Bush as Economic Bogeyman

There was good, intriguing stuff on Saturday from what is perhaps a suprizing source: the Nederlands Dagblad (“Dutch Newspaper”), which with its slogan Christelijk betrokken (“Involved in Christ”) on the masthead of its Internet edition puts its religious affiliation front-and-center. The ND has taken its time in considering the State of the Union message and fiscal 2005 federal government budget George W. Bush delivered over a week ago, presumably the better to produce a more profound analysis to share with its readers. The main point of that analysis is found in the article’s title: How George W. Bush Threatens the World’s Economy. The US has gone from Bill Clinton’s $127 billion budget surplus to a deficit of $521 billion, and, so writes author Ruurd Ubels, that has earned the President “scorn and derision” in his own country. But troubles like that in the world’s biggest economy cannot help but spill over to others.

Ubels takes a closer look at that proposed budget, first stopping to mention “Child’s Pay,” winner of the “Bush in 30 Seconds” amateur political film competition sponsored by moveon.com, notoriously turned down by CBS for broadcast during the Super Bowl. “I wanted to make clear,” he quotes that film’s creator, Charlie Fisher out of Denver, “that the Republican government is a big money-squanderer [geldverkwister], and that your children and mine will suffer for it.” Indeed, Ubels claims, since World War II Republican presidents have been responsible for federal budget deficits more often than Democratic ones. And this Republican one will try to regain that lost fiscal ground through cuts concentrated on seven of the sixteen federal departments, namely the ones concerning the environment, agriculture, and commerce; overall, 125 federal programs will disappear.


For a true solution, Bush might very well more usefully direct his attention to the tax-cuts he has pushed through during his term in office. But Ubels speculates that Bush the Younger is terrified of breaking his own campaign promises by doing anything to reverse those, because of the way that tax-hikes during the presidency of George Bush the Elder (“read my lips: no new taxes”) ensured that that would be a one-term affair. Still, these tax-cuts have not been as effective as they could have been in reviving the American economy, because (in the opinion of Rabobank economist Menno Middeldorp) they were incorrectly targeted on the rich. As Middeldorp puts it, “Give a beggar a dollar, and he’ll immediately buy something with it. Give Bill Gates a dollar and he just puts it on his account.” In any case, in this election year there is little chance that either Republicans or Democrats will be willing to scale back the tax-cuts. Ubels cites Clinton’s Treasury Secretary Robert Rubin: “I think that the problem-denial phase will last until after the elections.”

Meanwhile, the federal deficit is on track to hit 10% of GDP by 2010, according to analyst A. van Rijn of investment company Robeco. (It is already at 4.5% of GDP, when European Union rules allow governments of the “euro-zone” deficits of no more than 3%.) And no less than the International Monetary Fund has recently issued a report faulting America’s fiscal policy, which has led to the weakness of the dollar, which is the main conduit through which the American situation threatens the stability of other national economies. On the other hand, the American economy seems on-track to turn in something around 4% growth in 2004. But, say the Rabobank researchers interviewed by Ubels for the article, that is just the after-effect of the influence on the economy the tax-cuts have managed to have. That influence should wane by the end of the year – i.e. just after the presidential and congressional elections, time once again (one hopes) for grim fiscal reality to finally be addressed.

That same on-line edition of Nederlands Dagblad features another article I wanted to mention, one that I think you would never find in the daily American press, not even in the nation’s flagship newspapers out of New York and Washington. That is the piece entitled Thorstein Veblen, Prophet of Fraud, by Willem Bouwman. Sorry, I just don’t think the writing would ever get this “academic” in American newspapers, where the preferred subject of late has of course been Janet Jackson’s right breast instead.

Thorstein Veblen (1857-1929) was an American economist and sociologist who was particularly famous for his 1899 book “The Theory of the Leisure Class,” and particularly for the famous idea he promoted in that volume of “conspicuous consumption,” of the rich competing to distinguish themselves from their colleagues by excessive and extravagant expenditures (e.g. in Veblen’s day, smoking cigars make out of $100 bills). In this new era of Enron, Parmalat, Ahold, and all the rest, when (according to Bouwman, at least) to the general public the director of a public company is now assumed to be out after his own interest above all, are Veblen’s ideas coming back into resonance?


Give Bouwman credit, not only for that insightful postulate, but also for his willingness to concede that it is not exactly correct. Veblen’s “The Theory of the Leisure Class” and “conspicuous consumption,” it turns out, has little to say about contemporary problems, especially in the Netherlands. There, the only hint towards conspicuous consumption is the slight thawing of the traditional Dutch unwillingness to spend money, at all, that one sociologist claims in the article to see, calling it an “Americanization” of Dutch culture. But it is rather the ideas Veblen set out in another of his works, “The Theory of Business Enterprise” (1904) that speak most to today. In that book Veblen spoke out for the engineer as the one who truly adds economic value to an enterprise, and therefore to society; in contrast, the “moneyman,” involved in artificially manipulating prices and consumers’ demand for goods, truly added no economic value but nonetheless seemed to come away with more economic rewards. Such a situation prevails even more today, is Bouwman’s thesis, given the way financial markets now function as the central coordinating mechanism for all economic activity.

In all, this is some profound and interesting material, at least for those who are concerned with grand economic ideas and their influence on the “real world” – material that it is refreshing to see in a news daily.

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