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I can't wait for someone to blame this article on "liberal bias".
Here is an interesting article that I read recently, it is a bit dated, but offers a unique perspective on the (lack of) Bush economic policy.
The article is a bit dated, being from June 2005, but it is interesting to see how this has played out.Where is our economic policy? Chief executives say the Bush Administration lacks a viable strategy for U.S. compe iveness
Peter Galuszka
For President George W. Bush, the night of January 20, 2005, was one to remember. Nine gala balls were held around Washington, D.C., amid blazing fireworks in celebration of his second inauguration. Of the lot, the snazziest shindig was the Black Tie and Boots Ball, put on at the Marriott Wardman Park Hotel by the Texas Society. Featuring exotic animals from Bush's home state, including an armadillo and an alligator, the event was a fast sellout. By some accounts, tickets sold online at prices of up to $4,000 were gone in 40 minutes.
Corporate leaders greatly preferred Bush to Democrat John Kerry, but (snip)...
[s]ix months later, however, a quiet but stunning realization has crept in: It seems corporate leaders have serious doubts about Bush and his economic team in their second term. Although few chief executives will speak about the issue publicly, they worry that Bush continues to ignore critical issues while he spends time and political capital on more ideologically driven matters such as Social Security reform and building democracies around the world.
Left to languish are issues of equal or greater economic importance, such as America's eroding compe iveness, a decline in R & D and work force education, and a slowdown in high technology efforts aimed at promoting broadband and the Internet. Bush's economic policy team has also failed to address, at least to the satisfaction of CEOs, other serious issues such as the ballooning federal budget deficit, health cost burdens on companies and soaring energy prices.
"Bush seems to have been re-elected on the basis of the fear of terrorism, Iraq and overall security," says one reader, who requested anonymity, in Chief Executive's most recent CEO Confidence Index poll. "But we have the most unbalanced budget, a tax policy that favors the wealthy, declining public schools, a health care system in worsening condition, a trade imbalance with just about every country, oil prices at all-time highs [and] no real alternative energy or conservation plan."
Asked to grade Bush's economic policy, 593 respondents gave the president a grade point average of a C. The highest grade he received was a B- for his tax policies, but on other issues, the President received only passing marks (see report card, left).
At the same time, the magazine's overall CEO Confidence Index witnessed its largest drop ever. The index fell 16.8 points to the lowest level since November 2003. At udes toward employment also deteriorated, indicating that no significant increase in hiring is foreseeable (see charts, page 32). Contributing to the doubtful climate in the corner office has been a burst of statistics that show slowing economic growth, weakening capital-goods orders, stock market declines and chaotic energy prices. At the same time, the Federal Reserve seems determined to keep raising interest rates, raising fears of "stagflation," or stagnant growth and high inflation.
It's difficult for chief executives to publicly disparage Bush because many depend on solid relations with the government agencies. Criticizing a sitting president isn't exactly good for business. Also, the majority of chief executives polled are Republicans who support Bush overall; one respondent said he was "100 percent" behind Bush, while another called himself a "devoted Republican."
Yet on economic issues, there remains a notable lack of support. "Republicans have forgotten their economic policy foundations," one respondent wrote. "The loss of manufacturing to subsidized imports will turn us all into hairdressers and used car salesmen making no products, with no research and development."
Who's in Charge?
The blame for the business community's queasiness rests with Bush's economic brain trust. While former President Bill Clinton received raves for economic policy stars such as Goldman Sachs' Robert Rubin and bright academics like Lawrence Summers, Bush's economic policy team garners little such praise.
The ular head of Bush's team is John Snow, the former CEO of the CSX rail company, toting a Ph.D. in economics. Regarded as an affable team player. Snow came onboard in 2003 after Bush fired Paul O'Neill, the outspoken former CEO of Alcoa, who ran afoul of the President's inner sanctum. Another key post, the director of the National Council on Economics, is held by a relative newcomer, Allan Hubbard, a businessman and Bush backer from Indiana with limited Washington or economic policy experience. Observers note that Snow and Hubbard hail from mainstream business backgrounds rather than from economic think tanks or financial agencies. "Clearly," says Diane C. Swonk, chief economist at Mesirow Financial in Chicago, "economists do not have the same role as they did in the early 1990s when a lot of crises hit."
