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DLW
Registered Member
Date Joined Apr 2003
Total Posts : 2457
| Posted 9/3/2003 6:49 AM (GMT -6) |   | an economist attributes this to the slowing of the economy.
The slowing economy may be due to the ineffectiveness of tax-cuts for the wealthy in ecouraging more investment, especially when most industries have an over-capacity already.
And so, the Bush Administration's macro-mismanagement of the economy seems to be at fault for so many more people becoming legally "poor".
dlw
Census Shows Ranks of Poor Rose by 1.3 Million
By LYNETTE CLEMETSON
ASHINGTON, Sept. 2 — The number of Americans living below the poverty line increased by more than 1.3 million last year, even though the economy technically edged out of recession during the same period, a Census Bureau report shows.
The spike in economic hardship hit individuals and families alike. The report indicated that the total percentage of people in poverty increased to 12.4 percent from 12.1 percent in 2001 and totaled 34.8 million. At the same time, the number of families living in poverty went up by more than 300,000 in 2002 to 7 million from 6.6 million in 2001.
The number of children in poverty rose by more than 600,000 during the same period to 12.2 million. The rate of increase in children under age 5 jumped a full percentage point to 19.8 percent living below the poverty line from 18.8 percent a year earlier.
"These numbers provide a moving picture of population changes," said Stephen Buckner, a spokesman for the Census Bureau. "It's more timely data that should allow decision makers to make more informed judgments."
The new data, some analysts say, may raise the level of scrutiny on a variety of federal programs like welfare reform and the recently enacted increases in child tax credits, which excluded about 6.5 million low-income working families with children.
Stuart Butler, an economist with the Heritage Foundation, a Washington policy institute, called the data "a fairly predictable product of the slowing economy."
"The issue is, what do you do to continue to strengthen the economy?" Mr. Butler said. "You take the necessary steps to encourage people to move back into the work force, plus making sure we don't do anything to weaken the welfare reforms put in place some years ago."
Robert Greenstein, executive director of the Center on Budget and Policy Priorities, said, "Some people had drawn a Pollyanna-ish conclusion that somehow changes in the welfare system would insulate children from increases in poverty during economic slumps."
"These new data show that that assumption is flatly incorrect." Mr. Greenstein said. "It also underscores the mistake in federal tax policies that exclude the very families who are hurting the most."
The data, released today, is found in the Census Bureau's American Community Survey, a rolling month-to-month sample of the social and economic makeup of 742,000 households in 1,239 counties across the country.
The bureau's Current Population Survey, to be released at the end of September, still functions as the official barometer for measuring national income and poverty estimates. It is also used by the Labor Department to calculate the monthly unemployment rate. But the American Community Survey, which the Census Bureau began testing nationally in 2000, is eventually intended to replace the census long form in representing the most detailed sample of American households.
Assessed annually, rather than every 10 years like the current long form, the Community Survey, census officials said, should enable policy makers to better determine needs in allocating federal, state and local financing for a variety of services. The American Community Survey also calculates for much smaller geographic areas than the Current Population Survey, allowing more focused analysis.
The adjusted poverty line figures for 2002 have yet to be released. But in 2001, a family of two adults and two children would have to have made less than $17,960 a year to be ranked as living below the poverty level. For a single person under the age of 65 the poverty line in 2001 was roughly $9,200 a year.
Niebuhr thought that sustained moral energy in politics depended on religion's power to mobilize reason along with self-transcending love. The prophetic tradition, meanwhile, gave Jews and Christians some protection against the temptation to identify their social causes with God's will. Lincoln's second inaugural address expressed the prophetic insight, "The almighty has His own purposes." | | Back to Top | | |
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honorman
Registered Member
Date Joined Oct 2002
Total Posts : 1137
| Posted 9/3/2003 7:56 AM (GMT -6) | | | | |
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DLW
Registered Member
Date Joined Apr 2003
Total Posts : 2457
| Posted 9/3/2003 8:27 AM (GMT -6) | | quote:
Originally posted by Blood Washed Heretic
Considering that God pretty explicitly points the blame at those who make the laws in Isaiah 10, I doubt He's talking about the church.
Not that the church is innocent, either. I don't hear many sermons on social action these days. Evidently, conservangelicals just ignore the prophets and Jesus on this matter.
