clif, .. Clinton was no saint and did many things I disagree with.. but balancing the budget was not one of those. Mondale and Dole may well have been pointing to the structural weaknesses we see now (which were neither created nor necessarily ameliorated by Clinton). I would have to go back and check out their specific arguments.
When I look at Democrat and Republican, I see the Democrats as unfortunately amorphous, but at least willing to experiment. I see the Republicans as clinging to the hoary supply-side fantasies of Reagan (which, if you look at Reagan's real record you will see him as less than absolute -- he raised taxes, baby, yes indeedy).
If you look beyond the election cycles.. current doomsayers pinpoint the beginning of the current recession either in the dot-com bubble recession (presided over by Bush but the run-up under Clinton).. or a dirittura
beginning during the Reagan years!
Remember even Bush the First decried "voodoo economics"!?
What's becoming clear with all these recent Fed machinations.. is that things can somewhat
be pushed/pulled/staved off.. by the admin. and the powers that be. They are holding on with their fingernails right now to get the full brunt of the current crisis to hit under the next admin., whoever may be at the helm. Remember, W is preoccupied with "legacy" (allow me to laugh heartily yet bitterly).
The fact that the media exposure of the economy's being a disaster happens to fall in an "election year".. well, that's a convenient TV-pundit-type excuse.. supposedly "significant" elections happen every two years.
Terror alerts happen to come up every two years just before elections nowadays, too.... Economic cycles take longer than two years to play out, though, especially the systemic kind that we are seeing.
I loathe the current occupant of the WH, but if someone had asked me in 2000 whether the US economy were in terrible shape, I probably would have said "not really". If someone asked me in 2004: probably, "not really"... (I mean, I know: deficit bad, war spending bad..who will pay? etc. ... but it was all abstract.) This because I had a paid-off house, no tech stocks, and was not paying attention.
What I have been reading lately gives me a new perspective: what we have seen is UNPRECEDENTED leverage.. UNPRECEDENTED Fed interventions.. crazy private bailouts happening over the weekend with unregulated mystery collateral that will be forever(?) SECRET.. the G7 meeting 'unofficially'(?) and convening the heads of all the Investment Banks..
The public, mediatical, face of it all has a bit of worry, but also lots of soothing. Thank God i'm not exposed to it 24/7, but the irritation here on the board seems to be because there's a minority gloom contingency, any gloom whatsoever.. when what irritates ME is the majority bull contingency, for which I see no rational basis at this point in time.
The way I see it (and I try to hammer this into Right-Wing MBA Sis' head to no avail..):
1.) the USA actually produces ever less and less on an historical basis, yet personally and as a country we are more and more in debt (Cheney: "deficits don't matter")
2.) some measure of increased 'product' was booked during the dot com years.. some of this was actually productive, but the majority not. When that became obvious: recession.
3.) Then people looked for new places to invest, and with low interest rates homes became attractive. So did other debt-backed spending. The gov. measures that were supposed to spur lending and convenience for business did so in spades for consumers. This despite the fact that consumers were borrowing not only to make steps up "the ladder".. but felt they needed to borrow just to keep even with the TRUE Cost of Living.
4.) GDP kept increasing, but only because of the bloat in home "values", mortgages and consumer credit. "Financial services" became 40% of GDP, I believe.. and consumer-related GDP 70%. This was also somehow "productive"... in the way that if I have to pay for pointless packaging, that's productive.. and so is the garbage service that hauls it away.. and so is the space taken up in the landfill... all positive!! There's NEVER a downside! Huzzah! House-swapping, mortage-selling, house-financing became ever more of GDP.
5.) Unnaturally low interest rates meant people could afford "more" house on the same monthly payment. So housing prices rose to meet that threshold.. which was itself further distorted through fraud, wishful thinking, and the fact that banks and mortgage brokers kept making points and commissions on the fervid churn.
6.) But we were "rich"!! The assets on paper were as phenomenal as they were fake.
