The Levy Institute at Bard College has churned out some of the best economic analysis on the current economy. I thoroughly recommend reading the latest working paper by Wray and Papadimitriou, "Understanding Deflation: Treating the Disease, Not the Symptoms".
While few analysts have been specific, most seem to be concerned about the possibility of a 1930s-style deflation. Irving Fisher called this a "debt deflation" and Hyman Minsky was fond of pointing out that while output prices fell by only 25% during the Great Depression, asset prices fell by 85%. That is, unlike most current commentators, both Fisher and Minsky emphasized falling asset prices most prominently of equities and farms in the case of the 1930s, not falling indices of output prices.
This is not to imply that the two price systems are unrelated. In Minsky's view, competitive pressures and inadequate demand due in large part to declining investment spending as well as inappropriate fiscal policy led to falling sales and output prices. This in turn led to lay-offs and pressure to cut wages. Falling wages, however depressed demand further and led to a vicious cycle of price cuts, declining wages, and falling employment and sales. That was bad enough. But because the 1920s had been marked by a runup of private sector debt (the first consumer debt explosion occurred in the 1920s as households financed purchases of the new electronic products made available; farmers had borrowed heavily to finance land purchases; and the finance of investment by firms had changed markedly with the rise of what Rudolf Hilferding called "finance capitalism", to rely on greater external finance), and because debts are in nominal terms, falling sales prices and wages made it impossible to service the debt. Defaults snowballed and brought down the banking system, wiping out the savings of depositors.
Minsky liked to say that the financial system became "simplified" as most of the financial assets and liabilities disappeared. The lasting effects were fear of indebtedness, and hence financial conservatism, as well as destruction of banker/borrower relations that impeded recovery and contributed to the decade-long depression (made worse, as discussed below, by errant fiscal constraint).
This analysis points out that the deflation was mainly in asset prices, and the result of excessive "inflation" in asset prices that had occurred before the crash. In order to afford the higher priced assets (as well as everything else being produced), households, businesses and financial concerns borrowed heavily, and were thus unable to raise enough cash to pay those debts when economic activity subsided. Defaults spread to the banking system, to the point where the lending system could no longer function. While Minsky is mostly associated with Keynes, and Fisher was a neo-Classical economist, this is a very Austrian concept.
The three types of policies used during the Great Depression to fight deflation were price supports to prevent falling prices, employment programs to boost demand and prevent falling wages, and monetary policies (monetary injections and lower interest rates) in order to boost lending, consumption and investment. Ultimately, few of these have much impact on asset prices, as the contraction of credit is a much more powerful economic force. It is possible to re-inflate by bailing out the lenders, something that the paper notes about the Savings and Loan bailout of 1991.
When the savings and loans failed, the Bush (senior) administration's rescue plan was formulated and executed in such a way that asset prices were depressed by fire-sales of thrift assets by the Resolution Trust Corporation. As it turned out, this did not generate a general asset price deflation because the long 1990s expansion together with the post-1987 stock market bubble allowed asset prices and financial institution balance sheets to recover.
But this is not a permanent solution, as the bailout of bad lending decisions only emboldens lenders to make even riskier decisions in pursuit of profits, knowing that the government will step in to cover for any mistakes. This leads to what Minsky called "Ponzi Finance", which results in an even greater possibility of a default-driven deflation. In Minsky's terminology, today's economy (taken as a whole) is much more fragile than it was during the S&L crisis.
While the paper offers the stock solution that increasing government spending to compensate for reduced private spending is the most effective method for fighting deflation, the Austrian argument is that this fails for precisely the same reason that the monetary solution is vilified. The underlying problem is overconsumption (and its corollary overproduction) from the previous boon. Government spending thus becomes the "bailout" for bad consumption and production decisions. The case of Japan is indicative. While no recovery was apparent for more than a decade, government's proportion of consumption rose by half from 26% to 39% of GDP. Much like private businesses bad lending decisions shift to the Fed, the private sectors bad spending decisions shift to the government, which in the U.S. case is much more precarious as a global borrower than during the 1930s, when we were a heavy net creditor to the rest of the world.
The Austrian "solution" is to let the economy contract. While this is unsatisfying for most people in that it is a "do nothing" solution, there is plenty of leeway for government to relieve their citizen's suffering. We have unemployment compensation, welfare benefits, food stamps, subsidized job training programs, Medicare, and other programs that help people survive through bad economic times. But trying to prevent recessions is much like pumping oneself full of amphetamines and trying to keep working, rather than just taking cold medicine and bedrest. The medicine only treats the symptoms, yes, but there is no cure for a cold, just as there is no "cure" for a recession. Like a boom, it is half of the economic cycle.
