By Mary Mostert, Analyst, Banner of Liberty (www.bannerofliberty.com)
October 5, 2001
In today's Washington Post, in an editorial entitled "Poverty and Terror" the editors make the point that "The Bush administration also needs to step up its support for the long-term fight against poverty."
Now, why do we need to do that, in the midst of spending billions to fight a war on Terrorism? Because, the Post says, "The United States ... needs to distinguish between two kinds of foreign aid. If it rewards allies with money, it must be clear that it is buying cooperation rather than poverty reduction. Meanwhile, if it is serious about fighting poverty, it must allow aid dollars to flow without geopolitical factors dictating their direction.
If that sounds confusing, it's because it IS confusing. What appears to be the problem is the Washington Post's belief, which goes back at least 60 years, that poverty causes crime. Only, Osama bin Laden's problem is not crime. He was born to an incredibly wealthy Saudi businessman and had every advantage money can buy.
It appears that the current circumstances create a challenge to politically correct thinking. The facts speak for themselves. Someone hates America enough to die in destroying the World Trade Center in the hopes that it will put the United States into a serious recession. We have heard repeatedly that the World Trade Center is the "heart" of American prosperity and, without it, recession is inevitable.
And, then we watch the Stock Market stumble and fall after the terrorist attacks of September 11. Now, we hear in blazing headlines, in U.S. News and World Report that "The economy was in deep trouble before the terror attack. How much worse will it get?" In the first paragraph we are told that in Richmond, Virginia "which likes to boast that it lies within a day's drive of more than hlf of the U.S. population," the economic landscape had been decidedly mixed before September 11." In the next sentence we are told that "Unemployment had crept up to 2.9 percent, still very low but a full point higher than a year earlier."
Folks, you can't have a serious economic problem, much less a recession, with an unemployment rate of 2.9 percent. In fact, we were being told by Democrats for years that any unemployment rate below 6% would plunge the nation into inflation. From 1975 to 1996, in fact, the unemployment rate NEVER fell as low as 5%.
Almost every analysis of the Clinton years in December 2000 and January 2001 began with the mantra that "America' 42nd President, William Jefferson Clinton, is likely to be remembered for the longest-running business cycle expansion in American history, which coincided with his two terms," as the Center for Economic Policy and Research put it in January (http://www.cepr.net/columns/weisbrot/clinton_legacy_.htm) . However, unlike most economic writers, it did not lavish praise on Clinton for creating the boom. It said:
How then to explain the boom? While any business cycle expansion has multiple causes, two stand out here. The first, and most important, was a change in policy at the Federal Reserve about five and a half years ago. The Fed, which had previously operated under the theory that six percent unemployment was the best that the economy could do without accelerating inflation, abandoned that view. Unemployment was allowed to fall to its current 4 percent, and growth continued beyond the point at which the Fed, in the past, would have pulled the plug.The second was the stock market bubble: a 14 trillion increase in stock holdings over the last decade caused many upper income households to spend freely. This spending, even if it was based on paper increases in wealth that are now disappearing, provided a considerable stimulus to the economy-- much the same as we would get from a large increase in deficit spending by the federal government.
Mr. Clinton cannot claim credit for the stock market bubble, nor would he necessarily want to. Nor did he have anything to do with the Fed's policy shift, which was probably the most important positive change in economic policy in the last 20 years.
From January to October somehow we have adopted the notion that anything above a 4% unemployment is now "proof" we are in a recession, even though for his first five years in office the unemployment rate in the Clinton boom was higher than it is in the Bush recession. I might add that the stock market in the Bush recession is also higher than it was during three-fourths of the Clinton boom.
With the amount of money that is being recommended to be poured into boosting the economy, and with most of the nation being untouched by the terrorism that destroyed the World Trade Center, there is only one factor that can produce an actual recession: Fear of a recession. And, to his credit, President George W. Bush is well aware of that. While it doesn't make sense to some of the doomsayers, the president is encouraging the public to "get back to work" and start buying again.
In today's Washington Post, the lead online headline over a picture of an intense President Bush reads "More Aid for Jobless: President Bush unveils his plans to expand benefits to those recently unemployed." That would certainly seen to indicate that the President is as concerned about the state of the economy as the Washington Post. However, even in the Post the first paragraph of the article is not about unemployment, but about $300 million to feed the starving Afghans. Usually we Americans wait until after we've bombed a country we are at war with before we send in aid.
Later the story tells us that President Bush also announced "new initiatives to assist workers who lost their jobs as a result of the Sept. 11 attacks, or who live in the states hardest hit by the economic downturn." The Post went on to say that "The announcement came five hours after the Labor Department said new claims for unemployment benefits shot up last week to the highest level in nine years."
Nine years ago, in 1992, the unemployment rate was 7.5% of the workforce. The latest figures listed on the U.S. Department of Labor website in a September 7th press release by Statement of Katharine G. Abraham, Commissioner of the Bureau of Labor Statistics, stated that unemployment rose a "half a million over the month, and the unemployment rate rose to 4.9 percent." That would have been a .4 rise and most of those unemployed were in the 16-24 year-olds, most of whom were probably quitting work to return to school
Considering the shock to the airline and travel industries due to the terrorist attacks on New York and Washington, undoubtedly there have been a number of people who have lost their jobs and the President was right in addressing their needs.
However, most of America's 268 million people were not seriously affected. Most people went back to work the day after the attack and the drop in the stock market following the attack was actually smaller than the 1604 point drop during the Clinton economic boom, from July 16 to October 5, 1998.
In comparison, this terrible Bush recession we've been told we are in has had only a 1400 point drop from July 16 to October 5, 2001, after the deadliest attack in American history. From the time George W. Bush entered the White House on January 20, 2001 to October 5, 2001, the stock market has lost 1518 points.
The Washington Post notwithstanding, terrorism is not caused by poverty and U.S. News and World Report notwithstanding, the economy was not and is not in "deep trouble" - and won't be in deep trouble, unless thee public is convinced by the media that it IS deep trouble and stop buying anything because they are afraid.
To comment: mmostert@bannerofliberty.com