| Not So Fast |
17 January 2003
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Greenspan Rains of Bush's Tax Cut Parade
George W. Bush has followed arch-conservative theology in his economics policy, putting together a plan that will reduce taxes on the richest Americans to help stabilize a slow economy. Alan Greenspan, Chairman of the Federal Reserve, dumped buckets of cold water on the idea in his latest testimony before Congress. Despite that, Bush will prevail and back his way into a slight improvement.
America's GDP grew last quarter, so talk of a recession is silly. And of course, Mr. Greenspan has forgotten more about the economy than Mr. Bush ever knew about everything. However, he is also fighting the last economic war. Inflation is not dead, but deflation is a serious problem, and with millions of Americans in debt, a decline in the buying power of the dollar could be key to righting America's economic boat for the long-term.
What Mr. Greenspan ignores, because it is not his job, is the jobless feature of the current recovery. The employment scene in the US has lost 2 million jobs or more in the last year. That's 2 million voters who have a reason to oust Mr. Bush. So, the administration will cut taxes on the richest Americans, and wait for the wealth to trickle down.
A side benefit to this could be increased inflation due to budget imbalances. Debtors (i.e., most Americans) benefit when the value of the currency declines, while creditors suffer. The consumer spending boom of the last few years has kept the economy afloat, and for those who borrowed, Mr. Bush may have found a way to relieve the burden -- quite unintentionally.