Not surprising, since we gave up on teaching "the whole counsel of God" years ago...
Well, we got whip-lash somewhat from the whole Social Gospel movement a while back, especially after the prohibition fiasco. And, often the economic liberals were very antagonistic to faith, and used rather manicheistic language that was inappropriate and failed to account for the advantages of a capitalistic system and how the potential for evil/corruption exists in all forms of governance public and private, secular and ecclesiastical.
dlw
Niebuhr thought that sustained moral energy in politics depended on religion's power to mobilize reason along with self-transcending love. The prophetic tradition, meanwhile, gave Jews and Christians some protection against the temptation to identify their social causes with God's will. Lincoln's second inaugural address expressed the prophetic insight, "The almighty has His own purposes." | | Back to Top | | |
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honorman
Registered Member
Date Joined Oct 2002
Total Posts : 1137
| Posted 9/3/2003 9:51 AM (GMT -6) | | | | |
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DLW
Registered Member
Date Joined Apr 2003
Total Posts : 2457
| Posted 9/3/2003 10:06 AM (GMT -6) | | quote:
Originally posted by honorman
Blood: while I understand your point, you are quoting an Old Testament dealing with a government directly answerable to God. The United States is not. And if you are going to critise the US for their faults, you might want to start critising TRULY horrible governments around the world which are far more evil than the US. Remember our animals eat better than most people do in foreign countries.
Oh so because other gov'ts are worse, we shouldn't criticize our own? And, just because gov't ain't directly answerable to God, don't mean that we shouldn't seek to change parts of it because of our belief in God.
quote:
What bothers me is this attitude of critising the government for all the bad that comes up, when the NT reflects that it is the church's responsibility to care for our neighbors. No matter how the government is that doesn't give us the right to forget our responsibilities as Christians. Besides, poverty is relative. With our poverty, people are fed.
The NT reflects a praxis of the Christian Church under the non-democratic Roman Empire. What is right conduct now when we have a democracy may be different.
quote:
I am not one like you, DLW, who feels that every horror of the US life resides in the fault of government officals and their policies. If we, as the body of Christ, fully did our jobs, what the government does would be irrelevant.
Yes but gov't officials do have authority and their decisions do have consequences that go above and beyond what we can accomplish. We the body of Christ are fallen sinners. As such, we will never contribute enough to help others on our own. We face limitations and opportunity costs of our own. As such, there is room for us doing more than we can through charity by seeking to change some of the gov't policies. Rebecca Blank, a Christian Economist, has a chapter in her book, "It takes a Nation" (Yes, it is similar to a much, much worse book by Hillary Clinton, but it is much, much better.) where she defends why it is important to take action to fight poverty through gov't agencies.
quote:
Finally, I would be interested in what laws, Blood, you feel have been enacted lately that are truly evil.
The tax-cuts targeted against the rich, in a time of over-capacity, failed to get the economy on the rebound and thus permitted the impoverishment of several individuals within our country and will have spill-over effects on many other countries. This will also impede our ability to fund doing right by Iraq, which is essential to the stability and the lives of many in the Middle East.
This is truly evil and irresponsible. Professionally speaking, there were no objective estimates of what good such a tax was s'posed to accomplish. They could have been randomized, whereby a subset of the relevant population was given a tax-break or a tax-increase and then their relevant behavior was observed in the next period. That would let us know if the taxes would have the desired behavioral effect, instead of just the redistributional effect.
dlw
Niebuhr thought that sustained moral energy in politics depended on religion's power to mobilize reason along with self-transcending love. The prophetic tradition, meanwhile, gave Jews and Christians some protection against the temptation to identify their social causes with God's will. Lincoln's second inaugural address expressed the prophetic insight, "The almighty has His own purposes." | | Back to Top | | |
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honorman
Registered Member
Date Joined Oct 2002
Total Posts : 1137
| Posted 9/3/2003 10:59 AM (GMT -6) | | | I am deleting all my words previously written | | Back to Top | | |
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DLW
Registered Member
Date Joined Apr 2003
Total Posts : 2457
| Posted 9/3/2003 11:27 AM (GMT -6) | | quote:
Originally posted by honorman
It is the luxury of Christians within these US to, from my standpoint, whine about the US without praising the benefits that they themselves possess under it. If it is evil here, DLW, you benefit from it. I do advocate critising our government, but not without praising it as well. And recognizing the wonders of it, as well. Try living in a foreign country for a couple of years (not one, by the way, DLW, that you can jump back into the US from).
