Bush Got ‘C’s at Yale--But His Friends Got ‘F’s in Economics 101

PRESS RELEASE
Citizens for Corporate Accountability

-It isn't just Harvard economist Mankiw who fails
-Bush Fed crony Bernanke, and US Treasury Secy Snow actively involved in failure
-Low interest rates set by Fed are connected with credit issuance--but disconnected with jobs, creating a dangerous scenario related to mortgages and consumer debt
-Jobs to be lost, and perhaps houses, unless reality is faced quickly, and mortgage growth is trimmed

(UPDATE 1)

(SEATTLE) 02/27/04 - Recently, Democrats called for the resignation of Greg Mankiw, the chairman of the White House Council of Economic Advisers, and a prominent Harvard University economist. While Mr. Mankiw's statements regarding jobs and outsourcing raised controversy, actions or inactions by him at this point can have little effect, given the miserable failure of the Bush "growth and jobs plan"--which, several months past a peak in the economy, is already beyond the point of no return.

But Mr. Mankiw isn't the first or only one having serious problems with economics. A March 13, 2003 news release by a Heritage Foundation economist went so far as to say "This isn't a tax cut for the wealthy…it's a job-creation machine." Yet, the Heritage foundation, like Mankiw, is just one more mouthpiece of a very expensive, and failed program.

On the other hand, two Bush appointees are actively involved in economic matters, and are therefore capable of making the failed program even worse. Namely, US Treasury Secretary John Snow, and Federal Reserve appointee Ben Bernanke have made statements which show they are even more out of touch than Mankiw. For example, Mr. Snow promised a significant number of jobs before the end of 2003, which never materialized. And Mr. Bernanke persistently claims job growth is "just around the corner." Further, apparently in denial, Bernanke has gotten in the habit of blatantly contradicting the contents of economic reports--such as those which show unambiguous and dramatic increases in US inflation. At no known time in the past has this type of misrepresentation occurred (it is rumored that such occurred in Thailand before the last Asian crisis).

The question is, in these hands, just how much worse can "bad" get?

To understand this question, one needs only revisit basic college economics, related to supply and demand. To wit, when it comes to any market, there are basic issues related to supply and demand--employment is no different. But in the current US case, there is absolutely no reason to believe an increase in corporate production and employment demand will lead to an increase in domestic hiring--that is, when domestic corporations have no reason to hire domestically. And corporations cannot or will not hire domestically, for at least two reasons. First, due to a marked rise in US inflation resulting from ultra-low US interest rates, corporations choose to offset material costs by cutting labor costs. Specifically, they are doing this by utilizing an essentially infinite supply of offshore service and manufacturing workers and/or factories. That is to say, given any level of US worker training or re-training, there will likely be a cheaper offshore alternative waiting, perhaps at the other end of an Internet connection. Hence, the current state, a very jobless and unsustainable US recovery (as compared to other recoveries, there should be an additional two to eight million jobs at this point, by most estimates).

On the other hand, US and Fed moves encouraged by Mr. Snow and Mr. Bernanke have led to a major increase in the credit demand, in the form of both consumer debt and federal deficit--without a corresponding supply of jobs to meet the demand (you know, for those little things known as "bills"?) For example, while jobs have not grown over the past few years, houses have gone up almost ten percent in price in the last year alone, and the average vehicle financed has gone up nearly thirty percent since 2000. Moreover, despite blame being put on mortgage giants Fannie Mae and Freddie Mac, current low-interest Fed policy is unquestionably contributing to rapidly expanding mortgage debts, which Fed Chairman Greenspan recently described as "surely leading to significant problems." This means Mr. Snow and Mr. Bernanke, are in line for resignation right behind Mr. Mankiw. And they might as well bring Mr. Bush in tow--while he may have gotten 'C's at Yale, it appears he and his crew must have gotten 'F's in Economics class.

The sorry part is that our jobs--and if something isn't done quickly, even our houses--will likely disappear before those in charge fully admit the problems.

1. Kick

2. kick

[orwell]

3. Rant On

Nice rant Dan. Good job. I saw it earlier and meant to comment. Bernanke really honked me off with his Fed's "freedom to print money" hogwash last year.

I would posit that Greenspan has totally lost it as well, not because of the SS comments, but rather his late 90's whistling past the bubble graveyard in the stock market (Hey Al, ever hear about Reg T.)and now with the burgeoning real estate bubble post 2000.

His imbecilic rate hikes and drops over the last 4 years not only contributed to Gore's election theft (shouldn't have been close without Uncle Al's vicious rate hikes) but also to the credit orgy that has allowed *'s faux "economic recovery."

Hey, I can make your economy recover as well. I'll just keep giving you money for nothing and you never have to pay it back.

But your children...well that's another story.

O

7. Check out Fannie and Freddie

Look at model recently against other macro factors....

Even Greenspan is scared.

I am working on a full writeup.

[never cry wolf]

11. Molly Ivins did a piece on them last week

here: http://www.creators.com/opinion_show.cfm?columnsName=miv

[WhoCountsTheVotes]

4. Alan Greenspan is a Market Fundamentalist Ayn Rand cultist, very bizarre

Every country has a central bank, and the democratic government of that country, if it's democratic, has very little direct control over that central bank. In fact, the central bank often acts *against* the democratically elected leaders in trying shape economic policy.

I believe the Fed is chartered to work towards full employment. Since that goes against the Rand-style fundamentalism of Greenspan (and most of the Fed chairmen), they decided first to redefined their mission and have ignored their responsibilities. The Market Fundies are the economic equivalent of the Taliban - the Wall Street Journal once editorialized in favor of rounding up the bankrupt and jailing them like in medivial Europe. Make no mistake, this is a dangerous cult.

The central banks in the US, Europe, and much of the rest of the world always act as an enemy to democracy. Until we reduce their power, governmental reforms will only go so far.

[blurp]

5. Lots of ranting but no solution

OK. I see a lot of complaining, but what's the solution?

Personally, I like what Dean said about payroll taxes. There should be some reform. It should be obvious that you reduce the demand for domestic labor if it's taxed at a 15% rate. If labor costs drive corps to other countries, the government shouldn't be contributing to the problem.

6. You made a good point

IS there a solution, or wlll 4 trillion in mortgages collapse?

[orwell]

8. FOMC DOA

Step 1:

The Fed has to stop setting interest rates. Get rid of the Fed Open Market Committee.

It is the Fed's mandate to monitor the banking system and supply reserves in times of crisis. The rest of this nonsense causes tremendous distortion in the capital markets.

O

9. Kick

[leesa]

10. I find it real hard to believe Bush got C's at Yale when he couldn't

even pass the ANG entry exam. Didn't his score have to be altered to a passing grade? No one has ever seen his Yale records, have they?