an explanation of what’s happening
to the economy that makes sense

Contrary to popular belief, what's happening to the economy isn't entirely the fault of anything Shrub has done (or not done). What WILL happen to the economy will be affected by his policies, but not the current downturn, at least not completely.

I've only partially understood what's been happening, economy-wise, and have been looking for an explanation that fills in the gaps for me. When I saw an article about it in In These Times, I almost didn't bother reading it because I didn't want to wade through a far-left polemic that offered a lot of sound and fury, but no real answers. But gave it a shot, anyway. Boy was I pleasantly surprised. (Well, as pleasantly surprised as one can be reading what is, essentially, a bad prognosis.)

Below is a clip. The entire article is definitely worth reading, if only to understand what's going on and to maybe to get a handle on figuring out what to do about things, at least on a personal level.

Bursting Bubbles: Why the economy will go from bad to worse, by Dean Baker (In These Times, 5.9.03)

In 2000, President Clinton could legitimately boast of the "best economy in 30 years." Unemployment was low, wages were rising at all income levels, and the poverty rate was headed downward at a rapid pace. But after President Bush took office in 2001, the economy fell into recession, shedding jobs and causing real wage growth to slow and eventually stop altogether.

A convenient story explains this sharp economic reversal. According to the script, Clinton eliminated the deficit through progressive tax increases and spending restraint. This deficit reduction lowered interest rates and spurred an investment boom, which was the basis for the extraordinary growth of the late '90s. Then Bush came into office and quickly squandered the surplus with his tax cuts to the rich and military build-up. As a result, the deficit skyrocketed and the economy tanked.

It's a good story, but the reality is quite different. The Clinton boom was built on three unsustainable bubbles. One of them, the stock bubble, has already burst. The other two bubbles--the dollar bubble and the housing bubble--are still with us. The dollar bubble is starting to deflate, and the housing bubble is perhaps just now reaching its peak. These bubbles created the basis for the 2001 recession and the economy's continuing period of stagnation.

I just wish Dan Baker offered some opinions or suggestions on solutions, or what do do to ameliorate what he thinks is coming. But the article makes a lot of sense to me, and I never even thought about that third bubble.
Posted by .(JavaScript must be enabled to view this email address) on 05/11/03 at 01:04 PM
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