It’s the Economy Stupid

The Iraq war wrangling is now getting stoked to new heights and Bush’s popularity has plunged. He has come out swinging, hoping that by being aggressive he can sway enough middle ground voters to stop the rot. Can he? Not if the economy starts to falter as it is showing signs of doing. Inflation is creeping back up. Yes I know that the pundits always drop out energy and then claim inflation is benign, but no one I know can simply drop energy costs from their monthly bills. So for real people inflation really is rising. Which is not good news because the Federal Reserve Board will have to raise interest rates to apply the brakes just when consumer demand is weakening: car sales dropped sharply last month, and consumer confidence is slipping. Employers have heard this message too: they slowed down hiring last month in anticipation. The Fed. erred badly by not raising rates a couple of years ago when consumers were gaining confidence. Had they done so they could have reined in house prices, and prevented the calamitous drop in savings we have seen [the U.S. actually has negative savings and can only survive by sucking in money from around the world at the rate of about $500 million a day]. Those twin deficits, in the Federal Budget and in Trade, are beginning to loom larger as well: long term interest rates are also rising. Add in the fact that wages have been stuck for the fifth year in a row [a record in the U.S.] and the economic horizon has clouds gathering. Can George fend off those economic blues? Not with his current policies which are focussed exclusively on tax cuts for the wealthy, and benefit cuts for middle and low wage earners — exactly the people being squeezed most by inflation, interest rates increases and weak wages. On further thought, George has no economic policy, his lack of interest is demonstrated by the doofus he has running the Treasury Department. So by the mid term elections next Fall we will have had more inflation, higher interest rates, and weaker wage or job prospects. No wonder Republicans are getting worried, sooner or later it always comes down to the economy, stupid!