Oh, it is a bit of a jump from here in Southern Mexico to the US.
I praise the fact that I can criticize my gov't. I praise the fact that we are innovative and that we don't have a command-and-control gov't like is common in Europe.
I praise the Christianity of the US for not having shriveled up and died like it did in Europe, almost. I praise its historic autonomy from vested interests and gov't. I long for a return to that autonomy understood as neither blessing nor condemning either party as God's instrument.
quote:
"We will never be able to contribute enough on our own..." not with that attitude and lack of responsibility toward your neighbor. As long as Christians look beyond themselves to other "higher" powers to do the job God called them to do, the job will never get done. Stop trusting in the government to do the job we were called to do.
Gee but the Gov't isn't an autonomous entity. It is an arena of conflict whereby differences are compromised over or worked out. As such, part of the job we must do is to participate in the process of deciding whose interests will be supported by the gov't.
dlw
Niebuhr thought that sustained moral energy in politics depended on religion's power to mobilize reason along with self-transcending love. The prophetic tradition, meanwhile, gave Jews and Christians some protection against the temptation to identify their social causes with God's will. Lincoln's second inaugural address expressed the prophetic insight, "The almighty has His own purposes." | | Back to Top | | |
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DLW
Registered Member
Date Joined Apr 2003
Total Posts : 2457
| Posted 9/3/2003 12:18 PM (GMT -6) | | | | |
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Iconoclast
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Date Joined Oct 2001
Total Posts : 1227
| Posted 9/4/2003 2:21 AM (GMT -6) | | DLW
The slowing economy may be due to the ineffectiveness of tax-cuts for the wealthy in ecouraging more investment, especially when most industries have an over-capacity already.
And so, the Bush Administration's macro-mismanagement of the economy seems to be at fault for so many more people becoming legally "poor".
Iconoclast
DLW, you offer scant to zero evidence for your conclusion here. In a complex adaptive system the variables that lead to any particular macro process are nearly incalculable. We will not be able to really come to any conclusions on what the Bush administrations policies did for many years to come if ever. The core issue in this particular cycle is that company's balance sheets became fundamentally week in the crazy boom years that preceeded us (The Clinton years). Corporate execs felt a need to repair these balance sheets before doing any serious capital spending and THIS is what has caused the recovery to be so slow. How do you get corporate execs to untie the purse strings of capital spending when their balance sheets are weak? Bush and his advisors made a call on how to best do this without having other unintended consequences. We have no idea all the issues they looked at and debated. How can we even begin to make some sort of pronouncement on whether their decisions were good decisions or not without understanding this AND without understanding the expected timeframes these decisions were expected to affect the economy.
Furthermore, it is standard understanding in any complex adaptive system that "decision quality" CANNOT be measured based on outcome. Outcomes are inherently probabilistic due the free-will involved in the system. "Decision quality" is measured by a set of factors related to quality of input, quality of implementation, quality of the probabilistic model used and so forth. Bush's decision may have been the most brilliant, well thought out, well researched and best intended decision in the world AND the outcome may still have been less than desired due to probability inherent in the system. It is like blaming a parent BECAUSE they have an errant child.
What IS clear is that our system of decision making is the very best in the world. I totally stand by Bush's approach to decision making because I believe it is in-line with our system of decision making that has proven itself to be world class.
thanks,
Iconoclast
"The benefit overran the merit the first day, and has overrun the merit ever since. The merit itself, so-called, I reckon part of the receiving." - Ralph Waldo Emerson | | Back to Top | | |
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Iconoclast
Registered Member
Date Joined Oct 2001
Total Posts : 1227
| Posted 9/4/2003 2:34 AM (GMT -6) | | DLW
The slowing economy may be due to the ineffectiveness of tax-cuts for the wealthy in ecouraging more investment, especially when most industries have an over-capacity already.