Bush's current advisors draw fire for being more of a sales team than true long-term thinkers and policymakers. Policy is really formed, some say, by a trusted core of individuals, including Vice President Cheney and advisor Karl Rove. In this view, the Treasury has been marginalized while Cheney and Rove keep Bush focused on issues such as Social Security. Says one survey respondent: "President Bush has been a major disappointment to the moderate conservatives who put him in office. He panders to the right wing of the party and calls it conservative policy. That is false."
In an interview with Chief Executive, John Snow denied the Bush Administration was focusing too much on Social Security to the detriment of other issues. On energy, he says "we suffer from the fact that we haven't had a real focus on energy policy for a long time." But he asserts that Bush has sent serious proposals to Congress. Compe iveness and trade are top priorities, Snow argues, pointing to efforts to create a Central American Free Trade Agreement much like the current one with Mexico and Canada. The way to stay compe ive, he says, is "using government powers to eliminate the impediments that get in the way of the good performance of the American economy." (See interview, page 36.)
Social Security, Snow adds, is merely the first step in a long-range strategy to fix more nettlesome issues such as health care costs. "Social Security is the issue the President is taking to the American people this time because it's much better understood," he says. "It's been studied every which way to Sunday. It's all about demographics ... all about the changing nature of the American work force, and it's pretty straightforward." Rising health care costs are "incredibly complex issues," he adds. If the country can't find the political will to deal with Social Security, "it's going to be [nearly] impossible to find the political will with much more complicated issues [like] Medicare and Medicaid."
Manufacturing At Risk
Part of the overarching problem, frustrated CEOs charge, is that the Bush team doesn't seem to understand the broad economic challenges facing the U.S. His administration's lockstep attachment to a simplistic version of free market principles has led to public statements some call gaffes. Asked about General Motor's troubles in losing $1.1 billion in this year's first quarter. Bush replied, "They're going to have to learn to compete ... with, say, the Japanese automobile manufacturers." The statement stunned many U.S. automaker executives who are concerned that the industry's very survival may be at stake and believe that some form of government action will be necessary.
Many manufacturers are, in fact, worried about their ability to survive in the face of compe ion from Japan and South Korea on the technology-intensive side and from China and India on the more labor-intensive side. After taking a beating from foreign compe ors in the 1970s and 1980s, many manufacturers fought back. CEOs attacked bloated labor forces and antiquated ways of production, and new technologies enabled America to revitalize its automobile and electronics industries. The development of new services, particularly the Internet, turned global communications on its head, streamlined operations, provided better education for workers and made supply chains more efficient. As a result, prosperity was de rigueur for most of the 1990s, but today, particularly in the auto sector and related fields, the warm glow has long since faded as Toyota, Hyundai and others keep gaining on General Motors and Ford.
[ILLUSTRATION OMITTED]
Responding to these compe ive pressures has simply not been on Bush's agenda, but business leaders do credit the President for introducing his 2003 tax cut program, which helped ease the recession of 2001. "I think the tax cuts were pretty beneficial to the economy," says Dave Huether, chief economist at the National Association of Manufacturers in Washington. "We did a simulation of what would have happened without the cuts. The poor performance of 2001 would have continued into 2002 and you wouldn't have seen a real recovery until 2003 or 2004."
But Bush's economic successes seem to begin and end with tax cuts. America's global compe ive position, meanwhile, seems to be eroding. China continues to gain enormous economic power as it exploits its cheap labor force and takes advantage of a fixed-rate currency exchange rate, although the Bush Administration's mid-May decision to reimpose quotas on three textile categories imported from China is a hopeful sign that someone is paying attention. That said, the U.S. trade deficit with China grew last year to $162 billion, a 30.6 percent rise from 2003. Similarly, the U.S. trade deficit with Japan and Western Europe increased 14 percent. "I wish we had different people making economic policy," says Peter Morici, an economist and professor of business at the University of Maryland.
