Bushonomics A new Center for American Progress report released today --
Understanding Bushonomics: How We Got Into This Mess In the First Place -- documents "the extraordinary transfer of wealth that took place between ordinary households and the extremely well-to-do and the effort by this administration to address the consequences of that problem without addressing the root cause." Senior Fellow Scott Lilly argues that while the "
economy did in fact grow at a reasonably strong pace through most of the Bush presidency" and "the hourly productivity of American workers" increased by "
more than 19 percent," average Americans did not reap the benefits of economic expansion. Instead, President Bush's economic policies redistributed wealth to the richest Americans and left the majority with
stagnating wages and declining household incomes. The transfer "drained the American consumer of the resources needed to keep the economy humming" and led the administration to stimulate the economy by expanding credit -- an action that
only weakened "our long term capacity for growth," he concludes.
WEALTH GOES TO THE RICH: The Bush administration directed its economic policies and the benefits of economic growth towards a
narrow segment of the population, the wealthiest Americans. Looking at the effects of the first three Bush tax cuts, the Congressional Budget Office concluded that "the percentage by which the effective tax rate was cut for high-income families was
nearly twice the rate cut for those in the middle of the income spectrum." Meanwhile, the administration's failure to raise the
minimum wage coupled with its poor enforcement of federal wage and hour laws, trade agreements, and
union rights further
undermined the economic security of middle and lower-income Americans. Consequently, between 2000 and 2006, "those among the top 10 percent of all households on average increased their income by about 2 percent, while those in the bottom 90 percent
lost more than 4 percent." The "biggest beneficiaries of U.S. economic growth that occurred between 2000 and 2006 were
U.S. corporations," the report concludes. While corporate profits grew "at a little less than two-thirds the growth rate of the gross domestic product" during the second half of the 20th century, between 2000 and 2006, "corporate profits grew nearly four times as fast as GDP,"
increasing by an estimated 66 percent.
NO TRICKLE DOWN: The newfound prosperity of the top 10 percent of families, "which accounted for 95.3 percent of the nation's income growth between 2002 and 2006,"
did not trickle down the economic spectrum, and left most Americans incapable of absorbing the rising output of consumer products. Recognizing the precarious condition of the U.S. consumer, corporations retained their extra profits,
invested little in new commercial structures such as factories and office buildings, bought back their own stock, and "increased dividends rather than expand capacity." High-income individuals absorbed some of the extra output by
consuming luxury items, but most of their "increased income
went to savings rather than consumption," Lilly writes.
A POOR FIX FOR DEMAND: With families unable to absorb the extra production, the Bush administration tried to keep the economy growing by ordering the Federal Reserve to drastically lower the Reserve's Discount Rate, "the interest rate charged by the Federal Reserve to member institutions
for short-term lending." By 2002, the Fed Reserve Discount Rate dropped to
0.75 percent and "the dramatic
reduction in the cost of money to member banks began a frenzy of economic activity." The biggest effect was in-home mortgage refinancing. "Extremely low interest rates...made it possible for hard-pressed consumers to
maintain and even improve their living standards by taking equity out of their homes," Lilly notes. But "the dramatic expansion of credit created excessive debt and distorted the price of housing. It also
weakened the dollar, pushing up oil prices."
JUSTICE -- MUKASEY APPOINTS TORTURE APOLOGIST AS CHIEF OF STAFF: Yesterday, Attorney General Michael Mukasey appointed Brian Benczkowski to <a target="_blank" href="http://app.mx3.americanprogressaction.org/e/er.aspx?s=785&lid=8399&elq=B2F59B597E824081891363A97DF26976">serve as his Chief of Staff. As TPMMuckracker
reminded readers yesterday Benczkowski is one of the Justice Department's torture apologists. As deputy assistant attorney general, he wrote a letter declaring that if torture "is undertaken to prevent a threatened attack,
rather than for the purpose of humiliation or abuse," it doesn't violate the Geneva Conventions' ban on "outrages upon personal dignity," and is thus presumed to be legal. He wrote that for a torture act to violate the Geneva ban, conduct "
must be so deplorable that the reasonable observer would recognize it as something that should be universally condemned." Benczkowski invoked the torture "
ticking bomb scenario," which, according to Jack Cloonan, 25-year veteran of the FBI's interrogation unit, is "
a red herring." Cloonan said that "in the real world, it just doesn't happen." Announcing Benczkowski's appointment yesterday, Mukasey declared he "has been one of my closest advisers in the Department," and praised his "
exceptional judgement."
ENERGY -- FEDERAL PROGRAM HELPING POOR COUNTRIES WITHSTAND CLIMATE RELATED HAZARDS SHUT DOWN: Due to the "
shrinking of federal science budgets," the
National Center for Atmospheric Research (NCAR) has shut down a program "focused on strengthening poor countries' ability to forecast and withstand droughts, floods and other
climate-related hazards." The move to close NCAR's
Center for Capacity Building (CCB) "is
being denounced by many experts on environmental risk, who say such research is more crucial than ever in a world with rising populations exposed to climate threats." The CCB was established in 2004 and "built on
decades of work by its director, Michael Glantz, a political scientist who has focused on the societal effects of natural climate extremes and any shifts related to accumulating greenhouse gases." "Knowledge related to the societal dimensions of global environmental problems is fundamental to efforts to arrive at practical and effective solutions," said Dr. Pielke, a former staff scientist at the center, adding that the cut "undermined an
increasingly important branch of science." NCAR's director, Dr. Eric Barron, said that the cut was "unavoidable given the
steady erosion of the center's budget."
CONGRESS -- BOEHNER GOLFING WHILE HOUSE GOP PLAY FOR OIL DRILLING ON CAPITOL HILL: Since last Friday, House conservatives have been engaged in a
political stunt on Capitol Hill, staging fake sessions on gas prices while Congress adjourned for recess. The Hill newspaper
reported last night that conservatives plan to continue their protests "for at least the next two weeks -- right up to the start of the Democratic Convention in Denver" on August 25. In a memo yesterday, House Minority Leader John Boehner (R-OH) said, "Republicans will not rest until we have an honest, up-or-down vote on the American Energy Act." In a
separate memo on Tuesday, Boehner demanded that Democrats return to the Capitol, saying, "Congress doesn't deserve a break...Democratic leaders [need] to return to Washington -- today." Yet while his colleagues have been forgoing vacation to fight for oil drilling, Boehner has been at home and "has found time to
squeeze in a couple rounds of golf." The Minority Leader was spotted
on at least two occasions playing golf in his home state of Ohio this week, with one outing reportedly to raise funds for his political action committee. In his absence, House Republicans have turned to former Speaker
Newt Gingrich to lead the way.
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