Perpetual boom, as Minsky noted, actually makes economic agents weaker. They save less and spend and borrow more. They make poor lending decisions based on unrealistic expectations (can anyone say Internet stocks). As a result, when the economy faces problems they are less financially able to deal with them. It really doesn't help that the Administration is specifically directing benefits to the rich and privileged - you can be an Austrian and a liberal - but the Fed is not able to force banks to make better loans or businesses to make better investment decisions. Nor is the government able to get consumers to save money to finance productive investments. The current growth is just a respite. The next dip will be even more dangerous.
Yesterday's report got me thinking, and I went back through the historical GDP and employment data back to 1939. Before yesterday, was there ever a time where the economy grew by 7% or more yet employment shrunk? Turns out there was. In the third quarter of 1951, during the Korean War, GDP grew at an 8.34% annual rate yet employment fell by 0.23%. That was the only instance in recorded history. (Quarterly GDP data began in 1947, the Current Employment Statistics data begins in 1939).
To be fair (to Harry Truman), the economy was growing at a 5.2% rate for the entire previous year (versus Bush at 3.4%). In addition, even though employment growth was negative for the quarter, in September 1951 employment had grown 3.2% over the previous 12 months. Today, employment growth has fallen 0.3% the past 12 months.
Still curious, I went back and examined if GDP had ever grown 5% over any 12 month period while employment had fallen (annual GDP data goes back to 1929). Nothing. I lowered the GDP parameter to 4%: still nothing. How about 3%? Finally something. In the first quarter 1950, GDP had grown 3.9% over the past 12 months yet employment had fallen 0.6% over the same period.
Mind you, this was right after the post-WWII recession, and quarterly GDP had just put up a 17.6% growth rate for the first quarter, enough to push GDP positive while employment lagged. In the second quarter of 1950, GDP grew at a 12.6% annual rate and employment increased at a 12% annual rate. Now that was a recovery.
Outside of a freak quarter in 1950, the economy has NEVER grown above 3% for a 12-month period without adding jobs before Dubya was elected. And the Whistle Ass economy has managed to do this TWICE. In the third quarter of 2002, GDP growth was 3% over the previous year and employment had fallen 1%. [Update: an earlier version said this was the quarter of the previous tax cuts. It was not so that has been corrected.]
In a normal economy, GDP growth creates jobs as business needs more labor to expand production. Today, that doesn't seem to be the case, and this has never happened in recorded economic history. So will more quarters like this create jobs? We'll have to find out, but there are certainly plenty of impediments in the way. Capacity utilization is still under 80%. State and local governments are cutting their workforces to balance their budgets. Companies are still announcing layoffs to cut costs and recent surveys have not indicated they're ready to do significant hiring.
I hadn't intended to write anything more today, but as I'd had a 1pm meeting cancelled and have an hour before I'm expected to do anything, I'll add a comment by the wonderful Matt Taibbi.
But there is one new piece of equipment [in his car] that I’d like to discuss. I broke it out two weeks ago. It’s a white sailor hat covered with marks from a black magic marker. Residents in New Hampshire can guess what this is all about because it is a tribute to a New England sports legend, the great Bruins goalie Gerry Cheevers. Cheevers used to carve a notch in his mask and color it black every time the thing saved his life. He played a long time and by the end of his career, you almost couldn’t see any white in it. He was scarier than Jason.
I wear the hat every time I watch a candidate speak. And every time he mouths the phrase along the lines of, "It’s about creating jobs," I make a black mark. In two weeks, I have almost three dozen marks. The last one came at Wes Clark’s "major economic address" at the UNH-Manchester campus the other day ("That is why we need to do whatever is necessary to create jobs…"). John Kerry, I’ve observed, is good for two marks per appearance.
Certainly, Bush himself is serious about creating jobs, but there is a process of translating policy action to a change in the economic data that you want to influence. Simply based on the relative sizes, a $100 billion tax decrease isn't going to do much to turn around a $11 trillion economy. It instead is going to work in the same way most policy has been working, and at best will most influence the region of the economy it is most closely related to. This principle has been around for hundreds of years, most succinctly put in Richard Cantillon's Essai
If mines of gold or silver be found in a State and considerable quantities of minerals drawn from them, the proprietor of these mines, the undertakers, and all those who work there, will not fail to increase their expenses in proportion to the wealth and profit they make; they will also lend at interest the sums of money which they have over and above what they need to spend. All this money, whether lent or spent, will enter into circulation and will not fail to raise the price of products and merchandise in all the channels of circulation which it enters. Increased money will bring increased expenditures and this will cause an increase of market prices.
