As we mercifully approach the end of the Bush Presidency, the pundits will mercilessly begin the process of evaluating his Presidency. He has failed in so many areas such as foreign policy, diplomacy or lack of it, respect for the constitution and rule of law, the economy, trade and social security to mention only a few, that it is a challenge to know where to begin. Since the President recently intoned with great bravado and chest-thumping that the fundamentals in the economy are sound, it sounds like a good place to start.
The state of the economy is the precise opposite to the way President Bush described it as the President and his economic pseudo-magicians are papering over the real problems with stop-gap measures that will eventually fail. He has basically taken a sludge hammer and smashed the foundations of the economy until its toppling over is imminent.
War spending and related expenditures combined with tax breaks have plunged the budget over the past few years into a huge deficit adding $3 trillion to the debt since he took office. As of the end of 2006, the debt stood at $9 trillion and is expected to reach #11 trillion when he leaves office. His children and grandchildren will be burdened with this debt which will lower their standard of living as more and more of their tax dollars will be needed to repay the debt.
At the end of 2006, the American trade deficit will exceed $800 billion up from $377 billion when Clinton left office. Overall, the current accounts imbalance is almost -$400 billion, by far the highest in the world. A huge part of the problem is that the U.S., and in particular, President Bush, has allowed good American jobs to move offshore to countries with low wages. The three million jobs that have been lost under Bush are being replaced, if at all, with low-paying service sector jobs. The parent company, residing in the U.S., must now import its manufactured products back into the country contributing to the trade imbalance.
The trade and budget deficits force the United States to borrow money to cover the imbalance and since Americans now have negative savings, the money must come from abroad (China, Japan etc.). In fact, the U.S. must borrow $3 billion every single day to finance its two deficits. The money is used to buy treasury bills which form the basis of foreign governments buying up American companies. Seven-Eleven is owned by the Japanese; IBM’s personal computer business is owned by the Chinese etc.
An economic and social time-bomb has been built with "unfunded liabilities" such as Social Security and Medicare. The government has committed $65 trillion (economist Lawrence Kotlikoff) to pay for these programs but without any source of funding. The ramifications of this shortfall are that these commitments are worthless and that the government is actuarially bankrupt (Lawrence Kotlikoff).
I don’t know about you, but the American economy seems to be a little weaker than "sound". Bush’s chicken attempts to cover up his mistakes will come home to roost shortly after he leaves office and is safely at his ranch enjoying the perks of retirement. Too bad that he does not have to face the economic prospects of most Americans.