India, likewise, is gathering strength as a major service center. Its software writers and call centers are gaining thousands of jobs at the expense of those in the U.S., with its level of service growing ever more sophisticated as Bangalore call centers move up from handling telephone directories to interpreting X-rays of American patients sent halfway around the world via the Internet.
Broadband Lagging
That's why it's not just manufacturers who are concerned about the Bush economic policy mix--high technology leaders also are worried that the U.S. has lost the lead in Internet technology and broadband communications. Thomas Bleha, a former U.S. diplomat in Japan and author of a critical article about Bush's telecommunications policies in Foreign Affairs magazine, says the initial success of the Internet was based on close collaboration between U.S. government and business.
The Pentagon's Defense Advanced Research Projects Agency (DARPA) played a key role in developing the Internet during the late 1960s on through the 1970s, and in the 1980s, the National Science Foundation partially underwrote college networks. President Clinton further fueled the Internet boom with a series of laws, including the 1996 Telecommunications Act, and other e-commerce initiatives. Business did the rest. (See "Unlocking Innovation," p. 38.)
Yet, access to and adoption of broadband technology have stalled under Bush. "President Bush showed no interest in broadband until right up to the election," Bleha says. "He said he wanted broadband access for all Americans by 2007 and would offer tax incentives to [encourage] it, but since the election there hasn't been a murmur about it." Treasury Secretary Snow says the administration's strategy to influence Internet and broadband is based on deregulating the telecommunications industry.
Other governments, by contrast, are bootstrapping broadband and leaving the U.S. in a cloud of dial-up dust. Japan and South Korea, Bleha notes, slowly created their respective Internet programs back in 1999 through government-inspired programs, and by mid-2003, more Japanese homes were equipped with broadband connectivity than in the U.S. What's more, both Japan and Korea now boast broadband speeds as high as 40 megabits per second, compared to the meager 1.5 Mbps rate that's typical for many U.S. broadband or digital subscriber lines.
Clearly, the potential consequences for the U.S. are serious. As Japan and South Korea move forward, they are certain to draw attention from China and India, which will likely adopt similar technologies and draw ever more outsourcing work from the U.S. India has already embraced high-speed broadband, and China is making plans in its large coastal cities and in the industrial Harbin area.
(snip)
Weakening R & D has some CEOs worried. "I truly believe that if the U.S. is going to be a player in the world economy, R & D has to be a priority," says Kellie Johnson, president and CEO of Ace Clear-water Enterprise, a Torrance, Calif.-based firm that makes metal parts for the aerospace and defense industries, including the Army's Apache attack helicopter. Johnson says there must be more collaboration with government labs and that a tax credit for R & D due to expire at the end of this year needs to be made permanent. Instead, what she sees is a crescendo of research cuts.
A major reason for the cuts is the record budget deficit of $412 billion last year, which could rise to $450 billion this year as a result of lost revenue from tax cuts and spending for the wars in Afghanistan and Iraq. CEOs in the Confidence Index survey repeatedly noted concern about the budget deficits and the overall U.S. debt, which is nearly $7.8 trillion and growing. "Fiscal policy is hurt by the lack of fiscal restraint," said one CEO survey respondent. Another wrote: "Bush's huge federal deficits, unjustified tax cuts, unfunded education programs, wrong approach to Social Security 'reform' and other fiscal actions have created a mess that will haunt the country for a long time."
Energy Vacuum
Another drag on the economy, which showed its slowest rate of GDP growth in two years during this year's first quarter, is energy prices. So far, Bush's proposals to ease high prices have been to build new refineries on abandoned military bases and to build more nuclear plants in general. But cars don't run on nuclear fuel, and while Bush has called for tax credits for buyers of high-mileage, gas-hybrid cars, there have been no inducements for car manufacturers to move toward more fuel-efficient models, thereby maintaining--rather than reducing--U.S. dependence on foreign oil.
