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’Good economy’ remains an illusion

by Open-Publishing - Friday 5 May 2006
11 comments

Economy-budget Governments USA

’Good economy’ remains an illusion

By Ernest F. Hollings

With the Iraq debacle, the Washington establishment campaigns for the elections in November on: "The economy is good, the economy is good." As in the old movies, let’s have a "preview of coming attractions."

First, Washington hasn’t paid a bill in five years. Inheriting a budget "with surpluses as far as the eye can see," the president and Congress have been spending. In five years they have added $2.5 trillion to the national debt. Beginning in 1789, we paid for all the costs of wars and government before this nation reached a trillion dollar debt in 1982. The $300 billion Iraq war didn’t cost $2.5 trillion. The Congressional Budget Office now projects that interest costs on the national debt next year will exceed $1 billion a day ? $399 billion. Spending $1 billion a day for nothing. We have just paid personal income taxes to the government ? amounting last year to $927 billion. This means that with interest rates rising the government will spend almost half of its personal income tax take for nothing. To keep the government going we have to borrow about $2 billion a day.

How have we gotten by with this scandalous conduct? The answer is by China and Japan financing our deficits. Japan now directly holds $673 billion of our Treasuries and China $265 billion. China could stop financing our deficits and we would be in trouble.

To observe a good economy, everyone cites that the GDP (Gross Domestic Product) grew last year by 3.6 percent and today’s unemployment is low at 4.7 percent. No influence in finance is more corrosive or less recognized than the systematic distortion of U.S. economic reality by government agencies. The government’s greatest deception is quoting a deficit less than it is. For example, rather than subtracting spending from revenues, the government credits Social Security surpluses to Social Security and then spends the surplus, reporting a less than actual deficit. I authored the law forbidding the president and Congress from citing a deficit figure that includes Social Security money.

Ignoring the law, President Bush states on page 4 of the U.S. Government Budget for FY 2007: "We now project that the 2006 deficit will come in at 3.2 percent of GDP, or $423 billion ?"

But turn to page 334 of the same budget where it shows the gross federal debt from FY 2005 to FY 2006 increasing $706 billion ? a deficit of $706 billion instead of $423 billion.

The same monkeyshines are employed by the government in reporting the GDP, the CPI (Consumer Price Index), and unemployment. After World War II, the government measured GDP with consumption as 70 percent of the measure. At the time, all we consumed we produced. But today, half of the goods that we consume are produced abroad, and the reported GDP is flawed. For example, the official government GDP figure for the fourth quarter of last year is 1.7 percent. But according to John Williams, a respected conservative Republican economist, the figure "should be close to 2 percent contraction." Alan Greenspan and the Boskin Commission appointed by Congress jimmied the CPI to lessen Social Security payments. Rather than about 3.4 percent, Williams reports that "real CPI right now is running at about 8 percent."

The Clinton administration jimmied employment figures by reducing the number of people surveyed in the inner cities. Now with proper labor force growth, Charles McMillion, a noted Washington economist, reports an unemployment rate at 7.6 percent instead of 4.7 percent.

In the last five years we have lost 2.9 million manufacturing jobs. To keep us going, the government has cut taxes and goosed the economy with $2.5 trillion in "hot" checks to create jobs. Paul Craig Roberts, Ronald Reagan’s economist, states: "No sane economist can possibly maintain that a deplorable record of merely 1,054,000 net new private sector jobs over five years is an indication of a healthy economy."

With 17 percent of our manufacturing work force lost, economic support of the government diminishes.

When the economy is good, that’s the time to start paying down the debt. But Congress doesn’t really believe the economy is good. It is set to cut taxes to make sure the economy gets it by the election.

Ernest F. Hollings served as a U.S. senator from South Carolina from 1966-2004.

This article was printed via the web on 5/5/2006 12:39:17 PM . This article
appeared in The Post and Courier and updated online at Charleston.net on Monday, May 01, 2006.

ORIGINAL LINK http://www.charleston.net/stories/d...