So as a housing bubble exists a central bank does not have to worry about printing too much money or allowing too much mortgage credit, as the inflation will end up mainly in home prices, something not measured very much in CPI, the statistic you consider inflation. In fact, if a situation arises where the bubble sends people fleeing out of apartments and into homes (something a Bay Area resident can keenly appreciate), the use of "owner equivalent rent" as a proxy for housing inflation will actually make prices seem rather deflationary.
But an unfortunate correlary to this process is that if your desired statistic is say, jobs, and the economy (despite much previous stimulus) has simply too much production capacity or maybe wages are too high relative to say, India, to really hire that many more workers, continually hitting the wrong lever to release the pellet is at best, unproductive. It actually may be counterproductive in the long run if it continues to exacerbate existing inequalities in the economy. The thirteenth rate cut is going to be as productive as the first, and the fifth tax cut, too. Kurt Richebacher points out this issue.
Manifestly, America's bubble economy of the late 1990s had its center in the most profligate consumer borrowing and spending binge in history. In particular the fact that consumption soared as a share of GDP towards 90% and higher, as against a long-term ratio of about 67%, bears this unmistakably out.
This really is the U.S. economy's key imbalance that is obviously the root cause of its protracted sluggishness. The underlying basic fact is that Americans, in the aggregate, have been spending and continue to spend in excess of their current income.
What is wrong with that? Why should excess consumption strangle economic growth? The short answer is, consumer spending in excess of income inherently means also in excess of production, and this part of consumer spending essentially emigrates to foreign producers, adding nothing to the U.S. GDP.
My wife and I are currently installing a wood floor in the master bedroom. The floor is a tongue-and-groove model and has to be installed in a certain way, tapping the narrow width of each plank together first and then the much wider length. I learned the expensive way to not try the reverse, a surface composed of large gaps between the boards and damaged joints from trying to hammer with enough force to correct the mistakes. Surprisingly, even when my technique was obviously not working, I'd continue to try the wrong method, because that was what I thought the video said to do, and would hammer harder (and cuss louder), while my better half looked at me in complete fascination with a "exactly how is more of the same supposed to work here?" About $150 of wood sits in our hallway. Hopefully, we'll be able to break it apart for the closets. We'll see.
Meanwhile, for Bush and his Democratic opposition its all about creating jobs. No matter how unaffordable housing gets, or medical care, or pharmaceuticals, or tuition, no matter how attractive it becomes to move those white-collar jobs to India, you can be sure the Fed and the Administration will be out there trying to hammer those boards together with all they have.
(Teddy places hand to the side of his face a la Jack Benny) Well...
There's really only one response to this. So where are the jobs?
Seriously, because if GDP is growing at the fastest rate in 20 years, where are the freaking jobs? Doesn't that seem rather strange to everyone?
How do we get 1.3 million more in poverty with this kind of growth rate? How do we get 2.4 million more uninsured? Are we really in some type of Bizarro Economy now?
Okay, the breakdown. Consumption provided 4.66% of the growth, investment provided 1.37%, "government" provided 0.27% and net exports provided 0.84%. Net exports? In a country with a $500 billion annual trade deficit? Okay, then.
Not surprisingly, because there is a housing bubble going on, residential fixed investment provided 0.92% of GDP growth and 2/3 of "investment" growth. Equipment and software "investment", heavily inflated by hedonic adjustments, provided another 1.18% of GDP growth. We can roughly estimate how much was imputed into that number by looking at current dollar versus 1996 dollar spending. Spending on computers and peripherals in cash dollars was up $5.9 billion to $88.3 billion. In "real" terms that increase becomes an increase of $35.4 billion to $390.3 billion. Total spending in equipment and software was up $36.5 billion to $1,036.0 billion in the quarter. Total private investment was up $36.2 billion to $1,644.5 billion. So there you go. All of the increase in investment was computers and peripherals, and 80% of that was imputed.
