January 11, 2008

Taking Stock of the Bush Years

The Dow Jones Industrial Average (DJIA) closed at 10,587 on January 19, 2001. Today it closed at 12,606. There were times during the Clinton years when the DJIA was well over 11,000, but to be fair, one must use the benchmark established on Clinton's departure and Bush's inauguration when assessing how well even this somewhat irrelevant marker of national economic health has fared under George W. Bush.

Thus, the Dow has gained 2,019 points in the seven years of Bush's presidency. Dividing 2,019 by 10,587 = 19%; dividing this result by 7 = 2.7% per year. While the Bureau of Labor Statistics maintains tables for yearly inflation (increases in the Consumer Price Index), these are notoriously (almost hilariously, in a darkly humorous way) non-inclusive of the things an American citizen needs to buy in order to remain alive; nevertheless, even using these fantasy numbers, the overall inflation between January 19, 2001 and the present at least equals the average growth in the DJIA. If one were to undertake a serious analysis of the increase in the price of imported oil (from about $20 per barrel when Bush took office to a figure approaching $100 now, with concomitant increases in the price of gasoline), and the effect of increased transportation costs on the general cost of living, it's clear that during Bush's reign it would be optimistic to say that we've made no progress.

Sometimes the "subprime" mess gets talked about as if it were some adventitious growth on the otherwise healthy body politic. In reality, the subprime mess is the essence of how even the miserable performance of the American economy during Bush's years was achieved. Namely, with wages stagnant against steadily rising prices, Americans resorted to mortgage equity withdrawals (MEW, re-fi's with cash out, lines of credit) to the tune of about $800 billion per year in order to persist in their roles as the world's go-to consumers. This was Bush's "ownership" society; a chimera achieved by the Asian habit of lending money back to us at dirt cheap rates in order to sustain a housing bubble to use as a home-sized ATM for the vanishing American junk-buying junkie.

That's over now. Wall Street is freaking out because Americans aren't buying anything anymore, the MEW game is up, and the economy, which depended on consumer buying for 70% of its life blood, is now on a heart-lung machine. There will be no revival in the short term. If you think you've seen flop sweat on Bush's brow in the past over such debacles as the American occupation of Iraq and the Katrina fiasco, you ain't seen nothin' yet. The candidates running for president, mostly old white men with secure personal fortunes who made their money, in many cases, from using their political connections, can't talk about this unnerving reality because it's too negative for Americans to face. Instead, having presided over a political system which has bankrupted the social entitlement programs beyond redemption, and will thus visit an unsustainable burden on GensX&Y, they talk about assuring that today's youth will enjoy the same prosperity which they knew as boys. In truth, the Old Ones will be lucky if they do not become the main course at a GenX&Y Cannibal Banquet.