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The rhetoric surrounding George W. Bush's economic stimulus package, as boastfully "bi-partisan" as it is (we are, after all, in an election year), indicates a complete lack of comprehension of the difference between this 'national' economy and the 'people's' economy, and the extent of the gap between the two.
The unveiling of his plan was classic Bush: state something ambiguous about a $140 billion adrenaline shot, then have your cronies act as wingmen. Hence, at last Friday's press conference, Treasury Secretary and former Goldman Sachs CEO, Hank Paulson was left fending off uncomfortable questions like: would the plan help "elderly people on fixed incomes?" His answer: "The Christmas season has come and gone."
The national economy, as measured by large scale figures simply does not represent individual citizens' economic circumstances. That's why debate over whether we are in a recession or not misses the point of everyday financial realities for most of the population. According to the standard definition of recession (two quarters or more of a decline in GDP), we're not there. In which case, Bush and Paulson are technically right in saying the economy is simply 'slow'.
But, that's been far from the case if we consider the people's economy (the people - as in all the American citizens who don't fall into that upper percent of the nation's wealth bracket). And very little in the President's, or in most of the presidential candidates' plans, will change this.
The highest bidder mentality of Wall Street and its elite private equity groups has exacerbated the sub prime and regular housing market crisis. As investment banks stuffed loans into packages of toxic speculative waste, actual people lost their homes, hurt further by media attention on those declining home values, which didn't thrill new buyers.
In the process of trying to keep up escalating payments on their homes and home equity loans (backed by falling home values), people increased their credit card balances, suffering requisite late fees and higher rates, and ravaging 401K plans in desperation, during a time in which the values of those plans shrunk along with the falling stock market.
Don't get me wrong. No one would scoff at an $800 tax rebate check in the mail, but at best, it may provide a month of relief. Meanwhile, it does nothing strategically to fix the barrage of corporate gouging that continues unabated and unregulated by the Washington powers that be (including those running for office). Seriously, wouldn't it kill you if your health insurance premium rose just as you were about to cash that government rebate?
Home prices fell by a record 6.7 percent over the year and with legions of unsold homes on the market, they won't be rising any time soon. The largest mortgage lenders are trying to sell themselves to the banks that once funded them. And banks keep writing down loan values on their books faster than you can say "class action lawsuit." Credit card companies are starting to see the late payment and defaults that happen when people have maxed out their cards to pay their rising mortgages.
Unemployment has jumped to 5 percent, or 2001 'recession' levels. And, if more firms fire more employees to 'cut expenses', that number will rise. This means people will buy less, which will hurt corporations, who will then fire more people.
We can debate forever whether the average $300 tax rebate in 2001 that the administration claims stimulated the economy did or not. (We can debate whether a similar rebate will or will not this time around.)
But whatever it achieved for the national corporate economy, it did not halt the rise in basic living expenses, health care costs or tuition. More than one out of five middle-class families have less than $100 per week remaining after paying for basic living expenses. In nearly one out of four middle-class families, at least one family member lacks health insurance. And almost one in three families doesn't have more than a high-school education.
See more stories tagged with: recession, economy, stimulus package
Nomi Prins is a senior fellow at the public policy center Demos and author of Other People's Money and Jacked: How "Conservatives" are Picking your Pocket (Whether you voted for them or not).
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