Thom Hartmann / Independent Media Institute
JUN 19, 2019
If he times it right, Donald
Trump might set back the Democratic Party for a generation or more; if he
misses, he’ll go down in history along with Herbert Hoover as the guy who
brought the nation an economic disaster.
Back in 2007 and early 2008,
many of us were convinced that an economic crash was coming, and that George W.
Bush and his Treasury secretary, Henry Paulson, and Fed chairman, Alan
Greenspan, knew it.
And we also thought that they
were doing everything they could to hold it off so it would happen after the
2008 election, so if a Democrat was elected they could say the crash was
because people were “worried about the incoming Democrats,” and if McCain won
it would be his problem, not Bush’s.
It appears that Trump may be
doing the same thing, only, as with so many of his High Crimes (a phrase that
includes “serious
misuse or abuse of office”), he’s being much more public about it. On June
15, he tweeted, “if anyone but me takes over… there will be a Market Crash the
likes of which has not been seen before!”
The question now is whether
he’ll have the same bad luck Bush did in not being able to forestall it by a
year or so.
Bush knew the business cycle
that had cranked up during the late 90s was coming to an end, and he,
Greenspan, and Paulson did everything they could to hold it off.
Between 2001 and 2003, he pushed
through Congress and signed fully three major tax cuts for wealthy people and
businesses, including massive cuts to dividend and capital gains income. This
poured hundreds of billions in borrowed money into the economy, wiping out the
$236 billion budget surplus Bill Clinton had left him and throwing us into a
$458 billion annual deficit in 2008.
To further goose the economy,
Bush and Cheney illegally got us into two wars, raising defense spending from
the $290 billion ceiling it had hit during the 1990s to over $595 billion in
2008, pouring literally trillions into the defense industry.
In particular, the old Ayn
Rand cult member and acolyte Alan Greenspan got into the act by lowering the
Fed funds rate—the basis of U.S. interest rates—from 6.5 percent at the end of
2000 to below 2 percent in 2002. Greenspan kept the interest rates below 2
percent right up until just after the election of 2004, when he let them float
up slightly. Bush rewarded his good efforts by reappointing him as Fed chair in
2005, which many speculate was why he’d jacked up the economy so hard leading
up to the election of 2004, giving Bush a credit-fueled “feel good economy.”
And it was insanely
credit-fueled. Between 2000 and 2006, housing prices in the United States
doubled because the low interest rates, combined with repeated Republican
deregulation of the banking and security sectors, allowed millions of
unqualified new home buyers into the marketplace, driving demand toward the
sky.
Trump, Steven Mnuchin, and
Jerome Powell have virtually cloned the process, from tax cuts to defense
spending to low interest rates, and the inevitable result is increasingly
obvious to financial publication opinion writers. Op-eds in staid publications
like the Financial Times and the Economist are, with growing frequency,
somewhere between, “The sky is about to fall!” and, “There’s a meteor coming
the size that wiped out the dinosaurs!”
And with good reason.
The entire “supply side” scam
that if the rich people get richer it’ll help us all is totally discredited,
but, in deference to their billionaire donors, the GOP still clings to it.
Their policies, true to their proclamations, have raised the wealth of the top
1 percent by a total of $21 trillion just in the years since Reagan’s last
months in office, leaving them sitting on over $30 trillion in assets and cash.
In fact, though, demand is
what drives economies. And, while rich people might buy a few yachts and fancy
mansions, it’s the purchasing power of the bottom 99 percent that is known by
economists as “aggregate demand” and actually moves marketplaces.
Reaganomics—the neoliberal
economic system we’ve been living under continuously since 1981—has wiped out
the purchasing power of the bottom 99 percent. In the same time that the rich
have gotten $21 trillion richer, the bottom 50 percent of Americans have lost—vanished,
gone forever, lost—over $900 billion.
Cheap credit is the only thing
that’s keeping most Americans buying anything beyond groceries and medicine,
and both of those are exploding in price because of climate change, monopoly,
and fraud. It’s not a question of if, but when the working people of America
will stop going deeper and deeper in debt simply to maintain their current
lifestyles.
And as more and more Americans
downsize their housing or even become homeless (we’re the only developed country
in the world to have homeless teachers, nurses, and fast-food workers), their
ability to keep the American economy afloat will collapse even with 1.5 percent
interest rates. Right now, half of us would get wiped out by a medical or car
expense of just a few hundred dollars, having to turn to friends, family, a new
credit card, or GoFundMe to stay afloat.
Back in 2007, I started
refusing to read advertisements on my radio/TV show for banks and subprime
lenders. It infuriated our advertising sales team, but I was openly warning
people on the air that an economic winter was coming, and couldn’t in good
conscience then tell them to take on more debt.
We’re there again. In some
very real ways, in fact, we never got out of it.
Over the past five years, if
there had not been a multitrillion-dollar increase in government, corporate,
and individual borrowing, the U.S. economy would have contracted,
rather than grown.
All of our national
economy’s growth has been on borrowed money for all of Trump’s
presidency: there’s quite literally no “there” there.
This is not how a
healthy economy is supposed to work; instead, Trump is maintaining and
inflating an economic Potemkin village, a pretend economy made out of
cardboard, chicken wire and bubble gum that will collapse in the face of the
first stiff economic wind.
If Trump and his collaborators
can hold back the winds until November of next year, the GOP has a chance in
the elections.
And, as a bonus for Trump, if
Democrats sweep the 2020 elections and Powell and Mnuchin pull out the
economy’s temporary props right afterward, crashing the economy, Republicans
will blame Democrats for the ensuing economic disaster for the next generation
or two.
On the other hand, if Trump
can’t pull it off, get ready for some epic tiny-finger pointing.
And a crash before the
election could offer our nation an opportunity, should Democrats nominate an
actual progressive who will take us off the neoliberal Reaganomics we’ve
suffered under since 1981.
A 2021 return to New Deal
Keynesian economics, which rescued America after the Republican Great
Depression and built the strongest middle class in history between 1933 and
1980, could return working-class Americans to opportunity, life, liberty,
and the pursuit of happiness.
In either case, winter is
coming, and we all need to be prepared, both politically and economically.
This article was produced by
the Independent Media
Institute.
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