Critics say Bush's proposals are basically concessions to the oil industry, which makes huge profits off high oil prices. ExxonMobil racked up a 44 percent increase in earnings for this year's first quarter, with net income surging to $7.86 billion. High among unresolved issues is the escalating price for natural gas, which is critical for manufacturers and has risen to nearly three times its historical price, according to the American Chemistry Council.
So when W. Fletcher Steele, CEO of Pine Hall Brick Co. in Winston-Salem, N.C., says natural gas prices are killing his business, it's not hard to believe him. His firm, which supplies brick products throughout the eastern third of the U.S., depends on eight company-owned kilns that use great quan ies of natural gas. "In a three-year period," he says, "prices have more than doubled." Steele says he realizes gas prices are market-driven, but improving the overall domestic energy picture would help. "What can be done is that electric power plants, be they coal or nuclear, should be made much easier to build," he argues.
The big question for Bush is whether he'll shift gears after reassessing the lack of traction he's gained so far on marquee issues such as Social Security. April 28 marked the President's first press conference in more than a year and he dedicated it to selling Social Security reform, so the signals are that a switch is unlikely.
Pressure, however, is growing on many economic fronts, particularly trade issues, as China-bashing is becoming more popular. Democratic Senator from New York Charles Schumer wants to impose a 27.5 percent tariff on all Chinese goods unless China adjusts its currency exchange rate system. Other protectionist schemes on Capitol Hill would set up duties that would cover what the Chinese government pays in subsidies to its exporters. Snow says the Bush Administration believes it is time for the Chinese "to move to a more flexible system and we are urging them to do so." He says Bush has been instrumental in convincing the Chinese to start regulating their banks, allow domestic firms to keep more foreign capital they earn and permit foreign firms to participate in their financial system.
Yet CEOs seem to believe that Washington has very little clout with Beijing. "Our trade deficit is unbalanced and our budget is way out of balance," wrote one survey respondent. "Foreigners, especially China, are ac ulating too many U.S. dollars, and we are living high on borrowed money because of these imbalances. We're really just laying the seeds for the collapse of our economy."
Tepid support among CEOs for Bush's economic policies flies in the face of popular press assertions that "big business" is an unquestioning ally of the Bush Administration. True, the administration has helped push through new laws limiting class action lawsuits and curbing the use of bankruptcy to avoid paying personal debts, which have been business priorities for years. But those measures do little to address the compe ive challenge CEOs worry about.
It's increasingly clear there is a major gap in perceptions between the White House and business leaders with regard to those issues. But it will be difficult to bridge that gap because many CEOs have long advocated government that "stays out of our business." The Bush Administration also eschews what it regards as the practice of "picking winners and losers," or favoring one industry over another.
In that climate, for CEOs to seek any form of regulatory or legislative relief from the government could raise the accusation that they are merely seeking bailouts. Yet CEOs say an improved mix of economic policies is critical to the health of many companies, from old-line manufacturers to cutting-edge technology firms. Whether they can communicate that view to the Bush policy team quickly and clearly enough--and whether the President acts on it--is likely to shape up as the most important test of Bush's second term in office. Whether he passes or fails that test could affect the U.S. position in the global economy for decades to come.
Bush's Report Card
Overall C
R & D C-
Overall Tax Policy B-
Currency C-
Trade C
K-12 Education C
Energy C-
Fiscal Policy C-
About 5,000 Chief Executive readers received an email survey between
April 25 and 28; 593 responded, for a response rate of 11.8 percent.
RELATED ARTICLE: CEO Mood Is Softening
Overall confidence is declining ...
(snip)
Full text here
Snow has been replaced by someone that economists can have a lot more confidence in, but it has taken 6 years into an 8 year presidency for the president to realize that cronyism is a bad way to run the government. Meanwhile the damage has been done.
