archived: 20 - 26 May, 2007         Back                 Next

UPDATED:  MAY 16, 2007 

THANK BUSH & REPUBLICANS  

One gas station in San Francisco – May 10, 2007 – soon there will be more signs like this across the United States as the price of gasoline soars.  Has Bush uttered a word?  Called for an investigation of prices?  Of course not; because Republicans view the rise in the price of gasoline (energy) merely as the unrestrained economic forces in which Republicans believe. 

One important economic force driving the price of gasoline has been largely created by Bush and the Republican Party – debt; both international trade debt and federal deficit.  While regular TPJ readers have read the numerous articles that we have written on the subject; it is a point that bears repeating – to every American.  The analysis below was written in 2004; but it is even truer today:

Experts have a lot of good reasons to explain why prices are going up at the moment: unrest in the Middle East, gas-guzzling cars and greed among the oil producing nations, among others. But there is another culprit that is being ignored and that is making the problem far, far worse in the U.S. than elsewhere: the decline in the value of the dollar.  

Between the end of February 2002 and the end of February 2004, the price of oil in dollars rose by 51% (from $20 a barrel in 2002 to about $32 a barrel), but it rose by only 4% in euros. Over the same two-year period, the value of the dollar plunged from 1.16 euros per dollar to 0.80 euros per dollar. In this situation, it is perfectly rational for foreign suppliers of oil to charge more in dollars to make up for the falling value of our currency.  

While remedies such as encouraging more efficient use of energy are good, they won't negate the fact that a declining U.S. dollar that's worth less in the international market is an important cause of the run-up in oil prices. And the Bush administration is doing little about it.  

It may seem like a stretch to blame the price of oil on fiscal mismanagement, but the rising price of oil is closely tied to the falling dollar, which, in turn, is the result of flagging confidence in federal tax and budget policies. The dollar is falling, among other reasons, because of the prospect of too many U.S. Treasury bonds on the market — and that is made necessary by the enormous deficits generated by tax cuts, increases in spending and sluggish economic performance.  

Thanks to the unbalanced policies of the last few years, the U.S. will be pumping out trillions of dollars of new federal debt. Financial markets — and oil producers — are afraid that a future glut of bonds will drive down the value of these bonds and, sooner or later, drive up U.S. interest rates. The prospects of falling prices of Treasury bonds and a weak dollar have depressed European demand for U.S. Treasury bonds, so the value of the euro has further risen relative to the dollar.  

Dollars today simply do not command the same purchasing power that they did a few years ago — a situation that will persist as long as it is painfully obvious that the administration has no plan to reduce the deficit. As the value of the dollar falls, of course, OPEC raises the dollar price of oil.  

So as we flinch when we pump ever more expensive fuel into our tanks, we might reflect on the decline in international confidence in the dollar. The value of the dollar depends on widespread trust that sanity will prevail in U.S. fiscal policy. The falling dollar bears silent witness to falling international confidence in U.S. policy.

The chart below tracks the price of gasoline after adjusting for inflation.  Look at the price of gas since Bush took office and Republicans gained control of Congress.   

Under years of Bush and a Republican controlled federal government, trade deficits and federal deficits have risen to historic levels. It is no coincidence given these deficits that the value of the US Dollar as declined 40%. On January 15, 2001 just before Bush's first inauguration the average price of gasoline was $1.46 a gallon.  On May 10, 2007, the average price of gasoline reached $3.02 per gallon.   

The increase in the price of gasoline acts as a tax – it simple takes money out of your pocket.  Bush’s Secretary of the Treasury, John Snow, makes the analogy:     

John Snow said . . . , "Higher energy prices act like a tax on American business, and American consumers, reducing their disposable income."  -- Forbes   

Each 1 cent rise in the price of gasoline takes roughly ONE BILLION DOLLRAS out of the national economy.  Just the most recent rise in April gasoline prices brought this analysis: 

The increase in gasoline prices probably diverted at least $20 billion from purchases of other goods and services in April, said David Resler, chief economist at Nomura Securities International in New York. The average household had to spend an extra $30 to fuel their automobiles last month, he estimated.  

