Program Cuts and Spending Freezes for 2006 Are Intended to Trim Record Deficit - The Bush administration is preparing a budget request that would freeze most spending on agriculture, veterans and science, slash or eliminate dozens of federal programs, and force more costs, from Medicaid to housing, onto state and local governments, according to congressional aides and lawmakers.2006 will be when the United States of America will be all about increased homeland security and defense spending. Hooray. That’s W’s Harvard MBA hard at work. In 2006, everything except homeland security and defense will be held constant or cut.
Almost half-trillion dollar tax cut for the wealthy (80% of all tax cut refunds) to invest in their global portfolios, er, to spend for stimulating the economy has already evaporated, e.g. the lack of consumer spending and economic growth to show for it. The still lackluster economic results 1½ years later means that a significant portion was invested and/or saved than spent. The tax cuts just didn’t work as originally advertised.
I know - the wealthy “deserve” it. Presumably, it was their money to begin with.
However, consider that most of us aren’t wealthy. And that it is the not-so-wealthy consumers among us that spend and drive the economic engine, which taken together grows the wealth of this country. And the average consumer can't continue on spending too much, since they’ve overloaded their credit and home equity lines already.
Right now, circa 2003-2005, we actually have an investment glut in this country – lots of capital with no productive use since there’s insufficient, unsustainable consumer demand – as evidenced by flattening retail sales and a large slack in hiring, which has failed to replace all the jobs lost over the last four years much less to create all-new jobs to sustain the population's growth.
Meanwhile, the wealthy did their duty at tax time, investing most of their tax cut monies, and finding low returns domestically, resorted instead to foreign capital markets of China, Southeast Asia, and elsewhere to get the double digit returns they’ve become so use to 90s-style.
Under such circumstance, Bush’s tax cut for the wealthy during wartime was and is the very wrong choice and simply unprecedented. No other president has ever reduced the tax income the Fed receives while the country has to spend massive sums of money driving war efforts – for sound, obvious arithmetic reasons, until W.
In any event, education, veterans benefits, Medicare, Social Security, R&D, roads and infrastructure, housing programs are all on the block. One wonders how long we we afford such enormous expenditures for tax cuts and Iraq, even after these cuts. In comparsion, these programs are a pittance, yet ones so many Joe “W” Sixpacks rely on and even more so will over time, given:
- More non-degreed (75% of population) Americans can’t find low-end [manufacturing and assembly] jobs many of which moved offshore, have given up looking for a job altogether, thus not counted as part of employment or unemployment rates, and thereby not contributing as taxpayers,
- We have poorly educated kids who score in the last quartile of standardized exams, versus well-educated foreign students who are better equipped for the jobs of tomorrow, which immigration tightening cannot mitigate, especially given virtual outsourcing trends,
- Americans save 2% of income while borrowing the rest at double-digit interest rates payable to foreign creditors as the dollar devalues,
- Average weighted salaries are stagnant across the board particularly for Americans with no bachelor or advanced degrees, and as oil, medical and housing costs are rising significantly along with increasing offshore and outsourcing pressures,
- Almost 25% of Americans have little or no health care coverage, and with low or nil savings, meaning significantly increasing catastrophic healthcare costs to come
Trade Deficit Leaps Again - $60.3 Billion Gap in November Is 7th Monthly Record Set in 2004
The monthly U.S. trade deficit soared to an all-time high of $60.3 billion in November, the Commerce Department reported yesterday, sending the dollar tumbling and raising new worries about whether the U.S. economy has become too dependent on borrowing from foreigners.
And as China’s domestic consumption increases over the next 5-10 years - consider how their surged hunger for commodities had led to a drastic rise in steel, rubber, and oil prices this past year - foreign creditors will eventually shift their funds elsewhere in search of higher returns. Interest rates will rise. And many average Americans will finally feel what’s it’s like to have to live within their means.
From where I stand, the gathering macroeconomic trends for the next 2-5 years look pretty ugly for the average Joe. For W, it’s all cost-cutting now to salvage what he can out of this shoddy economy, lacking proactive planning that reflect any long-term vision except military and security spending, the former of which is being cut back since we can’t afford it already.
Mark these fonts, such simpleton policies will leech us bone dry – and we’re already beginning to see worrying symptoms today - large cuts in the military budget, unbelievable deficits, jitters in the bond and currency markets.
Through lens of Cold War-era history, one could almost find it ironic; al Qaeda did to us what we did to the Soviets, albeit with a whole lot better ROI.