The following article was published in "The Guardian", newspaper of the
Communist Party of Australia in its issue of Wednesday, September 24th,
2003. Contact address: 65 Campbell Street, Surry Hills. Sydney. 2010
Australia.
Phone: (612) 9212 6855 Fax: (612) 9281 5795.
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A rough ride for US economy
Some facts:
The US budget deficit for 2003 is anticipated to reach US$455
billion;
The deficit for 2004 is estimated to reach US$475 billion;
The estimated budget deficit exploded by 50 percent over the last
five months;
It has blown out because of the weak US economy, the Iraqi war and
the tax cuts of US$350 billion promised by Bush;
Unemployment is 50 percent higher than at the time of the Clinton
administration;
More than 2 million jobs have disappeared since Bush took office
in January 2001;
Interest rates at 1 percent are the lowest for 45 years but have
failed to stimulate the economy;
Tax revenues that make up a large proportion of government revenues are
down to about the level of 1943;
The US is suffering from a huge adverse balance of trade;
The IMF warned recently that the colossal US trade deficit was a
"noose around the neck of the economy" and that the dollar could
collapse at any moment.
The occupation of Afghanistan and Iraq, the "war on terrorism" at home
incurring heavy expenditure on "homeland security" and general economic
decline are all dragging the US economy down and these expenditures and
difficulties are expected to increase in the future. President Bush has
called on Congress to allocate an additional US$87 billion for war
funding alone.
In a recent poll the American people gave the thumbs down to this new
expenditure. A CBS News poll found that 66 percent of Americans are
opposed to the US spending US$87 billion to help rebuild Iraq with only
26 per cent in favour.
Lowering interest rates
As with the Japanese economists, it was assumed that the lowering of
interest rates would stimulate the economy. But this tactic failed in
Japan and is failing in the US as well.
It was also assumed that tax cuts would increase money available to
consumers who would go out and purchase more. But the US tax cuts mainly
benefited the rich.
Spread over the whole population it is said that the tax cuts amount to
about US$1000 per person but the reality is that because of their class
nature of Bush's tax cuts, about half of the taxpayers get a nominal tax
cut of only about US$120 and another one third receive no benefit at all.
The tax cuts mainly benefit the rich who do not spend their additional
money on consumer goods of which they have no need but on building up
their bank accounts and their share and property holdings. It does not
create jobs.
A small increase lately in US production has led to speculation that the
US economy has turned the corner but much of this increased economic
growth is due to a rise in productivity. This means that displaced
workers are being replaced by new machinery not by re-employment.
US social security expenditures, limited as they are in the US, have to
be financed by outside borrowing because government revenues are not
sufficient to cover costs.
The US cannot sustain the present rate of military spending, tax cuts
and corporate handouts without slashing and savaging already inadequate
spending on education, health and social security.
Military expenditures
At the core of the difficulties facing the US economy are the
astronomical military expenditures over a period of years. They have now
become critical with the wars being waged by George Bush. That is why
the US is now desperately attempting to get other nations to send troops
and help pay for the destruction and disaster that they have imposed on
Iraq - and on themselves.
The chief economist of the IMF, Kenneth Rogoff said, "If we were looking
at a poor developing country, the world gives them just enough rope to
hang themselves. A country like the United States, they give them enough
rope to tie the noose around their neck several times. But it does
happen in the end."
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