Economy--George W. Hoover

March 17, 2008

by Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, Ali Frick, and Benjamin Armbruster

ECONOMY

George W. Hoover

In a recent Wall Street Journal survey of the nation's top economists, 70 percent said the economy is in a recession and half said that "this year could be worse than the 2001 and 1990-91 downturns." "The evidence is now beyond a reasonable doubt," said one Wells Fargo & Co. senior economist. The Commerce Department also said last week that retail sales -- which account for more than 70 percent of U.S. economic activity -- fell 0.6 percent in February. Last month also saw the national unemployment rate increase as the Labor Department announced that the nation had lost 63,000 jobs -- the second consecutive monthly job decline. While the American public is in line with economists on the realities of the economy, President Bush has only recognized a "slowdown." Bush recently acknowledged that the "root cause of the economic slowdown has been the downturn in the housing market." But in a speech last week, Bush echoed President Herbert Hoover's sentiments regarding government intervention into a struggling economy, saying he "strongly disagree[s]" with "massive government intervention in the housing market." Bush said in his Saturday radio address: "The market now is in the process of correcting itself, and delaying that correction would only prolong the problem."

MORE BAD NEWS FOR BUSH: Beyond job losses, a decrease in retail sales, and the housing market crisis, a Center for American Progress (CAP) economic outlook shows that wages remain flat, family debt has hit record highs, fewer people have health insurance, and an increasing number are paying more for basics. In addition to housing woes, Federal Reserve Chairman Ben Bernanke said last month that the nation's credit crunch is also fueling the economy's downturn. "Additionally, government spending is in the red. The Treasury Department announced last week that" the U.S. federal government ran a monthly budget deficit of $175.56 billion in February, a record for any month" and "46% bigger than the deficit of $119.99 billion in February 2007." Last week, Sen. Sheldon Whitehouse (D-RI) illustrated that the federal debt incurred during Bush's presidency has reached $7.7 trillion. The value of the dollar is also in free fall, plunging below the 100 yen level last week for the first time in 12 years and "hitting a new low against the euro" today. Iraq war costs are reaching astronomical proportions, with projections ranging anywhere from $10-12 billion per month. The war has also helped oil prices skyrocket -- prices per barrel have recently reached record highs. Naturally, Bush has passed the buck. When asked during a recent interview about the rising oil prices, Bush deferred to "experts," saying: "I’m just a simple president."

BUSH'S QUICK AND EASY FIX: Regarding the housing and credit crises, the federal government has turned to a quick fix. "Hoping to avoid a systemic meltdown in financial markets," the Federal Reserve announced last night that it approved a $30 billion credit line to help JPMorgan Chase acquire one of the largest firms on Wall Street, Bear Stearns Cos., "which had been teetering near collapse because of its deepening losses in the mortgage market." The fire sale cost JPMorgan $2 per share, or "less than one-tenth the firm's market price" last Friday. The Fed coupled its "highly unusual maneuver" with a "new lending program [that] would make money available to the 20 large investment banks that serve as 'primary dealers' and trade Treasury securities directly with the Fed." However, experts are skeptical of the Fed's move, seeing that its recent plan to lend Wall Street $200 billion in exchange for mortgage-backed securities "failed to soothe investors and lenders, who are worried about the true value and default risk of many debt securities or are hoarding cash to meet their own needs."

PROGRESSIVE SOLUTIONS: Reacting to the Fed's announcement, President Clinton's former Treasury Secretary Lawrence Summers said "emergency provision of loans is necessary but not sufficient." The current economic situation needs progressive solutions. Andrew Jakabovics, CAP's Associate Director of the Economic Mobility Program, recently noted that "too many U.S. homeowners facing foreclosure and too many of their neighbors potentially lining up behind them." CAP's Great American Dream Neighborhood Stabilization, or GARDNS proposal "would provide $4 billion to buy up real-estate owned by banks and put deserving families in those homes" which would "cope with the foreclosure crisis and all its cascading ramifications for world financial markets and the U.S. economy." Addressing the other root cause of the nation's poor economy -- the credit crisis -- another CAP plan calls for a a credit card safety rating system to "give consumers better information about their credit cards and thus help them make better decisions." As more Americans struggle with paying for their everyday expenses in the midst of an economic downturn, such a system would lead to a better understanding about the ways the access credit. This would not preclude Congress from mandating "a higher level of fairness in credit card terms."