Iconoclast
Actually the "slowing economy" is clearly due to the business cycle. The slowing economy started in 2001 and was a natural reaction to the boom economy that we had for so long. We have not yet solved the problem of the business cycle, although we have made HUGE progress in knowing what REALLY exacerbates it (trade barriers, increasing taxes, inflationary policy etc...)
To blame Bush for ANYTHING related to the "slowing economy" makes zero sense unless you mean the first president Bush. Why not blame Clinton for this? The boom and resultant bubble happened on his watch. Why didn't Clinton make Greenspan poke a big old pin in the bubble?
I do NOT blame Clinton OR Greenspan for any of this. Personally, I think Greenspan did a brilliant job of not doing anything RASH. He wanted to poke a big pin the bubble years ago (remember the "irrational exuberance" remark) but did not do so. Who knows what that might have caused. In my view we are having a remarkably mild reaction to such a huge phenomenon as the bubble we just went through. Greenspan just slowly, slowly, slowly, counter-steered the economy to avoid putting us into a chaotic spin on the freeway with oncoming traffic. The recession we just went through has been utterly mild compared with times past. IF it slowly, slowly, slowly comes back THIS will have been a HUGE success. IF it quickly, quickly, quickly comes back then we may be in for some more rocky roads in the very near future. A slow but sure recovery will lead to many years of growing prosperity a quick recovery may cause all the problems of an overcorrection.
thanks,
Iconoclast
"The benefit overran the merit the first day, and has overrun the merit ever since. The merit itself, so-called, I reckon part of the receiving." - Ralph Waldo Emerson | | Back to Top | | |
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DLW
Registered Member
Date Joined Apr 2003
Total Posts : 2457
| Posted 9/4/2003 5:38 AM (GMT -6) | | quote:
Originally posted by Iconoclast
Iconoclast
DLW, you offer scant to zero evidence for your conclusion here. In a complex adaptive system the variables that lead to any particular macro process are nearly incalculable. We will not be able to really come to any conclusions on what the Bush administrations policies did for many years to come if ever.
Yes, but that is because with the changes in the tax-code system, a lot of other stuff happened. However, the theory says that the tax-cuts increased the return to profits for shareholders. The potential for higher profits is s'posed to encourage more investment. However, it was widely debated and nearly unanimously held that in the wake of our very long period of economic growth, that most industries were at over-capacity. Ie., because of past investments in the good years, they didn't have need of new machinery, factories, office-space. They weren't even using all of the capacity they had. In such a setting, tax-incentives that are s'posed to lead to more investment are unlikely to have anything more than a redistributional effect. And it is well known that richer people spend a smaller fraction of their disposable income and so the redistribution is unlikely to have kickstarted the economy much.
More equitable tax-cuts would have worked better, creating demand for products and preventing layoffs or a general decline in labor demand, which in turn would have prevented so many people from crossing the poverty line...
As for the complexity-stuff, there are ways to try to measure the impact of policies better through randomization. I.e., not offering all the tax-cuts or increases at the same level to everyone, but observing carefully the differences in behavior between the treatment and control groups so as to try to infer the impact of the change in policy... This is used here in Mexico quite a bit to evaluate the effectiveness of cash-transfer programs in improving health and education outcomes.
quote:
The core issue in this particular cycle is that company's balance sheets became fundamentally week in the crazy boom years that preceeded us (The Clinton years). Corporate execs felt a need to repair these balance sheets before doing any serious capital spending and THIS is what has caused the recovery to be so slow. How do you get corporate execs to untie the purse strings of capital spending when their balance sheets are weak? Bush and his advisors made a call on how to best do this without having other unintended consequences. We have no idea all the issues they looked at and debated. How can we even begin to make some sort of pronouncement on whether their decisions were good decisions or not without understanding this AND without understanding the expected timeframes these decisions were expected to affect the economy.
tax-cuts usually do have a longer-term timeframe. That is why they are bad instruments for trying to fight a recession.
I believe Bush Administration and the Republicans failed to support requiring Corporations to itemize executive stock-options in corporation's financial reports. After the public furor/attention to the Enron scandal subsided, they defanged a lot of the measures that were suppposed to change things and they caved into corporate lobbying pressure on the itemization point, which was likely the most important reform that was needed.
