George W. Bush looked into the TV camera, Tuesday morning [July 15] and tried to assuage the fears of about 300 million Americans who believed they were in the middle of a Recession.
"The economy is growing," said the President. "Productivity is high," he told us. "Trade's up. People are working," he said. In the Bush White House, the "R Word" is just a myth. Of course, the man who once wanted to be known as the Compassionate Conservative did say he knew "It's been a difficult time for many American families."
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"Difficult" doesn't even begin to describe what has happened to Americans the past seven years.
Within hours of the President's speech, a less optimistic Ben Bernanke, chair of the Federal Reserve, told the Senate Banking Committee that inflation is high and "seems likely to move temporarily higher in the near term." In sworn testimony, he told the senators that "Many financial markets and institutions remain under considerable stress, in part because of the outlook for the economy and thus for credit quality, remains uncertain." Market Watch reports that over the past year, "inflation at the wholesale level gained 9.2%- the largest year-over-year gain since June 1981."
On the day that the President assuaged and the Federal Reserve chairman testified, General Motors announced it would freeze job hirings in several areas, lay off salaried workers, suspend shareholder dividends, and borrow up to $3 billion. Six weeks earlier, GM announced it was closing four plants; on the day the President spoke, GM announced four more plant closings. The nation's largest corporation, which saw a 16 percent sales decline in the first half of the year, announced that it was giving retired workers a slight pension increase but was cutting health care benefits.
About 8.5 million Americans actively seeking work are unemployed, an increase of about 21.4 percent over one year ago, according to the Bureau of Labor Statistics (BLS). The unemployment rate of 5.5 percent is up from 4.6 percent a year ago. More important, about 1.5 million of the 8.5 million unemployed have been unemployed at least six months, a 37 percent increase over the past year, according to the BLS. Not included in the numbers are the "1.6 million people who are 'marginally attached' to the workforce, who had looked for work in the previous 12 months, but not in the last month," according to Andre Damon of Global Research. Damon also reports that the BLS data does not include about 420,000 "'discouraged workers', who had given up looking for work because they think that there is no work available."
Work is available in dozens of other countries, where American companies seeking to "maximize the bottom line" have been outsourcing jobs for years. About 14 million American jobs are going to be outsourced in the next four years, according to a report issued by the University of California at Berkeley. Short-sighted and greedy, these CEOs and their boards believe child labor and wages that can dip below $1 an hour is just another acceptable business practice. The "Made in America" label is now becoming as extinct as corporate morality.
Americans who have been using credit cards to survive the Recession and have now reached their credit limit can raise their limit or sometimes reduce their payments or rate. All they have to do is call a credit card agency's toll-free number, which is answered by someone at a call center in India. Those same call centers are also telemarketing Americans to get into even more debt by getting credit cards.
In a true "global economy," as many now euphemistically refer to outsourcing, persons having trouble with their computers assembled from parts made in Mexico and several Asian countries can now call technicians in India for assistance.
Book and magazine publishers have been outsourcing art, design, editing, and printing overseas. Even newspapers have figured out how to cut even more costs while driving up profits. The Orange County (Calif.) Register, which laid off 90 persons in 2007, outsourced copyediting and page design to journalists in India. The Modesto (Calif.) Bee and Sacramento Bee have outsourced most of their advertising design departments to India.
For Americans who have jobs, getting to them is more expensive. It makes no difference if the worker drives or takes public transportation, the rising cost of oil has pushed Americans into a crisis. Gas prices rose more than 25 percent in the past year, to more than $4 by July 1; diesel prices are up more than 30 percent to more than $5. The higher fuel costs affect almost every service and industry from home heating to food production and road repair.
Flushed with an inflated housing boom, banks and mortgage companies had begun issuing mortgages, usually with excessive fees and high interest rates, to just about anyone with a pulse. The weaker the credit rating, the higher the fees and interest. Even if the economy was healthy, there would have been several hundred thousand defaults. By the end of 2007, about 2.5 million mortgages were in default, almost 40 percent higher than one year earlier. Attached to the problem is that many new homeowners bought houses at inflated prices, assured by lending companies that housing prices would continue to rise, are making monthly payments that put them at financial risk, and are now watching the value of their houses decline.
Foreclosures and the Recession have driven down housing prices throughout the country. In 20 major American cities, house prices declined about 15 percent, according to the Case-Shiller index of housing prices. Prices declined by 25 percent in Las Vegas, Miami, and Phoenix, according to Case-Shiller. In California, the median price of houses declined by 35 percent over last year, according to the California Association of Realtors.
Monday morning, the day before the President's speech, hundreds of Americans stood in line at the 33 Southern California branches of IndyMac Bank, now renamed Indymac Federal Bank, to withdraw what they hoped was all of their money. Over 11 days, customers had withdrawn about $1.3 billion, amid rumors that the bank was failing. The previous Friday, federal regulators seized the bank, once one of the nation's largest mortgage lenders. Last year, the bank lost $615 million; the books bled red another $184 million the first three months of this year. The Federal Deposit Insurance Corp.(FDIC) guarantees each individual account to $100,000, joint accounts to $200,000, and retirement accounts to $250,000. Those with less knew they would get all of their money. For those with more, some were just hoping to recover 50 cents on the dollar. The cost to the FDIC is expected to be $4-8 billion. IndyMac was the fifth bank to fail in the previous six months.
Also failing were the Federal National Mortgage Association (better known as Fannie Mae) and the Federal Home Loan Mortgage Corp. (better known as Freddie Mac). The quasi-governmental agencies either own the loans or guarantee loans for almost half of the nation's $11 trillion in mortgages. But, with more homeowners buying houses they couldn't afford and now being subjected to rising costs in almost every area, combined with higher unemployment, both Fannie Mae and Freddie Mac faced collapse, their stock value freefalling about 90 percent in the past year. To keep the two agencies from failing, which would undoubtedly throw the nation into a deeper Recession that could dive into a Depression, the Federal Reserve announced it would issue low-cost loans of up to $15 billion.
While 15 billion taxpayer dollars may seem significant, it is only about 9 percent of the $168 billion Congress appropriated for the war this year. President Bush, Vice-President Cheney, and their advisors were vigorous in demanding the U.S. go to war in Iraq and vigorous in demanding massive funding for that war, which may now cost more than $1 trillion.
President Bush did acknowledge that the economy wasn't "as good as we'd like, and to the extent that we'll find weaknesses, we'll move." As domestic problems piled up the past few years, much caused by a diversion of the budget and assets to Iraq, it seemed that the Bush-Cheney Administration moved on domestic policies at the speed of a glacier.
Not receiving much help are the 47 million Americans who don't have medical insurance, mostly because they can't afford the premiums, and the 3.5 million homeless, most of whom once had homes and jobs but are now living in their cars or makeshift shelters. About one-fourth of the homeless are veterans; slightly more than one-third of the homeless are children.
In 1992, Bill Clinton and Al Gore campaigned against President George H.W. Bush on the slogan, "It's the economy, Stupid." The politics of that election came down to asking Americans if they were better off under that President Bush after four years than they were when his presidency began. Four presidential terms later, after eight years of a rising economy under President Clinton, it's the economy-not the war, the attack upon civil liberties, the destruction of the environment, or any of a few dozen other destructive policies-that may be what finally scuttles this Bush's legacy.
by Walter Brasch
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