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Bush's Voodoo Stimulus Package - White House In Full Panic Mode!

Economics / US Economy Jan 19, 2008 - 01:30 AM GMT

By: Mike_Whitney

Economics The White House is now in full-panic mode. In fact, the falling stock market has the administration so worried that Bush will deliver a speech later today that will lay out the details of a “stimulus package” designed to rev-up flagging consumer spending. The desperation is palpable. Fed chairman Bernanke's appearance on Capital Hill on Thursday turned out to be a total bust. Bernanke was supposed to calm jittery investors with promises of rates cuts and easy credit. Instead, his gloomy predictions put the market into a tailspin sending the Dow Jone's down 306 points by day's end. Now it's up to Bush and Co. to pick up the pieces and try to restore confidence in Wall Street.


Since we first reported on the proposed “stimulus package” (Bush's Voodoo Stimulus Package” informationclearinghouse.info) the size of the rebates have increased dramatically. The Democratic-led Congress was only calling for $250 per taxpayer or $500 per married couple. Under the White House plan, taxpayers could receive rebates of up to $800 per individual or $1,600 per couple. The rebates will accompanied by additional cuts to the Fed Funds rate (estimated 50 basis points) which will provide more liquidity to the banking system and easier credit for consumers.

The administration's desperate actions should remove all doubt that the main problem facing the economy is inflation. It is not. The moves are intended to forestall a deflationary spiral that is the logical corollary of 7 years of intensive neoliberal policies. Ironically, now that Bush has achieved his goal of crushing the middle class and destroying the foundation of America's consumer-based economy; he has decided to change directions and shower those same over-extended, subprime people with a $150 billion gift from the government. It makes no sense at all.

The negotiations on the stimulus package have produced the Democrats first victory over Bush. The president has agreed “not to push for a permanent extension of his 2001 and 2003 tax cuts.” Whoopee. Unfortunately, the Democrats don't seem to grasp how dire the economic predicament really is or they would have asked for much more. For example, they could have made the rebates contingent on troop withdrawals from Iraq or the closing Guantanamo Bay. But that would mean that the Dems actually knew something about the state of faltering economy, which they don't. They'd rather spend their time groveling for campaign contributions or applying tooth-whitener than following the collapse in the housing and stock markets.

Earlier today, Treasury Secretary Henry Paulson underlined the urgency of the situation on CBS's “The Early Show” saying:

“What President Bush believes is that we've got to do something that is robust. It's going to be temporary and get money into the economy quickly. It's going to be focused on consumers, individuals, families — putting money in their pocket. And it's going to be focused on giving businesses the incentive to hire people, to create jobs."

Can you sense the panic?

It's funny in a way. The Bush administration has been warned repeatedly about the disastrous effects of their supply side theories. Of course, they brushed off their critics and carried on with the plundering until they hit a roadblock. Now they're running around in circles trying to find some way to stop the bleeding. Good luck.

Remember the $2 trillion wars (Iraq and Afghanistan) that could be paid for with “unfunded” tax cuts to the rich?

Remember the cuts to capital gains and corporate taxes that were supposed to “trickle down” to working class Americans creating more jobs and making us all more prosperous?

Remember the low interest rates that were supposed to create Bush's “ownership society” that, in fact, generated the greatest speculative frenzy in real estate in American history?

Remember Dick Cheney's brusque assurance that, “deficits don't matter”?

Remember the myriad corporate giveaways, the lavish “no bid” contracts, and deregulated subprime shenanigans that were supposed to “grow the economy” and strengthen our markets?

The system is failing because it was designed to fail. The impending economic crisis is no accident, but the predictable outcome of deeply flawed policies that are thrusting the country towards a 1930s-type catastrophe.

Still, even disaster has its brighter side; like watching the most-reviled, least-credible President in American history try to stop a crashing market with his miserable offers of “cash rebates”.

By Mike Whitney

Email: fergiewhitney@msn.com

Mike is a well respected freelance writer living in Washington state, interested in politics and economics from a libertarian perspective.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

G S
19 Jan 08, 10:16
Timely quote from the past

“Rome is a city where everyone and everything is for sale.”

