Posted 6:45 pm by BOTE
Is George Bush dangerous?

Since George Bush took over as President of the US, the world has changed immeasurably. Unfortunately mostly for the worse. Terrorism has reared its ugly head again after a quiet decade, the global economy has taken a pummeling from the collapse of the telecoms bubble and the associated collapse in stock valuations and investor and consumer confidence. Unemployment and deficits have again become the prominent political issues they once were.

Now much of this is clearly not the fault of President Bush, the market correction was inevitable given the insanity of equity valuation, particularly in the US. It is also clear that 9/11 was, if not unforseeable, then at least difficult to anticipate. Although revelations from within the FBI make clear that intelligence gathering in the US probably requires a rethink, blaming the President for this inadequacy seems overly harsh.

So if we cannot hold him responsible for the initial causes of the malaise that has swept the globe, what can we say about his strategy for dealing with those causes?

Lets start with the economic climate. There is a real crisis unforlding in the US economy right now. The currrent account deficit is ballooning, as is the budget deficit. Unemployment is rising at a steady pace. States and cities across the US are struggling with collapsing revenues and are cutting into essential programmes in a struggle to balance the books. Probably the most visible of these struggles is Mayor Bloomberg's efforts to deal with a multi-billion dollar hole in New Yorks finances. These cuts, of course, hurt the vulnerable elements of US society. the poor, the aged and the young. How have things gotten so bad so quickly?

The straight answer is that, George Bush, along with his entourage of advisors(more about these guys later) decided that the best way to deal with the impending downturn was to push through an enormous package of tax cuts which disproportionately favoured the wealthier elements of US society. The package was cleverly marketed with half truths and surprising disingenuity to give the impression that it would benefit middle class America. But a congressional GAO study makes clear that the cuts massively favour the wealthy.

At the time the President claimed that he was spending a projected surplus. The insanity of the late 1990's had spilled over into US budget projections. Even Alan Greenspan at one point expressed concern that the US budget surpus might become excessive and rumours circulated about mechanisms that might allow the US government to be come a significant equity investor. All this sounds risible now but this was the Panglossian vision of the future that George Bush claimed as cover for his cuts.

That view of the world has been quickly discredited by the rapid disappearance of the projected surplus. Indeed during the last two years the projected budgetary position of the US government has deteriorated sharply and many analysts are predicting stormy waters ahead. So what has President Bush decided to do in response to this new information...

He's proposed a new tax cut! And who would have guessed? it massively favours the wealthiest elements of US society. He has proposed a dividend tax cut that will favour stock owners, and despite the broadening of equity ownership in the US, it remains the case that, broadly speaking, the richer you are the more stock you hold. The stated reasoning for this dubious decision is to initiate a rise in stock valuations that will boost investor confidence and hence investment and job creation. The marketing for the deal fails to point out the enormous public debt burden this strategy will require and that this debt is likely to crowd private sector investors out of debt markets making it more expensive for companies to invest.

The confidence argument is very tenuous. It is true that the cut may create a once off rise in the equity valuation of companies that pay dividends but this is unlikely to spark a generalised resurgence in equity valuation growth (A subject for further discussion). The truth is that the cut is another blatant attempt to transfer wealth from future lower and middle class workers to the wealthy with a vaguely plausible cover story trundled out to placate the voters of the US.

The dishonesty with which he has pursued this partisan agenda is breathtaking for a man who campaigned on a platform of honestly and integrity, even 9/11 has been exploited to divert attention from what is going on.....continued tomorrow