7., 8., 9., 10.) Plus all the other fun stuff like under-reported real CPI.. under-reported real joblessness (not unemployment measured by who actually signs up for immediate benefits.. JOBLESSness... more than double the unemployment figures).. then ever more people w/o health ins., health ins. covering less and less despite often double-digit premium increases.. now gas doubles in price, now food doubles in price.
Somehow, this all worked great and people were supposedly happy until someone balked. The goat. The Charlie Brown of the faccenda. "Ya know... I'm not suuuure that house is really worth $1.2 million.. 15+x my annual salary"... or .. "ya know, I'm not suuure your AAA-rated MBS/CDO/CLO is really all that and a bag of chips".
Real wages are where they were in the 1970s. The consumer can no longer be counted on to pull the economy forward. The fact that they did for 30 years is due to increased indebtedness otherwise known as reduced solvency. There's no more blood in this turnip.
Lucy yanked the football away.
What's happening now is that:
- housing will continue to go down in most areas for a while (10-20% min. from here)
- foreclosures will continue to rise (unless artificially halted by wrong-headed bi-partisan legislation)
- credit will remain frozen or at best sclerotic for who knows how long
- HELOCS, then commercial real estate will be seen as following the same trends as mortgages (commercial vacancies are huge in many places), putting MORE pressure on banks. We haven't seen this hit yet.
- municipalities will have serious problems due to drastically reduced prop. tax base; some are already on the verge of BK, others will raise prop. taxes to the point of real pain and possible revolt. Oh, will they be able to meet their muni bond obligations? Who knows?
-People have already stopped spending, generally speaking. Which leads to less store traffic, and more empty CRE in a downward spiral. Still more service-job layoffs and thus still more potential foreclosures.
I fear deflation/depression.
Obviously I don't/can't follow the full US media panoply. But I get wind that it's Very Very Very Serious to talk about Obama drinking juice rather than coffee. And that the pres. being directly involved with torture talks doesn't matter, but Obama noting that some people are "bitter" could Rend the Country Asunder.
I fear deflation/depression, not because of the current occupant of the WH exclusively, but because of the "all-gain/no-pain" supply-side fantasies this admin. assiduously harbored, whereby cutting taxes supposedly increased tax revenue. And where excessive stimulus rate cuts never had any down side.
Don't forget the most prophetic comment of the Bush era:
In the summer of 2002, after I had written an article in Esquire that the White House didn't like about Bush's former communications director, Karen Hughes, I had a meeting with a senior adviser to Bush. He expressed the White House's displeasure, and then he told me something that at the time I didn't fully comprehend -- but which I now believe gets to the very heart of the Bush presidency.
The aide said that guys like me were ''in what we call the reality-based community,'' which he defined as people who ''believe that solutions emerge from your judicious study of discernible reality.'' I nodded and murmured something about enlightenment principles and empiricism. He cut me off. ''That's not the way the world really works anymore,'' he continued. ''We're an empire now, and when we act, we create our own reality. And while you're studying that reality -- judiciously, as you will -- we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors . . . and you, all of you, will be left to just study what we do.''
We've sold what integrity was left in the "full faith and credit" of the US Government.. to Bear Stearns/JPM. For who knows what. 30 pieces of silver? Don't ask, don't tell. Maybe not even that much. Could be $29 billion. Could be more. Could be as much as MINUS $300 billion or LESS. Add some more bank/non-bank clients and the bottom is virtually endless. The US government is now backing random mysterious hedge funds and is on the hook as such. The Fed is talking about issuing its own AUTONOMOUS debt. Who will buy it?
It's not important. We're innumerate.
The US is trying fiercely to remain FAR from "the discernable reality".
The economy, the war, our whole political system is "faith-based".
Divorced from the truth and from reality.
I don't know what The Powers That Be are counting on to save us.. the Rapture?
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
Ludwig von Mises
or more succinctly, "Depression is the aftermath of credit expansion."
As for supply-side economics: Been there, done that, and it sucked.
see also: (unclear who to attribute this to; paraphrasing) "The definition of insanity is doing the same thing over and over and expecting a different result."
Of THIS I think we can accuse the current admin. in spades.