IRAQ -- ONE YEAR LATER, MARKET WHERE McCAIN STROLLED 'FREELY' IS TOO UNSAFE TO VISIT: On April 1, 2007, Sen. John McCain (R-AZ) strolled through the open-air Shorja market in Baghdad in an effort to prove that Americans are "not getting the full picture" of what's going on in Iraq. In a press conference after his tour, McCain told reporters that his visit to the market was proof that people could "walk freely" in parts of Baghdad. What McCain failed to mention was that he was accompanied by "100 American soldiers, with three Blackhawk helicopters, and two Apache gunships overhead." Since that trip, McCain has claimed that the situation in Iraq has improved even more. A few months ago, McCain claimed that "we've succeeded militarily" in Iraq. McCain is now back in Iraq for a "surprise visit with Iraqi and American diplomatic and military leaders." But it is unlikely he will be visiting the Shorja market again. Yesterday, CNN's John King reported that reporters tried to visit the Shorja market, but it was too unsafe and they were unable to go. "[O]ur own security advisers here in Iraq did not want us to go there," said King. "They didn't believe it was safe for an American to be in that area." King also noted that the area is now "controlled by the radical cleric Moqtada al Sadr's Mahdi army."

CONGRESS -- CONSERVATIVES GAG WITNESSES FROM TESTIFYING ON CREDIT CRUNCH: The House Financial Services subcommittee on Consumer Credit, which is considering a bill called the Credit Card Holders' Bill of Rights, invited citizens who had suffered sudden and massive fee and rate hikes on their credit cards to testify last Thursday. Yet four of the five witnesses ended up sitting through the hearing "silently in the audience," after conservative congressmen demanded that the witnesses "sign a vaguely worded waver permitting the credit card companies to discuss their credit histories publicly anywhere, anytime." Signing waivers is not an unusual procedure for congressional witnesses, notes Mother Jones, but these particular waivers "were far broader, and they were foisted on the witnesses only hours before the hearing. Some of the witnesses didn't get them in advance at all." Rep. Mark Udall (D-CO) condemned the tactics, saying, "In short, I believe the credit card industry used tactics of intimidation today to silence these consumers." Credit card debt is at a record high, reaching $790.2 billion last November.

ECONOMY -- SCHUMER: BUSH IS 'BEHAVING LIKE HERBERT HOOVER': As the economy spirals downward into what many economists view is already a recession, President Bush delivered a speech last week expressing confidence "in the ability of the markets" to turn it around. In 1930, as the U.S economy was sinking into deep recession, President Herbert Hoover said to Congress, "Economic depression cannot be cured by legislative action or executive pronouncement." In his recent speech, Bush echoed Hoover, stating, "The temptation of Washington is to say that anything short of a massive government intervention in the housing market amounts to inaction. I strongly disagree with that sentiment. ... Government actions are -- have far-reaching and unintended consequences." The unfortunate similarities in these statements and attitudes led Sen. Chuck Schumer (D-NY) to conclude on Fox News Sunday that Bush is "indeed behaving like Herbert Hoover." Schumer added, "We're in the most serious economic problem we've been in in a very long time -- much worse than 2001. The President's hands-off attitude is reminiscent of Herbert Hoover in 1929 and 1930."

JPMorgan Chase agreed yesterday to buy Bear Stearns for $2 a share, less than one-tenth the firm's market price on Friday. The bank and the Federal Reserve "will guarantee the huge trading obligations" of Bear, "which was driven to the brink of bankruptcy by what amounted to a run on the bank." Bonddad has more analysis.

