to explain his views on globalization for non-economists.
In recent years, though, with the flattening of the global playing field, it should be apparent that we are not just competing against ourselves. The opening of China, India and Russia means that young people in these countries can increasingly plug and play – connect, collaborate and compete – more easily and cheaply than ever before. And they are. We, alas, are still coasting along as if we have all the time in the world.
But Bush is acting as if we are competing against ourselves. His tax cuts are making us less competitive than before. The above example of the CEO asking for more time to turn around his company applies: With investors constantly monitoring their portfolios and quick to dump a non-performing stock, there is little incentive for companies to spend significant money on medium and long term research. Cost-cutting and current profits are king, all at the expense of the next big innovation. And while American companies forsake future growth, the rest of the world is passing us by:
South Korea, which has the world’s greatest percentage of broadband users, and urban China, which last year surpassed the U.S. in the number of broadband users, are keeping pace with Japan – not us. By investing heavily in these new technologies, Mr. Bleha notes, these nations will be the first to reap their benefits – from increased productivity to stronger platforms for technological innovation; new kinds of jobs, services and content; and rising standards of living.
No one with any real power is looking out for the interests of this country. We’re setting ourselves up to be dominated by several other nations because the same ideology prevails in both the White House and many corporate boardrooms: Short-term profits / election victories are more desirable than long-term growth / remaining an economic superpower.
When it is the United States facing a debt / currency crisis, we’re all going to regret not investing in our future. But then it will be too late for anyone but the investors taking huge profits today and those retiring on fat government pensions they earned while pissing away the leadership role generations of Americans fought to maintain. There won’t be anyone to call and beg for time, just plenty of blame for the people who chose to sell our future. They’ll be the ones riding bicycles, blissfully out of the loop.