I still will not hold my breath for a (gasp) balanced budget.
I can't wait for someone to blame this article on "liberal bias".
(In case you missed it, the article was originally presented in the liberal hotbed magazine "Chief Executive")
And just like that, inflation is out of control...
Fed's Kohn says recent inflation data "troubling"
Thu Jun 8, 11:30 AM ET
Yahoo NewsFederal Reserve Board Governor Donald Kohn said on Thursday that rising prices had raised an inflation "warning flag" that demanded attention, in the latest hawkish remarks from central bank policymakers.
"Price stability is important and I have found the recent inflation data somewhat troubling," Kohn told the Senate Banking Committee at a hearing on his nomination to be the Fed's vice chairman.
"They are backward-looking ... but they were higher than I had anticipated and that raises a warning flag that something might be in train," he said.
(snip)
"I think people are reacting to some extent to the energy price situation. The economy is facing a somewhat more difficult situation right now, because of the rise in energy prices, which has both tended to raise inflation and also tended to damp activity going forward," he said.
We've found it quite troubling since early last year, but then again, the FED Reserve board lives in its own reality.
Some SpursTalk.com posters were warning of inflation in 2003.
3% CPI is scary.And just like that, inflation is out of control...
Married, undo ented gays are hiding it with the WMDs until we recognize their unions.Where is our Economic Policy?
Did they translate it into Spanish and destroy the English copy?
Factor in the cost of health care, higher education, and energy, and that figure gets a bit higher.
I have come to the conclusion that the CPI is not the true measure of the costs of living that it once was.
NASDAQ below 2,100. Dow under 10,800. SP under 1,250
DJIA 10,792.58 -99.34 -0.91%
Nasdaq 2,091.32 -43.74 -2.05%
S&P 500 1,236.40 -15.90 -1.27%
Dow Util 412.74 +0.51 +0.12%
NYSE 7,855.44 -109.88 -1.38%
AMEX 1,859.34 -23.80 -1.26%
Russell 2000 683.19 -18.20 -2.59%
Semcond 435.69 -8.47 -1.91%
Gold future 611.30 -1.50 -0.24%
30-Year Bond 5.03% -0.00 -0.02%
10-Year Bond 4.99% +0.01 +0.12%
2-year/10-year bonds in inversion and 10-year/30-year nearing inversion.
It's interesting that such a large drop occurred prior to the PPI/CPI reports due later this week.
that's because you do not know much. Even Greenspan thinks CPI is overstated.
Greenspan left for a reason..
NY TimesAside from being abstract, many of the most popular aggregates are simply misleading. Dean Baker, a director of the Center for Economic and Policy Research in Washington,puts the Consumer Price Index — the main gauge of inflation — at the top of the list.
"It has no direct relationship to what people perceive as inflation," he said. Mr. Baker notes that the index doesn't take account of rapidly rising co-payments and higher insurance deductibles when it calculates health and medical costs. And to gauge inflation in housing, the index approximates a measure of rent instead of looking at home purchase prices.
"We've had a huge run-up in the price of housing, and that doesn't show up in the C.P.I.," he said. So while the index shows that inflation is elevated but still under control — up 3.5 percent from April 2005 to April 2006 — many Americans find themselves paying sharply higher prices for essential goods and services.
In addition, aggregates generally are averages, which are of declining utility in an economy characterized by greater inequality of income and assets. In an interview with The Wall Street Journal in March, Mr. Snow took pains to point out that there had been substantial gains in per-capita income (8.2 percent, after inflation) and net worth (24 percent, before inflation) from the beginning of 2001 to the end of 2005.
The data he cited were averages, or means, and that can be misleading. "The average wage is a useful indicator if you want to know what's happening to the tax base, but it might not tell you what's going on for the individual worker," said Alan B. Krueger, an economics professor at Princeton and a former chief economist at the Labor Department. Consider a hypothetical country with 300 million workers. Say the chief executive of an investment bank gets a $300 million raise this year, while the other 299,999,999 workers don't get a raise. In the aggregate, the average per-capita salary has risen by $1, but only one person has more money in his pocket.