Forum posts

  • Hey Mr. Hollings, so good to hear from you-will you please run this country for us??????Don’t I.D.as DEM or REPUB,just an honest American of my father’s generation.kgb56-MD.-USA

  • Bogus and bubble economics. Take the military spending out of the GDP and U.S. has a minus GDP. The rest applies to all G8/10 economies, while the stock markets are booming unemployment and vanishing social systems are getting worse.
    But who cares! Another example the house markets booms, but this means for the buyers the pay 3 times as much for the same house and even if the intrest is very low you never be able to own your house.
    The inflation in America is growing and this isn’t reflected in GDP or stock market figures.

    Illusions? Yeah, we are so great that oil companies deny necessary installments or investments in refineries, even if the get tax reduction. The infrastructure of the electrical grid is so rotten, that power outages are common. Ever ask yourself, why it takes so long to repair things?
    Water supply is already an issue in some states.

    There is an endless list - Yeah, America is doing great!

  • I know what will fix everything.

    Let’s have a war with Iran.

    It has the advantages over the Iraq war, for starters, it is a larger country and we will need many more bombs. Yes, the few hundred tactial nuclear will take care of some of the wites, but we truly intend to bomb them to the stone age (as a phase of) and then onwards to regime change.

    It gets the home manufracturing going; we get to print more and more dollars and keeps the like of China and Russia guessing and well, because of the much higher price of oil, the Chinese have to buy and keep more and more of those dollars.

    We win.

    • Proof is in the Pudding. Check the Dow Jones you non news reading smile a.. .

    • The only thing America will win through a war with Iran is the paralization of the world economy. Japan will no longer be able to lend you money and China will step back, too, because the first will use 80% of its oil supply and the second will like to keep the oil supplies from Iran.
      Moreover the muslim world will join Iran an boycott oil deliveries to the U.S. and Nigeara, Venezuela, Mexico and Bolivia will do it, too.

      Finally you will have to stop to ride your SUV’s and your ridiculous made American trucks. We always laugh, if we see ancient American "technology".

      Yeah, you are a real winner nation - living the American dream or may be just dreaming.

    • As any thinking person knows, the Dow Jones is all rigged.....the worth of the stocks are manipulated by the businesses who steal from the investors, especially the small independent investors who have no one advocating for them and get ripped off MOST of the time.....let’s not pretend that there is an honest and level playing field there and that everything is great because the "numbers" are going up. You would have to be a gullible person to trust Wall Street with your hard earned money.

    • To 4.57: Unfortunately, the Chinese are beginning to pull most of their foreign holdings in the US treasury and so are many of the world’s central banks. And, no, they don’t have to keep Uncle Sam’s bogus dollars and neither do the Japanese, nor do they need to cater to an American consumer market that no longer is as large as theirs or the Russians’. Just a reminder if you haven’t heard, China, India and Russia have made Iran a full member of SCO, their alternative to both the EU and NATO. China and India together have a far larger middle class and consumer market than the US. Bottom line: the US economy needs them far more than they need US dollars or US markets. Let’s see how far America’s War Machine can go without foreign money. If you think that Uncle Sam’s towel-head beating machine can go on forever without foreign investments and with an economy that consumes far more than it produces, you are going to be one sorry ass fuck, let me tell you.

    • For 72.125: Here you prove to be just as ignorant of real global economics as you are of history and the human condition. Only an unmitigated fool would put their hard earned money in either the NYSE or the US treasury. Enron and Telecom have shown us that the world’s giant conglomerates have two books, just as much as the US Federal Government has two books, making their ’accounting’ measures nothing but piffle to fool the ignorant like yourself and to steal their money. But hey, you care as much about your money as you care about the future of this country, don’t you, you sad sack of shit? In that case, there’s a real great IPO coming up that want you to get in on from the get go....... sucker.

    • Is that why most investors in the US are in the middle class? Unemployment is under 5 per cent. Inflation is low. How is your country in those numbers?

    • Boy did you ever buy the bullshit and I would bet that you aren’t getting a nickle out of it......

    • It used to be that the Jews owned the U.S....now so does communist China and the Japanese......next it will be the Mormons.....during the massacre of the Vietnamese, the warmongers used to say love it or leave it....bad as it was during that war, the country as really gone to hell since, and I wish I had left it, but I’m too old now.