We certainly seem to have spent this tax cut. Compared to third quarter 2002, when everyone got $300 (or $600, or nothing, and then had to pay it back in 2003), consumption rose at a 1.7% faster annual rate (4.66% versus 2.93). I'll say this, reducing marginal tax rates seems to be more successful on the surface than a lump sum advance. Maybe that's why Bush is talking about more tax cuts.
And through all this, isn't it odd there is no inflation? The GDP deflator was 1.7% for the third quarter. Housing prices up 10%, the Nasdaq up 40%, the CRB index up 20%, but GDP inflation is running at a 1.7% annual rate. I have to say that seems weird.
It's doubly weird that the Federal Reserve, despite the best growth in 20 years, has no plans to raise interest rates from the lowest levels in 50 years for for the foreseeable future.
I'm not going to try and spin this. Normally, this kind of GDP growth is fantastic. We've been successful at reinflating our economy, and even better doing it for most of the rest of the world. Look at global industrial production statistics out this week: Portugal up 2.3%, Philippines up 7%, Singapore up 3.9%, Chile up 5.8%, Japan up 3%. In addition, we've done this with money growth practically stagnant, which is clearly out of the norm for the past two decades.
But it really begs the question of how this could be with unemployment claims just a whisker below 400,000? It also begs the question of what happens next? We get a huge boost from a tax cut this quarter, a war the quarter before, a big jump in homebuying thanks to people rushing in to buy homes before rates go too much higher. As a country, we're borrowing like gangbusters to finance all this.
As an economist, my litmus test to see if this is sustainable is if we're making productive investments, those that will result in more stuff for the future. The most productive investment is in industrial equipment: machines that make more stuff. In nominal terms, investment in industrial equipment rose only $2.2 billion for the quarter, and has fallen $1.4 billion over the year. (It is also indicative that investment in this category is less than 10% of total investment, with residential investment being 30%). This is consistent with industrial capacity running at 74.7% and manufacturing employment falling 640,000 over the past 12 months. While homeland security needing new computers is a boon for GDP growth in the short term, especially when we count the 1.2 Ghz processors at twice the price of the 600 Ghz ones built last year, we're really not adding to our long-run productive capacity.
Fourth quarter 2003 and first quarter 2004 data will be interesting. Fiscal stimulus has had a predictable consequence of increasing consumer spending in the short run. Investment has largely been either nonproductive residential investment or hedonically imputed into computer purchases. It has only cost us around $500 billion in government deficits and another $100 billion in trade deficits to provide this "growth". It kept housing prices rising at a $1.2 trillion annual rate. For all this we lost 41,000 jobs in the quarter.
While it always surprises me how we can push out the inevitable another quarter, how consumers can find a way to get one more credit card to max out, how businesses can increase earnings another 15% while sales remain in the single digits, how the Japanese and Chinese can still pump another $100 billion or so into U.S. treasuries and agencies to keep their exchange rate stable, it is certainly not what an Austrian economist would call a sustainable, robust economy. It instead seems like a manically inflated economy running entirely on the capacity to borrow. I'll definitely be interested on January 8th to see how much we've added to our $32.8 trillion bar tab.
The United States has become the consumer of last resort. We consume the world's production and exchange it for promises to pay it back in the future. Looking at GDP (our income statement) and the Z-1 (our balance sheet) shows that this fundemental disequilibrium is only growing worse over time. It cannot go on forever and it will end in tears. In the meantime we just have to expect more chaos in relative prices, while "inflation" remains tame. Another year of 10% health care premium increases and 2% cost of living adjustments for seniors. Another year of earning 2% on your CDs while paying 6% on your mortgages. Another year of tuition hikes and empty recruitment fairs. Another year of dipping into home equity to pay for it all. Could we see a $600 billion budget deficit for 2004? How many states will go bankrupt? A $1 trillion trade deficit? How extreme can it get before the whole infrastructure breaks apart? We do live in interesting times.
That's the $64,000 question. The data come out this Thursday. Working from the October forecast from Paul Kasriel, I can offer some amendments.
Top-line number: 4% (Northern Trust 5.5%).
