January 18, 2008

Bush Economic Plan Puts Dems On Defense

Annual U.S. Unemployment Rate
click for full size

That dirty word “recession” rises from the dead during every presidential election to spook voters. Partisans jam broadcasts with gloom and doom extrapolating: “Spend, spend, spend!”

This time, the trip-wires were “sub-prime home mortgages” and “high oil prices."

True, many banks shucked $10 billion in bad home-loans. Crude oil hit $103 a barrel but dropped back to $100 after President Bush begged Saudi Arabia to lighten up.

However, other economic factors also were involved.

“Irrationally exuberant” stockholders ran up the Dow Industrial Average to a breath-taking 14,198 last October -- then slithered down.

Consumers spent less than expected for Christmas. Last Friday’s closing of the Dow was 12,099.

Presidential Problems

Other second-term presidents have had to wrestle with ups and downs of the economy.

Who can forget President Bill Clinton’s: “It’s the economy, stupid!”

Or, his rueful confession in 1995 to a group of Houston donors as we drifted to a mini-recession in his final term: “It might surprise you to know that I also think I raised taxes too much.”

The efficacy of controlling a national economy through tax-and-spend policies is like speeding down an icy highway – one foot on the accelerator and the other on the brake.

President George W. Bush brought the Clinton mini-recession to a soft landing by large cuts in taxes – with Democrats screaming bloody murder all the way.

Who Is In Charge?

Today, Democrats control both houses of Congress – but not with enough margins to over-ride Bush’s vetoes of excessive spending bills.

Dems hope to elect their own president, and enough congressional seats to wipe out the Bush tax cuts.

Then, Sen. Majority Leader Harry Reid, and House Speaker Nancy Pelosi could bring back President Franklin Roosevelt’s Democrat winning policy of “tax and tax, spend and spend, elect and elect.”

The Bush Plan

In an address Friday, President Bush acknowledged the slacking economy needs “a shot in the arm.”

He called for “economic stimulus” through tax “rebates,” and “incentives to invest” totaling $145 billion. He specified “certain principles” for a get-well package:

“The plan must be big enough to make a difference in an economy as large and dynamic as ours, which means it should be about 1 percent of GDP (Gross Domestic Product.)”

That’s $140 billion by current reckoning, calculating from the $14 trillion final value of all goods and services produced by labor and property in the U.S – the largest single country GDP in the world.

Bush said:

“This growth package must be built on broad-based tax relief that will directly affect economic growth, and not the kind of spending that would have little immediate impact on our economy.

“It should include tax incentives for American businesses, including small businesses, to encourage major investment in their enterprises this year -- and direct and rapid income tax relief for the American people.”

Call For Cooperation

The President urged Congress to work with his administration “so we can deliver this boost to the economy as quickly as possible -- and make it permanent.”

Fat chance if Democrats take over the White House and/or rack up veto-proof majorities in both houses of Congress. Bush’s tax cuts are due to expire in 2011.

Bush wants to provide rebates of $800 for individual taxpayers, and $1,600 for married couples.

Democrat presidential candidates denounced these figures. They propose $500 for individuals –combined with additional money for the unemployed -- and recipients of food stamps.

However, Reid and Pelosi welcomed the President’s initiative – with changes, of course.

Employment Figures

Annual U.S. Unemployment Rate
click for full size

Chicken-Little forecasters are all atwitter over the December employment figures just released by The U.S. Department of Labor.

The unemployment rate rose to 5 percent. Run for your life, the sky is falling!

Conversely, the employment rate is 95 percent – nearly the highest its ever been.

The fact is that the average unemployment rate -- since President Truman invented the statistic 58 years ago – is 5.59 percent.

The Misery Index

U.S. Annual Misery Index
Click for full graph

Employment began nose-diving during President Carter’s Administration. Unemployment rose to 7.8 percent. Inflation rate hit 14.76 percent. Critics created a 21.98 “misery index” (click) high for Carter -- combining inflation and unemployment.

This “malaise” – so described by Carter – persisted in the first two years of the Regan administration. Unemployment hit 10.8 percent until Reagan managed to push through extensive tax cuts to boost the economy.

Reagan closed out his second term with a misery index of 9.72. Clinton achieved a 6.01 index in the last half of his second term --but closed out with a 7.29.

President G.W. Bush’s “misery” from June 2007 – November 2007 averaged 7.57 -- against Democrat efforts to cancel his tax cuts.

In short: President Bush’s 5 percent unemployment rate is super.

Democrats will have to work hard to bollix his 95 percent employment rate.

As my Grand-dad Williams used to say on Election Day: ‘Vote early and often.’

PARTING SHOTS

The Republican and Democrat debates at Des Moines, Iowa, looked like First Graders raising their hands for permission to speak.

Fred Thompson – GOP wannabe – was the winner by refusing to comply. A one-finger salute would have been too noticeable.

If a person does something you don’t like, tell him. If people don’t know what there’re doing is wrong, how can they improve?

Osama bin Laden’s son says he wants to be a “peace activist.”

One must keep ancient wisdom in mind: “Like Father, Like Son?”

By Lindsey Wilger Williams, retired newspaper publisher and syndicated columnist