JUDGMENT CALLS
Robert J. Samuelson
‘Crunch’ Time for the GOP
A slowing economy is already a burden that Republicans will carry into the election. A harsher credit 'crunch' could be fatal.
Don't believe all the hype about the "credit crunch." Not yet, anyway. It's supposedly suffocating the economy. Big banks and investment houses have suffered multibillion-dollar losses on "subprime" mortgages and related securities; CEOs have departed. But outside of housing —where lending has collapsed—the effects on consumers and businesses have so far been modest. What we should be wondering is whether all this is the first act of a three-act drama, or whether the worst is past. If it's act one, the crunch isn't just about economics. It could decide the next president.
People vote their pocketbooks, as the old saying goes. Up to a point, this is unfortunate, because politicians of both parties usually get too much praise or blame for the state of the economy, when their influence on its behavior is often negligible. Voters ought to cast their ballots on issues where what politicians do, or don't do, matters. But politics isn't always rational or fair, and a slowing economy is already a burden that—along with Iraq— Republicans will carry into the election. A harsher credit crunch could be fatal.
Consider the latest economic forecast from Global Insight, a well-known advisory firm. Though not yet predicting a recession, it sketches an economy that won't feel good for much of the 2008 election cycle. To wit:
• Housing's slide continues. New home starts fall to 1 million, down from 2.1 million in 2005. By early 2009, home prices decline a cumulative 11 percent from their peak. On a median-priced home of $220,000, the loss is $24,000.
• Car and light-truck sales dip to 15.7 million, the lowest since 1998; they were 16.9 million as recently as 2005.
• Unemployment averages 5 percent, up from 4.6 percent this year.
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Member Comments
Posted By: Mr. Wonderful @ 11/24/2007 8:36:28 AM
Comment: Republicans Unfairly held accountable? NO. This is the Republican's economy, they built it, they safeguarded it and they should be held accountable for it. And that is only the start of the Mis-characterizations of this article.
American consumers not saving--while this is true, the operative question is why not? Couldn't have anything to do with Government Policy? How should we as a people respond to 9-11? Go Shopping says the Republican President. What do we do about ENRON? Set up a set of Psuedo-Regulations, then continue the same regulatory malfeasance of the 70's,80's and 90's---Allow the new Calvin Coolidge and Herbert Hoover (Reagan and Bush) to push Predatory Capitalism and encourage speculation--but not directly on the stock exchanges ;t;his time--FDR made it hard to do that in secrecy'' NO, this time lets do it in Private Hedge Funds and use "securitization" to disguise the risks from the regulators and the public--and just to be sure that nobody catches on--let's repeat the mantra "government is bad" so that we can appoint idiots to the regulatory agencies because they really don't matter anyway--and government is the problem not the solution.
A wise man said--"those who ignore history are doomed to repeat it"--here's a piece of history for you...take a look at the British Empire in the 1930's---that's America today.
We are transferring our wealth to our enemies and a few marginal friends...all to prop up a society where reality is ignored and conspicuous consumption lionized....where SUV's for a single driver are considered sheik and living modesty is assumed to indicate hidden character flaws. Add together the deficit from this moron president's war of choice, his lunatic tax cuts for the wealthiest 1% and his criminal neglect of the rich American dream that he inherited...and you have in play the single worst leadership failure in the history of America...and not just by Bush and Company, but by the DLC led Democrats too....don't forget that the House and Senate ALLOWED THESE ACTIONS--and refuses to impeach.
It is clear that it is time for a new NEW DEAL....what isn't clear is whether EITHER of these political parties is capable of dealing with the reality. I think that this may be the election where America stands up and says "A POX on both your houses" and engages in an "anyone but these guys" anti-incumbent tsunami.
Posted By: rpharkness @ 11/18/2007 6:32:43 PM
Comment: ???Voters ought to cast their ballots on issues where what politicians do, or don't do, matters.??? What Republicans haven???t done is regulate businesses effectively, and it matters. The SEC, IRS, and the Comptroller of the Currency have turned a blind eye to banks and other financial institutions use of off-balance sheet loans to the point where investors have lost faith in companies??? SEC filings. Lenders have used fraudulent practices to trap home owners in disastrous loans and defrauded investors with worthless collateralized mortgage obligations because George Bush???s government doesn???t believe in regulation.
The Republicans like to think of themselves as the party of fiscal responsibility. In reality, they are the spend-and-spend party that now openly says that the deficit doesn???t matter. Under George W. Bush, the national debt has increased 3 trillion dollars. The dollar is worth less, much less, compared to the Euro which is part of the reason that oil is over $90 a barrel.
They have been afraid to stand up to China???s free trade abuses. China has kept their currency artificially low compared to the dollar. The U.S. owes China over 1.3 trillion dollars. China now has so much of our debt that they have been able to threaten the U.S. with the ???nuclear option??? of liquidating their holdings if we push them to revalue the yuan upward. They won???t do that but they will start shifting new debt to the Euro just because the dollar is so weak. That will push up our long term interest rates.
Now as the country slides toward recession, the Republican???s economic mismanagement is coming home to roost. It???s the economy, stupid, and when it comes to the economy the Republicans aren???t that smart.