This, undoubtedly weakened confidence in our economy. But tax-cuts on capital gains taxes are an expensive instrument to use to prevent future enron abuses. It would have been less expensive for the country as a whole to just mandate the itemization.
quote:
Furthermore, it is standard understanding in any complex adaptive system that "decision quality" CANNOT be measured based on outcome. Outcomes are inherently probabilistic due the free-will involved in the system. "Decision quality" is measured by a set of factors related to quality of input, quality of implementation, quality of the probabilistic model used and so forth. Bush's decision may have been the most brilliant, well thought out, well researched and best intended decision in the world AND the outcome may still have been less than desired due to probability inherent in the system. It is like blaming a parent BECAUSE they have an errant child.
Well, most major tax-cuts have been appropriately labelled by George Bush Sr. as Voodoo Economics. The reason is that since we don't have variation in the tax-code, it is hard to measure what the likely response to the change in incentives from a tax-cut or tax-incentive will be. I believe Tim Penny's book "The Fifteen Biggest Lies in Politics" describes his experiences as a congressman in that the distributional consequences of tax-code changes are far more certain than the incentive effects.
So speaking professionally, the likely immediate effect of the change in incentive was not quantified well. As such, it was a dangerous move for the overall economy for the tax-cuts to be made at the same time as the overly-optimistic projections of surplus were being turned into deficits.
But then again, the Bush Administration probably at root didn't make the tax-cuts because of its incentive effects. Distribution, serving their base of economic conservatives who have responded by contributing so generously to the Republican Party, was likely the main intention.
[quote]What IS clear is that our system of decision making is the very best in the world. I totally stand by Bush's approach to decision making because I believe it is in-line with our system of decision making that has proven itself to be world class.
thanks,
Iconoclast
Paul Krugman had an article last Fall titled, "For Richer". Here he traced out how the pay of top-executives rose at a very high rate in more recent years and, paradoxically, the economic growth rate of the US was historically higher when we paid our executives less.
As stated before, one could be better informed about the likely consequences of said tax-cuts if they were initially randomized and their effects were measured. Carl Levine of Michigan proposed a bill requiring that any major tax-cut change potentially affecting the federal gov'ts revenue a lot be subject to randomization testing initially. It was scuttled by the Republican Leadership, who realized that such would likely make it harder for them to get massive tax-cuts for the wealthy.
Politics makes me sick, but the fact that there is complexity in the Macro-economy doesn't invalidate some of the basic common-sense notions of Macroeconomics.
dlw
Niebuhr thought that sustained moral energy in politics depended on religion's power to mobilize reason along with self-transcending love. The prophetic tradition, meanwhile, gave Jews and Christians some protection against the temptation to identify their social causes with God's will. Lincoln's second inaugural address expressed the prophetic insight, "The almighty has His own purposes." | | Back to Top | | |
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DLW
Registered Member
Date Joined Apr 2003
Total Posts : 2457
| Posted 9/4/2003 6:04 AM (GMT -6) | | quote:
Originally posted by Iconoclast
DLW
The slowing economy may be due to the ineffectiveness of tax-cuts for the wealthy in ecouraging more investment, especially when most industries have an over-capacity already.
Iconoclast
Actually the "slowing economy" is clearly due to the business cycle. The slowing economy started in 2001 and was a natural reaction to the boom economy that we had for so long. We have not yet solved the problem of the business cycle, although we have made HUGE progress in knowing what REALLY exacerbates it (trade barriers, increasing taxes, inflationary policy etc...)
I believe this is still debated among professional macro-economists. Macro-economic data is always in the form of time-series analysis. When you look at changes over time, there is always a lot of stuff changing at the same time and so its possible to attribute fluctuations to more than one set of variables. There just isn't that much power in the data-series...
quote:
To blame Bush for ANYTHING related to the "slowing economy" makes zero sense unless you mean the first president Bush. Why not blame Clinton for this? The boom and resultant bubble happened on his watch. Why didn't Clinton make Greenspan poke a big old pin in the bubble?
We had a very brief slowing of the economy that was arrested. The question at hand is why is our macroeconomy currently slowing so much. My point was that alternative macro-policies than the tax-cuts the Bush Administration enacted would have served to increase demand and produce more job-creation in the short-run.
