Aid for a Flagging Economy
Here’s the war report from home: Consumers have been in the trenches battling a double-dip recession with their own spending, but they may be starting to lose the struggle. Congress is caught up in the White House’s obsession with Saddam Hussein, and neither the administration nor lawmakers are doing anything significant to battle the slump.
Far from being isolated from the economy, a war with Iraq is linked to it. The prospect of war is increasing business and investor uncertainty. The Congressional Budget Office estimates that war could cost the U.S. as much as $9 billion a month. Oil prices could shoot up as well. The cost of reconstructing Iraq is unclear, but would be significant. Partly because of the threat of war, the U.S., Japanese and European economies are seeing a contraction in manufacturing demand. Businesses are taking a wait-and-see stance.
The economic numbers are so anemic that normally they would be impossible to ignore. Last year, the number of Americans living in poverty increased from 31.6 million to 32.9 million. Median household income declined 2.2%. The ranks of the uninsured increased by 1.4 million, to 41.2 million. Car sales are slumping despite continued loan rate-cutting, and retailers are anticipating a dismal Christmas.
Congress and the Bush administration should take more steps to increase confidence in the economy and to stimulate it, beginning with the corporate reforms that have somehow evaporated. The Bush administration has failed to back legislation requiring companies to report stock options as expenses, for example. Legislation to make 401(k) pension investments more worker-friendly is stuck in Congress; tough restrictions on offshore tax havens have gone nowhere. A handcuffed Andrew S. Fastow, former chief financial officer of Enron, doing the perp walk Wednesday makes a good photo op but doesn’t fool investors.
Nor has Congress put its own financial house in order. It keeps passing stopgap measures to avoid a government shutdown, but it hasn’t approved any of 13 required spending bills. It’s also the case that in the next five months, about 3 million workers and their families risk losing unemployment benefits unless Congress extends a temporary program providing extra weeks of benefits.
The Bush administration and the House are proposing to boost spending on homeland security but cut spending on higher education, job training, public housing, community health centers and child care. It is social spending, however, that most quickly alleviates the worst effects of an economic slowdown and stimulates the economy.
The White House and lawmakers need to give consumers some ammunition to fight against an economic downturn. Otherwise, all they’ll be waving is a white flag.