``Higher gas prices are taking a toll on discretionary spending, and the weaker job market is detrimental,'' Resler said. ``I expect consumer spending will be much slower this quarter than in the first quarter.''

You will pay the price for Republican fiscal irresponsibility – every day.

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UPDATED:  MAY 12, 2007

BUSH’S ECONOMY 

TPJ focuses on Bush’s economy today in a series of articles that appears below.  While the war in Iraq rightfully dominates the plethora of issues facing America, the economy that Bush so grandly promotes is faltering.  For most hard working Americans, the economic fallout developing will adversely affect them the most.  

Our series today opens with Mickey Walker, TPJ Columnist, painting a broad picture of what is happening and the effect on middle class Americans.  Two additional articles follow that provide more in depth coverage of the impact of Republican economic theory.  We hope that readers will enjoy.

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JOBS IN AMERICA, THEN AND NOW
            [Mickey Walker, TPJ Columnist] 

Our view in the 1950s and 1960s that wages were good was born out of seeing our fathers prosper in the times that saw America’s finest jobs.  They prospered building automobiles, building houses, farming crops, and running the nations refineries.  Jobs paid well back then, largely thanks to unions.  On the heels of FDR and Harry Truman, everybody seemed to have enough and even a bit more.  There was enough food, a new thing called television, and even Social Security for the retired folk.  We kids could buy candy and bubble gum regularly.   

Company pensions were superb as well.  My father, while still in his 30s, bought a second car, a work car, a 1936 Chevy, and our two-car family seemed even a bit more than prosperous at the time.  Why would a family need two cars?  And for a family of four we did not even notice that our house was only 800 square feet with space heaters (not central gas) and an attic fan for cooling in the hot East Texas summers.  Those were the days.  Everyone had good incomes.  Some bought lake houses with the overflow.  And fishing boats and motors.  And some even bought stock. 

These days are different.  Things are so expensive, many working class families are busy dumping many of their goods and services because they cannot afford as much stuff as past generations.  The lost bass boats or the country club membership falls like dead weight ballast from the basket of a high-flying balloon.  Though what seems to be drastic, these necessary family measures become necessary, just to keep the balloon up and the family ship afloat.  First, you let go of the Dental, then the hairdresser once a month, then the life insurance policy, then the health insurance.  Some even let go of the house insurance if they own their own house and are feeling lucky.  They become self-insured.  Junior is healthy and doesn't need SCHIPS, but don't worry, he won't get sick.  Besides, that’s for poor people, only if they can get it from the stingy states that seem to overlook small matters like providing for the health of children.  Georgia recently tightened up on their SCHIPS program to where the state will not readily accept new applicants, and if you, the parent, happen to miss a monthly payment, your child gets dropped from the program.  Permanently.  He might find himself uninsured if he breaks a leg or develops leukemia. Yes, we have become adept at finding many ways to economize our family budgets due to the rising cost of living.  How about the old “increase the insurance deductible” trick so the premiums might be more affordable?  How many of us have been there, show of hands?  Then when living expenses squeeze you a bit tighter, you can get a loan against your home equity which in most cases is the beginning of the end.  Hello, slavery.  CNN yesterday reported that many Americans are taking out loans on future wages, even.  How extreme is that?  That promises to get you and your family to the bread lines a lot quicker than usual. 

Americans today are hurting.  Prices are high.  But not for the super rich.  They are accumulating over three times the wealth compared to the 1950s and 1960s.  Trillion dollar tax cuts.  No more Inheritance Tax to bother them with.  Reducing taxes on dividends doesn’t hurt them either.  It allows them to spend more money on more stock and real estate as the economy balloons huge for those at the top of the economic food chain. The average price for gas is now over $3.00 per gallon.  The Rich could care less.  They could pay 10 dollars per gallon and still have more money than they could ever spend.  But the common man rids and says goodbye to things that he once felt made him a part of the opportunities in this great land.  It has become a ritual of ridding things and saying goodbye.   