Attributed to Jugertha

From Sallust Jugerthine War


Sile McGrath
30 Jan 08, 10:51
Iraqi oil money being pumped into Federal Reserve Bank of NY

Article published Jan 30, 2008

Iraq not using oil cash to rebuild money going to Fed Res Bank NY

January 30, 2008 Washinton Times

By Sharon Behn - Increased Iraqi oil revenues stemming from high prices and improved security are piling up in the Federal Reserve Bank of New York rather than being spent on needed reconstruction projects, a Washington Times study of Iraq's spending and revenue figures has shown.

U.S. officials and outside analysts blame the collapse of the country's political and physical infrastructure for Baghdad's failure to spend the money on projects considered vital to restoring stability in the country.

Out of $10 billion budgeted for capital projects in 2007, only 4.4 percent had been spent by August, according to official Iraqi figures reported this month by the U.S. Government Accountability Office (GAO). The report cited unofficial figures saying about 24 percent had been spent.

Meanwhile, some $6 billion to $7 billion from last year's budget is "being rolled over" and invested in U.S. treasuries, said Yahia Said, director of Iraq Revenue Watch, part of the private watchdog group Revenue Watch Institute.

"The government is broken," said Mr. Said, speaking by telephone from Baghdad. "The country's midlevel bureaucracy has either fled the country or been purged in de-Ba'athification, [and] a lot of ministers are politically appointed and not professional."

The result is that orders go out from the ministers in Baghdad, but there is no structure or staff at the middle level to carry out the instructions.

"It's like they lost the manual for driving the government," said Mr. Said, who is working to put that blueprint back together. "They lost the landing instructions for landing the airplane."

A quarterly report to be released today by Stuart W. Bowen Jr., the U.S. special inspector general for Iraq reconstruction, says rising production and high prices could produce a revenue windfall for Iraq this year, according to the Associated Press.

Production levels finally are approaching prewar levels of 2.5 million barrels a day and might reach 2.8 million barrels a day by the end of the year, Iraqi Deputy Prime Minister Barham Salih told The Washington Times on the sidelines of the World Economic Forum in Davos, Switzerland.

Acknowledging the need to reform the bureaucracy, Mr. Salih said, "Some of us think we can do a lot better [on production] if we do adequate or proper management restructuring."

Oil prices, meanwhile, are expected to average $85 a barrel this year, well above the $57 estimated in the Iraqi budget.

However, the GAO expressed frustration in a report this month at its inability to get a handle on how these revenues are being spent.

"We cannot determine the extent to which Iraq has spent [budgeted capital] funds due to conflicting expenditure data," the report said.

It said the Bush administration, citing unofficial Iraqi data, reported in September that Iraq"s central government ministries had spent 24 percent of their 2007 capital projects budget as of July 15.

"However, this report is not consistent with Iraq"s official expenditure reports, which show that the central ministries had spent only 4.4 percent of their investment budget as of August 2007," it said.

U.S. and foreign officials told the GAO that weaknesses in Iraqi procurement, budgeting, and accounting procedures had stymied the completion of projects.

"For example, according to the State Department, Iraq"s Contracting Committee requires about a dozen signatures to approve projects exceeding $10 million, which slows the process," the GAO wrote.

Capital projects expenditure this year is expected to reach only $4.3 billion, less than half of the $10 billion spent in 2007, according to a GAO analysis of Iraqi government data provided by the U.S. Treasury.

Provincial governments, which had little or no control of their finances under Saddam Hussein, are struggling to spend the money they have under new budget systems, said Joseph Saloom, an adviser to David Satterfield, the senior adviser to Secretary of State Condoleezza Rice and coordinator for Iraq.

That budget system includes strict bidding rules and a process of committee approvals designed to prevent corruption, Mr. Saloom said.

But if a province needs a piece of specialized oil equipment, "often there are not three suppliers" who bid, so the process is cut short and the project cannot go forward, he said.

According to Mr. Said, the situation is slightly better on the local government level, partly because of U.S. forces who supply protection, logistics, resources and emergency funds.

"There is more [improvement] on the gras-roots level on the back of the surge," he said.

Reconstruction also has been hobbled by delays in getting the central government up and running. Although elections were held in January 2006, the government was not formed until May of that year.

Within that government, said Mr. Saloom, "most of the people had never been ministers before, they had never managed large budgets."

• John Zarocostas contributed to this report from Davos, Switzerland.


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