To see how typical workers are doing, it's better to look at median wages and incomes — the midpoint that separates the top 50 percent from the lower 50 percent. And median income, which was stagnant during President Bush's first term, is struggling to keep pace with inflation. "Median household income has gone nowhere since the turn of the decade," said Mark Zandi, chief economist at Moody's Economy.com.
Mr. Zandi puts the problem with averages another way. "If you put one foot in a tub of hot water and the other in a tub of cold water and take the average, everything is fine."
THIS dichotomy accurately describes the economy. From 2001 to 2004, the average net worth of an American family rose 6.3 percent, according to the Federal Reserve's Survey of Consumer Finances. But not everybody grew richer. For the bottom 40 percent of families by income, the median net worth fell. "It just doesn't resonate with people when the Treasury secretary says everything is fine," Mr. Zandi said. "It's fine for half the population, and it's clearly not for the other half."
There's a final reason that the aggregates may not accurately capture the public mood. Aggregates shed light on the performance of the economy in the last month, or in the last quarter. By contrast, measures of sentiments and polls gauge feelings about the present and expectations for the future.
I don't know much about what? Not sure what you're getting at.
because those cost you talk of are included in CPI and when you take them out, particularly energy, CPI is usually very tame.
Plus no one in their right mind would argue CPI is understated. ON the contrary, it's more than likely overstated.
because he is old and was Fed Chief for 20 years. There's another conspiracy down the toilet.Greenspan left for a reason..
So you, like most corporate conspiracy theorists, expect energy prices to come down? Let's quit kidding ourselves. The era of cheap fuel is over.particularly energy
Why does anyone even try to "take out" energy?
I guess the homeless who don't live in cars are feeling the effects of inflation the least. There's a plus.
Finance 101: We take out energy because prices are very volatile and sometimes scews the data.
Increase in energy prices have lagged long term inflation rates.
If you want to help the homeless be an advocate for intensive drug and alcohol rehabilitation programs for homeless people and stop blaming others.
the only one who spouts conspiracies is you Dan.
So you are expecting a huge downturn in energy prices soon?We take out energy because prices are very volatile and sometimes scews the data.Blaming others? What the are you talking about? Sorry you can't follow a train of thought; just try to explain to the common person that he shouldn't pay any attention to energy or medical prices ever because, you know, they're volatile.If you want to help the homeless be an advocate for intensive drug and alcohol rehabilitation programs for homeless people and stop blaming others.
doesn't matter what I think, I'm just educating you as to why energy prices are removed sometimes when evaluating CPI. There's about 50 years of data to support that type of analysis.
You're the one who brought up homelessness in a discussion about energy prices.Blaming others? What the are you talking about? Sorry you can't follow a train of thought; just try to explain to the common person that he shouldn't pay any attention to energy or medical prices ever because, you know, they're volatile.
Well sure, there's also 50 years of oil's not being over $70 a barrel. I simply think there have been major changes to the possible ranges of energy and health costs that have to now be considered since they will never again be as low as they have in the past.doesn't matter what I think, I'm just educating you as to why energy prices are removed sometimes when evaluating CPI. There's about 50 years of data to support that type of analysis.I was actually just givning an example of people who wouldn't be affected by energy or health cost inflation -- directly anyway.You're the one who brought up homelessness in a discussion about energy prices.
You're right and 1st class postage has never been .39 before. the point is when you measure from point a to point b the increase in energy prices lags the inflation rate.Well sure, there's also 50 years of oil's not being over $70 a barrel. I simply think there have been major changes to the possible ranges of energy and health costs that have to now be considered since they will never again be as low as they have in the past.
Energy prices will decrease eventually if the markets remain free.
I'm not very confident of that in that long term, given the finite supply of fossil fuels and the increasing compe ion for the remaining reserves.Energy prices will decrease eventually if the markets remain free.
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