Consumption Expenditures: 7.5% (6%)
Business Investment 5% (15%)
Residential Investment 6% (5.3%)
Change in Inventories -2% (-4.6%)
Government 0% (2.5%)
Net Exports -550.0 billion (-572.7 billion)
GDP deflator 1% (1.8%)
I think while the consumption number will be just fine and dandy (padded by auto sales in July and August - watch for that double-digit durables number), forecasts have really blown up business investment. The durable goods orders number has been far too unstable, and a lot of that has been hedonically adjusted software investment. I'd expect a lot more "investment" to be of the involuntary inventory ilk. And government spending just can't hope to increase from the heavily Iraq-loaded second quarter, unless they've already counted that $87 billion that has yet to be allocated. I expect the deflator to continue to lag behind true inflation, and that will make the "real" number look a lot better (as well as productivity down the line). The falling dollar is padding corporate profits, and should also reduce our trade gap slightly. Overall, I think that the number will be the forecast minus 1.75% (the contribution of defense spending), plus any actual growth in defense spending and inventories. The rest should be a wash.
Remember, GDP component growth in one quarter is not indicative of growth in the next; And you can tell an economist has a sense of humor when they include decimal points in their forecasts.
Today, it is the nature of financial sector liability expansion that we must carefully monitor to garner clues for important systemic liquidity developments. There has been a recent notable stagnation of money supply after several months of heady growth.
Clearly, there has been a tremendous flight to risk assets this year (out of the money market funds), but that doesn’t help much in explaining the dramatic monetary boom turned recent stagnation. There is also the issue of the collapse of the Refi boom that has played a role in the composition and holders of financial sector liabilities over the past several months. But talk of a collapse in net mortgage lending is poor analysis. Yet I do believe we can look directly to the recently mushrooming Fannie and Freddie balance sheets. They provide the best explanation for the abrupt stagnation of “money,” especially Money Fund deposits.
The GSEs have aggressively ballooned their holdings (mainly buying mortgages and mortgage-backs), providing liquidity to the banks, hedge funds, and Wall Street community. And, importantly, to finance this extraordinary balance sheet expansion, the GSEs have been issuing non-monetary IOUs/liabilities – long-term agency bonds (that are not a component of the “money supply”). Thus, we must appreciate that agency debt (as opposed to bank or money fund liabilities) has been over the past few months a predominant financial sector liability created in the unrelenting financial sector expansion (liquidity creation). The system has experienced tremendous liquidity creation resulting in little expansion of money supply components. This is a very atypical development in quite unusual times.
So I would tend to have my own view of the current liquidity situation: I believe the recent money supply stagnation is NOT indicative of generally faltering systemic liquidity. Indeed, it could be just the opposite. There is today a strange paradox of GSE induced over-liquefication financed by the issuance of agency bonds. Large quantities of these agency securities are being purchased by foreign central banks and international players recycling the raging surplus of global dollar balances. The Overriding Issue Remains Unrelenting Dollar Liquidity Excesses – an out of control Bubble of dollar financial claims creation. (At the same time, the grossly speculative and inflated U.S. stock market is a liquidity-Bubble accident in the making.)
I would wholeheartedly agree that money supply stagnation is not the result of lenders not wanting to lend (despite higher interest rates). But the largest money creation mechanism is mortgage finance, because so many households have been trading mortgage debt for purchasing power.
The Fed used to control money supply, but now it is mortgage and structured finance. Three developments created this monster: the deregulation of the banking and financial sector that started in 1980 (the last Depression-era Glass-Steagal laws were recently repealed), the massive pooling of income into mutual and hedge funds, and the steady and consistent reduction of interest rates from 20% in 1982 to 1% today. Now corporations can create money effortlessly with a special purpose entity - set up a shell company to take your debt in exchange for receivables (instant purchasing power). Households use their houses as an ATM, exchanging mortgage debt for instant purchasing power. That Alan Greenspan has not stepped in to get this mess under control shows his complete incompetance as a central banker.
As a result, the jump in mortgage rates has curbed the desirability of households to create money through the housing market. You can chart M2 and M3 over at Economagic.com if you want to see the results graphically. Look at the 10-year treasury yield: it starts to drop precipitously from 5.3% in April 2002 to a low of 3.1% in June 2003 and then spikes up again. At the same time MBAA's refinancing index skyrockets by a factor of 10, and M2 growth takes off. During the peak of the refinancing boom (April/June of this year), M2 and M3 were growing at 10% plus rates and MZM was nearing a 20% annual growth rate. When rates reversed, refinancing and money growth just stopped cold.
It appears that the response of the mortgage finance industry is that Fannie and Freddie are becoming the buyer of last resort, purchasing mortgages from profit-maximizing private lenders, like B of A. Lenders still need to make a buck, so other sectors pick up the slack. Money has just shifted to corporate and international debt markets, where corporate refinancing has just gone crazy and risk spreads have collapsed. GM and Ford (and Argentina) recently issued major debt offerengs that not only were oversubscribed, but at risk premiums several hundred basis points less than they were paying when things threatened to get very very bad just about a year ago.