This is not rocket-science!
quote:
I do NOT blame Clinton OR Greenspan for any of this. Personally, I think Greenspan did a brilliant job of not doing anything RASH. He wanted to poke a big pin the bubble years ago (remember the "irrational exuberance" remark) but did not do so. Who knows what that might have caused. In my view we are having a remarkably mild reaction to such a huge phenomenon as the bubble we just went through.
Remarkably mild, except to the 1.3 Million more poor people... .
Bubbles ought to poked. They foment too much instability and the gains go too much to the wealthy controllers of firms who know when to bail-out.
quote:
Greenspan just slowly, slowly, slowly, counter-steered the economy to avoid putting us into a chaotic spin on the freeway with oncoming traffic. The recession we just went through has been utterly mild compared with times past. IF it slowly, slowly, slowly comes back THIS will have been a HUGE success. IF it quickly, quickly, quickly comes back then we may be in for some more rocky roads in the very near future. A slow but sure recovery will lead to many years of growing prosperity a quick recovery may cause all the problems of an overcorrection.
I'll share with you a dirty secret of the economics profession. The instruments that Greenspan has really aren't that powerful. However, the trust people put in him over the perception that he is guiding the macroeconomy prevents panic and makes the overall macroeconomy far more stable.
The future of our economy/country rests on us being able to deal with a large number of serious issues we have looming in our immediate future. To adequately address these issues in a democratic manner, we need to renew the quality of democracy by finding a way to keep the cultural wars out of our politics.
Improving democracy matters, because the perception that the system is equitable is important for people to be willing to work hard at their jobs, go to school instead of trying to game the system and make money through dishonest means...
dlw
Niebuhr thought that sustained moral energy in politics depended on religion's power to mobilize reason along with self-transcending love. The prophetic tradition, meanwhile, gave Jews and Christians some protection against the temptation to identify their social causes with God's will. Lincoln's second inaugural address expressed the prophetic insight, "The almighty has His own purposes." | | Back to Top | | |
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honorman
Registered Member
Date Joined Oct 2002
Total Posts : 1137
| Posted 9/4/2003 6:23 AM (GMT -6) | | | and I would ask that you consider that I was never here. I would rather my words not be associate with this discourse. If possible I would ask that you delete my words from any of your responses, but that is up to you. If you do not, I disavow them. They no longer represent me. | | Back to Top | | |
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DLW
Registered Member
Date Joined Apr 2003
Total Posts : 2457
| Posted 9/4/2003 6:31 AM (GMT -6) | | quote:
Originally posted by honorman
If politics makes you sick, you must be sick a lot . Politics doesn't make me sick, its just like a lot of other things...some good, some bad.
more bad than good, most of the time... Unless manipulating people from understanding the basic issues that are being decided in a given policy dispute is good.
quote:
But DLW, government is not a instanteous thing and as Icon pointed out, you can't expect to know how the Bush tax cuts with effect us tomorrow, when they happened yesterday. Government isn't about instant gradification no matter how much you want it, nor is it that easy to solve and talk about, no matter how much you want to make it the villian.
Yes, but the thing is the Bush Admin. advertised the cuts as being meant to prevent a recession and having great effects on long-run growth, but this only works if our economy is in need of encouragement of more investment by companies, which it wasn't.
quote:
Regardless, after reading you awhile, it seems your preconceptions dictate how you read things. You might want to step out of your box for a little while.
Yes, bubbles ought to be poked, even our own sometimes...
Honordude, I have a Phd in Economics. I've been studying Economics for the past ten years of my life and before that avidly read about such issues.
I'd kindly ask you to take that plank out of your eye before you accuse me of letting my preconceptions blind me.
Your position is easily summarized as an apologetia for private governance.
Icon's position is easily summarized as saying the system is complicated so we can't know for sure what's going on but lets trust the Bush Administration's wisdom anyways...
My position is easily summarized as saying that tax-cuts are not meant to manage the macro-economy and their effectiveness is debatable, but that other measures could have in fact prevented the economy from slowing as much as it has.
dlw
Niebuhr thought that sustained moral energy in politics depended on religion's power to mobilize reason along with self-transcending love. The prophetic tradition, meanwhile, gave Jews and Christians some protection against the temptation to identify their social causes with God's will. Lincoln's second inaugural address expressed the prophetic insight, "The almighty has His own purposes." | | Back to Top | | |
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DLW
Registered Member
Date Joined Apr 2003
Total Posts : 2457
| Posted 9/5/2003 6:27 AM (GMT -6) | | While Krugman's assessment that GWII had nothing to do with terrorism is incorrect. It is correct to say that Iraq did not likely pose an immediate security threat against the US.