The current economic crisis "is likely to be judged in retrospect as the most wrenching since the end of the second world war," writes former Chairman of the Federal Reserve Alan Greenspan in the Financial Times. He also argues that "market flexibility and open competition" are "our most reliable and effective safeguards against cumulative economic failure."

Sen. John McCain's (R-AZ) current visit to Iraq is bolstering the belief by the country's politicians that if he is elected president, "the American military would have a large presence in Iraq for a very long time." Jalaladeen Sagheer, a senior member of the leading Shiite Supreme Islamic Iraqi Council, described McCain's visit as "an advertisement for the American elections."

Vice President Cheney made a surprise visit to Iraq today, to reaffirm "the unwavering commitment" of the United States to rebuilding Iraq. Cheney told reporters that it was "especially significant" he was in Iraq five years after the March 2003 U.S. invasion. Shortly after his arrival, "two explosions rocked Baghdad."

Five years after the U.S.-led invasion, the Red Cross reports that Iraq faces a major humanitarian crisis. "To avert an even worse crisis, more attention must be paid to the everyday needs of Iraqis," said Beatrice Roggo, the ICRC's head of operations for the Middle East and North Africa. "Everyone should have regular access to health care, electricity, clean water and sanitation."

Harper's Scott Horton reports that an internal Department of Justice investigation into the firing of at least eight U.S. attorneys is approaching its conclusion. The report will likely be released in the spring, and it "will almost certainly be explosive."

Climate change may "turn Ireland’s legendary emerald landscape a dusty tan" according to a new report by the Irish American Climate Project. "[T]he soft rains that people talk about as a blessing...could turn harsh," said the project's director Kevin Sweeney. Additionally, potatoes, Ireland's agricultural staple, "might cease to be a commercial crop under the stress of prolonged summer droughts."

And finally: Right-wing radio host Rush Limbaugh describes himself as "a big Mac guy." Lately, he's been having trouble backing up his e-mail archives, a "problem that was echoed by other users on message boards." So Limbaugh took to the airwaves, making his plea directly to Apple CEO Steve Jobs. Apparently, someone at Apple was listening, and sent over an engineer to help Limbaugh. Two weeks later, the problem was fixed.

The research team that brings you The Progress Report and ThinkProgress.org needs summer interns! Click here for more information.

On Friday, the House passed an amendment to the Foreign Intelligence Surveillance Act by a vote of 213-197. The legislation "does not provide retroactive immunity for telecom companies but allows the courts to determine whether lawsuits should proceed."

NEW YORK: Lt. Gov. David Paterson to be sworn in as nation's first blind governor.

TEXAS: Residents and a federal judge delay completion of border fence.

LOUISIANA: One in 25 New Orleans residents are homeless, the highest rate in the nation.

ECONOMY: Nearly half of state legislatures face budget shortfalls due to worsening economy.

THINK PROGRESS: White House: confusion over long-term agreement with Iraq resulted from a sloppy Arabic translation.

WONK ROOM: ThinkProgress launches its new sister site, a rapid-response policy blog as well as a resource for in-depth policy analysis.

ALAS, A BLOG: Right-wing radio host Laura Ingraham attacks Brett Favre for crying "like a girl."

BEAT THE PRESS: Financial markets "need credible analysis from the Fed, not happy talk."

"Agency FOIA operations shall be both results-oriented and produce results. Accordingly, agencies shall process requests under the FOIA in an efficient and appropriate manner and achieve tangible, measurable improvements in FOIA processing."
-- President Bush's Executive Order on "Improving Agency Disclosure of Information," 12/14/05

VERSUS

"Despite ordering improvements more than two years ago, President Bush has barely made a dent in the huge backlog of unanswered requests under the Freedom of Information Act."
-- AP, 3/16/08

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