Bush's War Economy

The Progressive, December 2003 | Go to article overview

Bush's War Economy


When the Commerce Department announced that the economy grew at a torrid 7.2 percent in the third quarter, President Bush cheered and some Democrats gulped. Both reactions were premature.

The Bush economy is not likely to sustain itself. Nor does the uptick compensate, in any significant way, for the destruction Bush's policies have wreaked on U.S. workers over the last three years.

The high rate of growth "is great as far as it goes," says Max Sawicky, an economist at the Economic Policy Institute. "But you shouldn't gloss over all the damage that's already been done: the bankruptcies, the mortgage foreclosures, people going without health insurance, evictions, repos--all the things that happen when you run out of money."

The amazing thing about the growth in the third quarter is that it took this long for the economy to get moving. Alan Greenspan at the Federal Reserve Board has been holding interest rates down at historically low levels. Bush has been spending money on the military like he was Ronald Reagan, and his summer tax cuts--as lopsided as they were in favor of the rich--still shoveled $100 billion of disposable income into the economy.

"Almost anything that pumps that much aggregate demand into the economy is going to be expansive," says Robert Pollin, an economist at the University of Massachusetts-Amherst.

But Bush can't rely on such injections forever. While Greenspan continues to hold interest rates down, he will be under pressure to raise rates if the economy keeps growing. On November 6, Greenspan gave the first hint that the party may be over. "No central bank can ever afford to be less than vigilant about the prospects for inflation," he told the Securities Industry Association.

And no matter what Greenspan does, long-term interest rates are already rising, making it harder for businesses to take out loans and dampening the home-refinancing market. In fact, much of the growth in the third quarter was in response to feverish refinancings that have now chilled.

"You had the peak of the mortgage refinancing boom, which led to a huge flood of cash," says Dean Baker, co-director of the Center for Economic and Policy Research. "And people spent that money on cars and home remodeling." The numbers back Baker up. Spending on consumer durables, such as cars, was up 26.9 percent from the previous quarter, and new home construction and remodeling rose 20.4 percent.

Already, the early numbers for the fourth quarter are not encouraging. "September consumer spending was down 0.6 percent from August," says Baker, "and car sales plummeted."

Another factor that won't reappear in the next quarter is the child tax credit. Bush won't be sending checks out to millions of parents, so the "finding-money-in-the-street" mentality that boosted spending over the summer was a one-shot deal.

Granted, Bush is still relying on vast quantities of military spending. In the second quarter, military spending jumped by a whopping 46 percent over the previous quarter (with total government spending up 25.5 percent). And while military spending was flat in the third quarter, it was still at an unusually elevated level. To keep it there is one of the unstated reasons why Bush wanted that $87 billion check for Iraq. (Military spending, it should be noted, is an inefficient way to stimulate the economy. A dollar spent on building bridges or repairing schools has a bigger multiplier effect than a dollar spent on a new bomb. And if a lot of those military dollars are spent in Iraq itself, the benefits to the U.S. economy will diminish accordingly.)

The irony is that Bush could have stoked an even hotter economy. As James Galbraith pointed out in our October issue, Bush could have spent some of those deficit dollars on social needs, or spread them around to the states, or targeted the poor and the middle class for most of the tax cuts.

Instead, Bush is content with trickle down and war. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Bush's War Economy
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.