However, the below article accurately sums up the mainstream analysis of the macroeconomic effect of the Bush Administration tax-cuts.
dlw
The China Syndrome
By PAUL KRUGMAN
funny thing happened this week: the Bush administration, with its aggressive unilateralism, and its contempt for diplomacy and international institutions, suddenly staked its fortunes on the kindness of foreigners.
All the world knows about the Iraq about-face: having squandered our military strength in a war he felt like fighting even though it had nothing to do with terrorism, President Bush is now begging the cheese-eaters and chocolate-makers to rescue him. What may not be equally obvious is that he's doing the same thing on the economic front. Having squandered his room for economic maneuver on tax cuts that pleased his party base but had nothing to do with job creation, Mr. Bush is now asking China to help him out.
Not, of course, that Mr. Bush admits to having made any mistakes. Indeed, Mr. Bush seems to have a serious case of "l'état, c'est moi": he impugns the patriotism of anyone who questions his decisions.
If you ask why he diverted resources away from hunting Al Qaeda, which attacked us, to invading Iraq, which didn't, he suggests that you're weak on national security. And it's the same for anyone who questions his economic record: "They tell me it was a shallow recession," he said Monday. "It was a shallow recession because of the tax relief. Some say, well, maybe the recession should have been deeper. That bothers me when people say that."
That is, if you ask why he pushed long-term tax cuts rather than focusing on job creation, he says you wanted a deeper recession. It bothers me when he says that.
Of course, nobody says the recession should have been deeper. What critics argued — correctly — was that Mr. Bush's economic strategy of tax cuts for the rich, with a few token breaks for the middle class, would generate maximum deficits but minimum stimulus. "They" may tell him it was a shallow recession, but the long-term unemployed won't agree.
And the fact that even with all that red ink the recovery is still jobless should lead him to wonder whether he's running the wrong kind of deficits.
Instead, however, he's decided to plead with the Chinese for help.
Admittedly, it didn't sound like pleading. It sounded as if he was being tough: "We expect there to be a fair playing field when it comes to trade. . . . And we intend to keep the rules fair." Everyone understood this to be a reference to the yuan, China's supposedly undervalued currency, which some business groups claim is a major problem for American companies.
By the way, even if the Chinese did accede to U.S. demands to increase the value of the yuan, it wouldn't have much effect unless it was a huge revaluation. And China won't agree to a huge revaluation because its huge trade surplus with the U.S. is largely offset by trade deficits with other countries.
Still, even a modest currency shift by Beijing would allow Mr. Bush to say that he was doing something about the loss of manufacturing jobs other than appointing a "jobs czar." And so John Snow, the Treasury secretary, went off to Beijing to request an increase in the yuan's value.
But he got no satisfaction. A quick look at the situation reveals one reason why: the U.S. currently has very little leverage over China. Mr. Bush needs China's help to deal with North Korea — another crisis that was allowed to fester while the administration focused on Iraq. Furthermore, purchases of Treasury bills by China's central bank are one of the main ways the U.S. finances its trade deficit.
Nobody is quite sure what would happen if the Chinese suddenly switched to, say, euros — a two-point jump in mortgage rates? — but it's not an experiment anyone wants to try.
There may also be another reason. The Chinese remember very well that in Mr. Bush's first few months in office, his officials described China as a "strategic competitor" — indeed, they seemed to be seeking a new cold war until terrorism came along as a better issue. So Mr. Bush may find it as hard to get help from China as from the nations those same officials ridiculed as "old Europe."
Sic transit and all that. Just four months after Operation Flight Suit, the superpower has become a supplicant to nations it used to insult. Mission accomplished!
Niebuhr thought that sustained moral energy in politics depended on religion's power to mobilize reason along with self-transcending love. The prophetic tradition, meanwhile, gave Jews and Christians some protection against the temptation to identify their social causes with God's will. Lincoln's second inaugural address expressed the prophetic insight, "The almighty has His own purposes." | | Back to Top | | |
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