'Storm On The Horizon'
Last week, Federal Reserve Chairman Ben Bernanke testified to Congress
that the economy would "slow
noticeably"
this year and likely get worse before getting better. Yesterday on ABC
News's This Week, Sen. Chris Dodd (D-CT), chairman of
the Senate Banking Committee, said of a possible recession: "[I]t's
certainly pointing in that direction.
We hope that's not the case, but there are many people who watch this
minute to minute and would have drawn that conclusion." America's
economic fundamentals have been weak for some time now. Since 2000,
investment growth has been anemic, productivity growth has declined,
and
income
growth has stagnated. Weak income and job growth and the decline
of health care and retirement benefits have already squeezed
the middle class and made Americans more
vulnerable to economic downturns. When these trends are combined
with the
subprime mortgage crisis and the ensuing slowing of the housing market,
the collapsing dollar, and the enormous cost of the
Iraq war adding to the country's ever-growing debt, the
economic slowdown is likely to hit Americans quite hard. Sen.
Charles Schumer (D-NY) found Bernanke's testimony disquieting. "I'm
very concerned that there may be a
bigger storm on the horizon,"
he said. Approximately 48 percent of
Americans feel that the economy
is already in recession, including 69 percent of black Americans.
Another poll found
that two-thirds of Americans worry that economic conditions are getting
worse, "by
far
the highest number since 1992,"
and four in ten say recession is likely next year.
THE HOUSING FALLOUT: Last
spring, Bernanke downplayed
the broader effects of the subprime mortgage crisis, suggesting that
the effects seemed "likely to be contained" to the housing sphere. Last
week, Bernanke admitted that "[a]lthough
the problems with subprime mortgages initiated the financial
turmoil, credit concerns quickly spilled over into a number of other
areas." He added, "A sharp increase in foreclosed properties for sale
could also weaken
the already struggling housing market
and thus, potentially, the
broader economy." An October real estate report showed
that U.S. home prices fell nationwide in August for the eighth
consecutive month, in the ten largest cities falling five percent from
a year ago,
the biggest
monthly drop since June 1991.
Remarking on the falling housing sales, Dodd noted that it was "the
first time since the Great Depression we've had two successive years of
predictions of housing sales declines." Housing had been the one sector
through which many middle class families could get ahead through
investment. A report released late last month by the
congressional Joint Economic Committee, however,
stated that "families, neighborhood property values, and state and
local government
will
lose billions of dollars
as two million subprime mortgage homes are
foreclosed." The housing crunch, dragging the whole economy down with
it, demands the government's full attention. The most
President Bush will admit thus far is that "housing
is soft."
IRAQ EATING UP DOLLARS: A new
report by the Joint Economic Committee estimates that the wars in
Afghanistan and Iraq have cost
the average American family of four more than $20,000. The
government is spending $2 billion per
week to wage war in Iraq, and a Congressional Budget Office report
estimated that the total cost of the war in Iraq could equal $2.4
trillion. Though the White House has asserted that it is "not worried"
about the
cost of war, it should be. The war is draining finite resources away
from needed programs at home and abroad. Approximately $2.4 trillion is enough to
"provide every college freshman in the country with a free, four year
education at a private college or university; provide health care
coverage to every American for one year; [or] pay off 26% of our
current national debt."
THE COLLAPSING DOLLAR: The
dollar fell
to a new low against the euro on
Friday, propelled by Bernanke's glum economic
forecast and by signals from the Chinese government
that it would "readjust"
some of its U.S. Treasuries holdings
from dollars to other currencies. A weak dollar is likely to affect
average Americans at
the gas pump, since "crude oil is priced in dollars, and oil producers,
especially members of the Organization of Petroleum Exporting
Countries, want to be compensated
for the dollar's decline." As oil approaches the unprecedented
price of $100
a barrel, the average cost of gasoline continues to
rise, surpassing $3 per gallon last week, a
rise of over 81 cents from last year.
Gas prices are expected to rise
another 20 cents
over the next two to three weeks, making holiday travel more
expensive. Sen. Sam
Brownback (R-KS) said, "When those gas prices
get up to
$3 a gallon, it seems to hit
some sort of psychological point in consumer's mind that 'I
have less to spend,' and that's a reality for them." Before the holiday
recess, Congress should
pass a final energy bill
that will establish a 35 mpg standard and require utilities to draw 15
percent of their electricty from renewable sources by 2020.
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Wal-Mart, the nation's largest private employer, is now providing health insurance to 100,000 more workers than it did just three years ago.
CALIFORNIA:
Authorities subpoena the crew involved in a devastating oil spill in
San Francisco Bay.
MASSACHUSETTS:
"Far-reaching Medicaid changes proposed by the Bush administration
could cost Massachusetts more than $100 million a year."
ENVIRONMENT:
President Bush has given "immunity" to mining companies conducting
devastating environmental practices in Appalachia.
THINK
PROGRESS: Former U.N. ambassador John Bolton smears IAEA director
Mohamed ElBaradei as Iran apologist.
ENERGY
SMART: Former Vice President Al Gore joins a clean energy venture
firm.
DAILY
KOS: Iraq war vets banned from Veterans Day parade.
TPM
ELECTION CENTRAL: In a new anti-immigration ad, Rep. Tom Tancredo
(R-CO) dramatizes a faux terrorist attack in a shopping mall.
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