Bush Administration Tries To Run Out The Clock
Andrew Samwick, one of my bloggers-in-crime here at Capital Gains and Games, had an interesting post on Thursday about whether we're in a recession.
Andrew was speaking like an oustanding economist, which he is. I can report that after spending most of the past week talking at conferences sponsored by two of the largest brokerage firms as well as doing separate meetings at several individual offices of a third, there is little doubt that the people on the ground have already concluded the downturn is real.
And that was before the Bear Sterns bailout.
I can also report the same thing from Washington, or at least from Capital Hill: for the average member of Congress, the economic problems are already a recession. They don't need and aren't going to wait for the NBER to confirm it.
If that's the case, why did President Bush tell the Economic Club of New York on Friday that this is just a bump in the road?
It's simple: as has been the case since the start of the Bush presidency, when it comes to economic issues the White House is trying to run out the clock, that is, to get to Inauguration Day in January 2009 without having to do anything and leave the problem for the next president and Congress to admit and deal with.
The budget is the best example of this persistent economic policy rope-a-dope. It's now completely obvious that Treasury Secretary John Snow's often-repeated comment that the deficit was "manageable" only meant that it would explode as a problem after the Bush administration ended. The White House had no plan for dealing with it.
The same is true of the way the administration financed the trillions of dollars in national debt it was piling on with its manageable deficits: It increasingly used short-term borrowing. Why use longer-term debt with its higher shorter-term rates when that would increase the interest payments while George W. Bush was in office and the benefits would be enjoyed by subsequent administrations?
The White House is now doing the same thing on the economy as a whole. If the script holds, it will deny anything is a wrong for as long as possible and will never admit that its policies have had anything to do with the problem.
That means that congressional actions will have to have substantial support to get around what will otherwise be an almost certain presidential veto for additional federal spending and tax changes that don't extend the tax cuts enacted in 2001 and 2003. That will be exceedingly hard to come by in an election year.
It also means that, as we saw with the Bear Sterns situation, the major responses will have to come from the Federal Reserve and private sector.