Get Herald RSSOn Friday, March 14, President Bush gave a speech to the Economic Club of New York about the state of the economy. Despite hard times, he said, "In the long run, I'm confident that our economy will continue to grow, because the foundation is solid."
Well, that's nice to know. Every day, more and more bad news streams in from the world of finance: Bear Stearns' troubles cause stocks to plummet, the dollar falls to new lows and a new wave of foreclosures is imminent. Thank God we know what's really important, like the contents of Eliot Spitzer's prostitute's MySpace page. But one day, it all might just catch up with us, and, as with any statement the Bush administration puts forward, it's important not to take this one at face value.
Here is how the campaigning President Bush explained economics in 2004 to a reporter he attempted to brush off at the Nothin' Fancy Café in Roswell, N.M.: "You get paid a lot of money, you ought to be buying some food here. It's part of how the economy grows. You've got plenty of money in your pocket, and when you spend it, it drives the economy forward. So what would you like to eat?" Although the President's dismissal of the reporter's legitimate inquiries about national security by insisting that he was there to order ribs, not answer questions, was disturbing, his definition of the economy made basic sense. However, it was predicated on certain assumptions that don't necessarily hold true, especially not in 2008:
"You get paid a lot of money." There was a time in this country when Fordism reigned, when people's wages were intentionally kept high enough to buy cars, houses, food, clothes and gas, and still have a little bit left over to save, invest and pass along to the next generation. That time has become somewhat of a nostalgic dream. Outsourcing, illegal immigration, prohibitively high healthcare costs; all have contributed to job elimination and wage stagnation or depression. Not only that, but the costs of higher education, childcare, healthcare and the other traditional hallmarks of an American middle class existence are far outpacing inflation. In any case, most people are no longer getting paid "a lot of money" by any stretch of the imagination. Which brings us to the next point:
"You ought to be buying." No one has to tell Americans to buy things. For the first time since the Great Depression, we have a negative savings rate, spending 0.5 percent more than we earn. Credit card debt has nearly doubled in the last seven years and is now at $12.8 trillion. I don't know if we as a nation simply have a congenital inability to say "no" to overspending, or if, despite the rising number of two-income households, money doesn't go as far as it used to. It's probably a mixture of both. And reckless spending doesn't stop with the consumer - a cursory look at bloated executive pay or either political party's refusal to stop the pork can tell you that. In any case, when people have no money, urging them to buy more is probably unwise. Unfortunately, there isn't much choice:
"When you spend [money], it drives the economy forward." I take no issue with this as a basic statement of fact. However, it doesn't take into account that investing money also drives the economy forward, a truth that the President's party has long touted. In order to make an investment that will yield significant returns, you have to have the money to invest in the first place, and as we've already established, huge numbers of Americans are too busy trying to hold on to their middle-class status to be able to consider investing. To add to those woes, it seems that the dollar reaches new lows every day, and although its weakness increases exports, it also creates an unfavorable investment climate domestically and pushes up the cost of foreign commodities that are priced in dollars.
Apparently, even more has changed than I thought. I will leave you with one more quote from the President's Friday's speech: "The purpose of government ought to be to help the individuals." This from the folks who brought you trickle-down economics and a Corporations-R-Us tax policy that allows companies to hoard cash while laying off workers by the thousands. This from a man who said he "hadn't heard" any predictions of $4-a-gallon gas, even as that price appears at gas stations in California and Hawaii, shrinking the earnings from stagnant wages. (People with SUVs could potentially spend their entire government rebate checks from the stimulus package over three or four stops at the gas pump.) That's certainly a different tune.
The American economy is still dynamic, and it's bounced back before. But "the individuals" have been losing faith and feeling real pain for years, even when the numbers said that all was going well. When things are so obviously going badly, all that sunny optimism strains credulity. You don't have to be an economics genius to realize that.
Sarah Rosenthal '11 is here to order ribs, not write columns about the economy
