This Republican Economy Sucks!

On Friday, we got hammered with the bad jobs news – unemployment up from 4.7% to 5.0%, an astounding three-tenths jump in one month. The payroll report showed an increase in jobs of only 18,000. This is a horrible number where most economists believe 150,000 is the break even point for new jobs to keep up with the increased number of people entering the labor market through population growth. Worse yet, the jobs number is only positive because government jobs increased by 31,000. That means, there was negative job growth in the private sector.

During the Bush years (as of the close of the markets on Friday), the dow has only increased from 10,570 to 12,800. Anemic is a charitable description of such growth.

Real wage growth (especially for all but the rich) has been terrible and now we are facing a bursting housing market bubble which is sending shockwaves throughout the credit industry and is likely to place a large constraint on consumer spending. Yet, at the same time, inflation has been slowly rising.

All this despite Bush’s deficits driven by tax cuts and increased military spending.

While Iraq has certainly played a huge role in dragging down the Republican party (see 2006), I expect the problematic economy will come to play even a larger role in the 2008 election year creating a strong possibility for a second Democratic wave.

Democrats shouldn’t be quick to cheer because these economic problems are going to require difficult choices and strong leadership to fix. The fact of the matter is we will have to keep running deficits for sometime forward.

Now, I’ve never complained about the size of the Bush deficits. In relation to GNP, they are within a range this country can handle without undue stress. I also am not per se against tax cuts as an economic stimulus. The Democratic idea of giving some money back to taxpayers as a stimulus after 9/11, an idea that Bush hijacked, was a great idea for the moment. The questions really involve the type of tax cut and whether it is the most efficient stimulus. Bush’s huge tax cuts for the uber wealthy fail as an economic stimulus because these folks don’t necessarily pump that money back into America as opposed to foreign investment. Government spending on TVA type projects (infrastructure) tends to be much more efficient as an economic stimulus.

Likewise, increased military spending – as we’ve seen under Bush – is also not a very efficient form of economic stimulus. Defense contractors tend to be engaged in more capital intensive spending rather than the more stimulative labor intensive spending.

Being in a state with a late primary, I have yet to focus on the economic proposals of the candidates.  Some of the things I will be looking for are a policy that greatly reduces spending in Iraq while increasing spending on Afghanistan-Pakistan, for a net reduction.  A policy that sunsets the Bush tax cut for the wealthy.  Spending programs that will have the greatest stimulative effect and that are for good causes.

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