Bush facing growing concerns about US economy

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During his African tour this month, there were both questions about the invasion of Iraq and jokes about president Bush, especially relating to the growing US budget deficit. On Iraq he was asked about Iraq’s alleged purchase of uranium from Niger. This allegation was made by Bush in his state of the union address last January, and was one of several reasons given for attacking Iraq. The WMD story has similarly been discredited, although it is now being peddled as Saddam’s having had a WMD “programme.” British prime minister Tony Blair has been criticised too, and has used the same tricks to try to wriggle out of a tight spot.

On the economic front there is some amusing stuff on the Internet. What are the reason for the American economic decline and the growing budget deficit, Bush was asked. “Our main problem is that the majority of our imports come from foreign countries!” When pressed to explain what his team was doing about it, he is supposed to have said, “Well, now that we have liberated Iraq…we won’t need to import oil any more.” But the US’S woes are deeper than Bush’s mildly amusing explanations, real or imagined. Not only has the US incurred a trade deficit of $136 billion in the first quarter of 2003, more than most countries’ total annual budgets, economists have also raised serious doubts about the US’s ability to pay its way.

There are several reasons: the USis suffering from what one historian, Paul Kennedy, has called “imperial overstretch.” It now has forces in 10 countries. In neither Iraq nor Afghanistan (in particular) are the Americans finding life easy; cartoonists have already renamed Iraq the “quagdad.” Testifying before the congressional armed services committee on July 10, general Tommy Franks, former chief of US Central Command, who masterminded the assault on Iraq, admitted that US forces are likely to be in Iraq for five years or more, facing increasing resistance. The same day, two more US soldiers were shot dead in Iraq. Morale among troops has hit rock-bottom, according to the New York-based Village Voice newspaper (July 6). The same goes for its involvement in Afghanistan.

Second, since September 2001 foreign investment, hitherto the mainstay of the US’s economy, has dried up, and an estimated $100 billion leaves the country annually. Third, the Internet bubble has burst. There was much hype before 2000 about the problem of Y2K; it was mostly a big hoax, but it sucked millions of people into the information technology (IT) business. Since then there has been a meltdown in the IT sector. Finally, the US has stretched itself domestically by using money from social security assistance and employment benefits to finance grandiose short-term projects. Again, several economists have warned of the consequences of such policies, but Bush and his ideologically-driven team are not prepared to listen.

So far the American public has been hoodwinked into believing every story about the “terrorist” threat, which is being used to keep them from worrying about the economy, but some are beginning to see through this ruse. Initially, only foreign residents were affected, so most people did not care, but now more Americans are being hit directly. There is little or no investment in new projects, no money is available for venture capital, and more and more Americans are being put on temporary work. These are all signs of serious trouble, aggravated by a growing boycott of American goods abroad. Together with Israel, the US has become one of the most hated countries in the world.

Writing in the Dallas Morning News on June 13, Scott Burns explained the underlying problems with US accounting and economy. He said that economists who had worked on “generational accounting”, a procedure that takes into consideration the US government’s long-term financial obligations, were sidelined when it came to presenting the budget. These economists had worked at the behest of then US Treasury secretary Paul O’Neill to give an accurate picture of the government’s obligations. Bush asked O’Neill to sell his $350 billion tax-cut for the rich. Unable to reconcile this proposal with economic reality, O’Neill resigned in January.

According to Burns, the economists’ estimate included the formal debt of the US Treasury plus equally serious government promises to provide retirement income and medical care to future generations. The economists projected that “the true obligations of government are 10 times larger than the Treasury debt held by the public. It shows the current value of these unfunded obligations is a mind-numbing $43 trillion.” The US Federal Reserve recently put the net worth of all American households at $39 trillion. The American Enterprise Institute, a conservative thinktank close to Bush and his associates, has confirmed similar findings in its recent report.

How is the government going to meet such obligations? One way is to rob other countries, as it has done for generations and is trying to do in Iraq, but this policy has to confront the reality that those who are being occupied will resist.

Neither the Afghans nor the Iraqis have rolled over; in fact their resistance is increasing, as are American casualties. The Iraqi adventure is also costing $4 billion per month. It was supposed to be a “cakewalk”; once it was in, the US expected that it would simply collect the goodies and take them away. The reality has turned out to be different. American soldiers in Iraq would give their life’s savings to be out of the hell-hole, according to US congressmen who have received mail from them.

Militarily the US is so strong that nobody can meet it head on. Economically, however, it is vulnerable. Those at the receiving end of its aggression can go for its soft underbelly. The American giant can be defeated; it only needs some imagination to come up with workable strategies.

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