So you cast away more ballast, more things you thought you needed from the family balloon, and you watch them mournfully as they fall.  Say goodbye to Junior's college.  Too bad about Sally's piano lessons, she could have been a star, maybe, but oh well, she still might someday, if she gets a college grant.  Grant, what grant?  Like in Pell Grant, maybe.  No, we had to jettison those last year.  Many of us have speculated on whether the balloon and would stay up forever.  You know, would prosperity in America always be a given for those who worked hard?  There have been many imagined scenarios.  Some of us have talked about how the end would come (if the balloon fell), you know, the inevitable squeeze that would choke us down for the count?  Looks like it begins with a ritual of ridding.  Spring-cleaning is the first order of business, ridding all the things you thought you needed but don't really.  Like heart medicine.  A little food, some milk, maybe.  Are old people really eating dog food?  Oh, for cryin' out loud, it ain't that bad yet, is it?  Some liberal probably made it all up, anyhow.  The country's prosperous, jobs are plentiful, and the Stock Market is higher now than at any other time in our history.  Sean Hannity and Rush Limbaugh say so, every day, on their radio broadcasts.  Bush tells us the same thing and how we’re winning the War in Iraq.  Halliburton and other war corporations are getting rich, no doubt, but what happened to high working wages that allowed the common man to prosper in the past?  Why are him and his family so busy jettisoning goods and services they used to enjoy?   

 I'm sure things are good for Warren Buffet and Bill Gates, and I salute them both for their generosity they have shown to mankind.  They are exceptions.  Most of the wealthy class in America has invested their spoils into foreign countries because labor in China and Mexico gives them a better bottom line.  Exxon’s record windfall profits made on the backs of an American people who have come to fear terrorists, is reinvested, to be sure.  But where are the jobs?  Where is the prosperity in America that allowed the little man, the average Joe to share in the wealth of this great nation?  Meanwhile we rid.  Isn’t it funny how we continue to ballast our family balloon so we don't collide with the treetops?  As good as the talking heads on Fox News make things sound; something just doesn't seem right, does it?  The politicians who supplied all the hot air have run out on us or have been locked up as scapegoats for the bigger criminals.  So what’s next?  After losing our family ballast, and all the things we used to call necessities, what comes next?  Will our two-person family income last?   Only if dad's job at IBM or mom’s at Macy’s isn’t cut in the next wave of overseas outsourcing, sound familiar?  Will there be any Social Security or Medicare for us when we need it later?  Or will all the rich people other than Bill Gates and Warren Buffet just horde all their money and stock dividends while the Beast (social programs for the common man) gets drowned in the bathtub?  What will happen to us?  Where will we go?  Will the balloon stay up?  Who knows?   

Meanwhile, anybody got a parachute?  

                        EMPTY POCKETS 

As Mickey Walker notes above, millions of Americans have borrowed against the equity in their homes or used credit card debt to maintain their standard of living during the Bush administration.  With the housing market falling, gasoline rising to historic prices and employment stagnating, many Americans simply have empty pockets.  

Retails sales have largely kept the Gross National Product, which has been falling, from declining at a precipitous rate.  The report above suggests that retail sales will no longer keep the US economy moving forward. 

The potential result – recession. 

Bush’s economic “recovery” has been one of the weakest in modern American history.  It may be coming to a very disagreeable end for Americans. 

                        A VICIOUS REPUBLICAN CIRCLE 

The US trade deficit has grown – again.  

Why does the trade deficit matter?  As the US trade deficit grows with other nation, the worth the US Dollar declines.  The declining value of the US Dollar means that foreign producers charge more for their products to offset the decline in the value of the Dollar.  

In terms of oil, carefully note in the article above that the price rose even though stocks of both oil and gasoline are higher.  Why?  Oil producing countries are charging more for oil, over the long term, because the US Dollar is worth less.  Americans are going to pay more for gasoline and all of the goods that we import. 

Rising prices means that inflation could rise.  The Federal Reserve is now stuck.  Federal Reserve Chairman Ben Bernanke faces two basic ongoing choices: raise interest rates to prop up the dollar, but risk pushing the economy into a recession; or lower interest rates to stimulate the economy, but risk further declines in the dollar.  And, further declines in the Dollar simply push up consumer prices.  

Republican stewardship of the economy has been dismal – and hard working Americans will pay the price.