A
'revolution' awry
In less than 3
years, Bush & Co. have turned a $230 billion surplus into a deficit of $525
billion U.S.
JENNIFER
WELLS
"Look, I'm not in the budget business. The president has announced a
number. I work for the president. If you want to know what I think of his
number, I like it."
U.S. Defence Secretary Donald Rumsfeld could not be prodded last week
into debating the sufficiency of the presidential request for an $87 billion
(U.S.) top-up to right-size Iraq and Afghanistan. That's $87 billion to cover
this year's tab, or so the Bush government hopes.
Rumsfeld fans might protest that it's not his job to scrutinize the
government accounts. But I still think there's something telling in the glib,
almost carefree response. The Bush government has plummeted so far so fast over
the deficit cliff, $87 billion starts to look like a rounding error. On Friday,
economists at Goldman Sachs raised their 2004 federal budget deficit forecast to
$525 billion (up from $475 billion), and set their 10-year cumulative deficit
target at $5.5 trillion (up from $4.5 trillion).
Pretty soon, if we're not careful, we'll forget that the Bush
administration inherited a $230 billion surplus. Assuming that David Copperfield
hasn't been having a field day on Capitol Hill, we are left to wonder, where'd
the money go?
Princeton economist Paul Krugman has been following the money as an op-ed
columnist for The New York Times for the past 3 1/2 years, and in a just
released book brings all those columns together, along with some extra bits, in
a stinging indictment of the Bushies.
"From the beginning," writes Krugman, "it was obvious to me that George
W. Bush's plans didn't add up, that he and his people were simply lying about
all the important numbers, and that their plans would dissipate the budget
surplus."
It's easy to look in the rear-view mirror and make such declarations. But
as Krugman's real-time columns attest, he's been aggressively criticizing the
Bush accounts and corollary issues — the gap between the rich and poor; tax
breaks for the crème de la crème; corporate greed — from the get go.
I count myself a frequent Krugman reader. Still, I was surprised that the
compilation, The Great Unraveling: Losing Our Way In The New Century,
packs such a punch.
There's a reason for it. Actually, there's more than one.
Krugman is one of a rare breed: an economist whose writing is long on
grace and short on the heavy terminology common to the trade.
Two, he's fearless. The Bushies, he writes, are not only liars, they're
mendacious, and the media are wusses for not saying so. ("I have ... been
willing to see things differently, and report on what I see, because I'm not
properly socialized. The commentariat mainly consists of people who live in
Washington and go to the same dinner parties ...
"I work from central New Jersey.")
Thirdly, and this is key, Krugman deftly deconstructs the power structure
in Washington and the power structure in boardrooms.
As we all know by now there's never been a more illicit convergence of
the two than the union blessed by George W. himself.
Remember Harken Energy? Bush was on the board, and on the audit committee
of the energy company after Harken paid $2 million for Spectrum 7, a
money-losing outfit of which Bush was CEO.
With Bush on the audit committee Harken announced it had sold a
subsidiary called Aloha Petroleum, the sales proceeds then being seen to plump
Harken's anemic — read, empty — coffers. Except that the purchase of Aloha was
made by Harken insiders, who borrowed the money from the larger company. Bush
made a timely profit of $848,000.
"Mr. Bush profited personally from aggressive accounting identical to the
recent scams that have shocked the nation," wrote Krugman in a July, 2002,
column reprinted in Unraveling.
According to Krugman, the U.S. Securities and Exchange Commission
"decided that Mr. Bush's perfectly timed stock sale did not reflect inside
information without interviewing him, or any other members of Harken's board."
Martha should have been so lucky.
Against the Harken backdrop Krugman can look to the regulators, and the
Bush administration's attempts to replace reformers with corporate cronies —
rest in peace, Harvey Pitt — and broad resistance in the corridors of power to
such much-needed change as the expensing of stock options and see nothing
affirming. "[A]t a time when we really need another Franklin Roosevelt, we are
instead led by men that are part of the problem."
Of course, the Bush crowd never expected to get tripped up by Enron et
al. Krugman remains unconvinced that the wave of corporate scandals will result
in meaningful reform.
And his portrayal of the people at the top as a "revolutionary power" is
chilling. The Republicans under Bush makes for "a movement whose leaders do not
accept the legitimacy or our current political system ... There's even some
question about whether the people running the country accept the idea that
legitimacy flows from the democratic process."
What is tripping up the Bushies is the money. Krugman reminds that the
initial Bush tax cut pledge was made to put down a primary challenge by Steve
Forbes. It was an easy promise, though Krugman believes Bush didn't comprehend
the degree to which the budget surplus was the result of taxes on capital gains,
aka the stock market. Thus the administration shared a false sense of slush
fund.
"At first, tax cuts were about returning an excessive surplus to the
people," he writes. "Then, as the surplus vanished, tax cuts were about
providing short-run economic stimulus. Then, as it became clear that they
weren't serving that purpose, tax cuts were about promoting long-run growth."
It ain't working. The feds are in the red, the rich are richer, the poor
are poorer and even right-leaning economists have grown nervous.
"I think," concludes Krugman, "the Unites States is setting itself up for
a Latin American-style financial crisis, in which fears that the government will
try to resolve its dilemma by inflating away its debt cause interest rates to
soar."
This isn't, as the author attests, a "happy book." But it's very good
medicine.
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