We are seeing major systemic stress - but it is currently only mildly in the mortgage finance sector. Several of the Federal Home Loan Banks have reported losses. These entities swap duration with Fannie and Freddie and the slowdown in mortgage finance means they can no longer "make it up on volume". Secondly, a couple bond insurers are reporting very poor earnings. MGIC saw earnings drop 30%, even though rival Ambac increased coverage written by 47% year-over-year. Delinquencies continue to rise. It does not bode well for these insurers when their safest customers, municipalities like Pittsburgh, are starting to look at Chapter 9 as a realistic option.
But the main systemic stress is with the household sector. They have been the ones taking out nonproductive mortgage and consumer debt in spades, and now they're being squeezed from every conceivable angle. Their earnings are stagnating. Their expenses are rising. They are losing jobs with little hope of regaining an equivalent paying one. They already have record debt burdens and are being asked to spend more. They are also borrowing at increasingly poor rates (1% on CDs and 6% on mortgages is a -5% spread). GDP growth will occur only as long as they are able to do so. While Fannie can still stick out a hand and get them to extract equity in a crisis, after the crisis the river of credit runs dry.
So from here it just gets more difficult. If we don't get jobs improvement and/or if interest rates ratched up even 1%, that may be the final straw. The stock market, for one, is so far ahead of the economy that any downturn could be a disaster for houshold balance sheets. It also doesn't bode well for risk markets. Spreads could whipsaw on a moment's notice. We've gotten a minor recovery in GDP, but at what cost? As an economist, I have to think about the next downturn given such a meek "recovery". This may be the last chance for Americans to get their financial house in order.
A few years ago, people were talking about the largest intergenerational transfer of wealth in history due to take place, with boomers the recipients.
At one point, experts estimated that parents of boomers were worth an estimated $14 trillion to $18 trillion. One report projected that about $10 trillion in bequests would go to boomers between 1990 and 2040, or an average of $90,000 per bequest.
But for many experts, that view has changed.
"All along, boomers may have been counting on this as part of their retirement income stream, but they've been barking up the wrong tree," says Dr. Sandra Timmerman, a gerontologist and director of the MetLife Mature Market Institute, which studies aging issues.
The president tells us the economy is accelerating, and the statistics seem to bear him out. But don't hold your breath waiting for your standard of living to improve. Bush country is not a good environment for working families.
In the real world, which is the world of families trying to pay their mortgages and get their children off to college, the economy remains troubled. While the analysts and commentators of the comfortable class are assuring us that the president's tax cuts and the billions being spent on Iraq have been good for the gross domestic product, the workaday folks are locked in a less sanguine reality.
It's a reality in which:
• The number of Americans living in poverty has increased by three million in the past two years.
• The median household income has fallen for the past two years.
• The number of dual-income families, particularly those with children under 18, has declined sharply.
The administration can spin its "recovery" any way it wants. But working families can't pay their bills with data about the gross domestic product. They need the income from steady employment. And when it comes to employment, the Bush administration has compiled the worst record since the Great Depression.
Jared Bernstein, a senior economist at the Economic Policy Institute, has taken a look at the hours being worked by families, rather than individuals. It's a calculation that gets to the heart of a family's standard of living.
The declines he found were "of a magnitude that's historically been commensurate with double-digit unemployment rates," he said. It was not just that there were fewer family members working. The ones who were employed were working fewer hours.
these are some of the things working (and jobless) Americans continue to face:
• Sharply increasing local taxes, including property taxes.
• Steep annual increases in health care costs.
• Soaring tuition costs at public and private universities.
Families are living very close to the edge economically. And this situation is compounded, made even more precarious, by the mountains of debt American families are carrying — mortgages, overloaded credit cards, college loans, etc.
The Bush administration has made absolutely no secret of the fact that it is committed to the interests of the very wealthy. Leona Helmsley is supposed to have said that "only the little people pay taxes." The Bush crowd has turned that into a national fiat.
A cornerstone of post-Depression policy in this country has been a commitment to policies aimed at raising the standard of living of the poor and the middle class. That's over.
When it comes to jobs, taxes, education and middle-class entitlement programs like Social Security, the message from the Bush administration couldn't be clearer: You're on your own.