Can Bush Keep the Economy a Secret?

By: Robert Reno

Right about now, millions of Americans are receiving the depressing news that their 401(k) balances have shrunk to levels that may force them to postpone retirement and reassess their prospects for a secure old age.

If this puts them in a foul mood, it could make them lose patience with the notion that President George W. Bush knows where he's leading the economy and has sense enough to get it there. In the quarter that ended Sept. 30, the one now being reported to shareholders, common stocks took their worst beating in 15 years. Since its historic high of 11,722.98 in January 2000, the Dow Jones industrial average has declined by about 4,000 points. The Standard & Poor's index of 500 stocks is now headed for its third straight year of decline, something that hasn't happened since the 1930's.

Already, Republicans are throwing up defense maneuvers including a nine-page memo issued by Bush's Commerce Secretary, Donald Evans, who argued: "There is more than ample cause for optimism about the economy." He insisted that "most of the economy is following a normal recovery pattern". But the stock market clearly isn't.

To add to the nation's anxieties, the Census Bureau reported that the number of people without health insurance rose 1.4 million in the last year, and the number of people living in poverty rose for the first time in eight years. The bureau also reported that the median household income fell to $42,228 in 2001, a decline of 2.2%. The index of consumer confidence has fallen in four consecutive months. Even if Secretary Evans starts issuing longer and more wildly optimistic memos, sooner or later the perilous condition of the American economy is going to become so widely known that even the Bush administration's fetish for secrecy cannot conceal it.

There were also long-term signs that the distribution of incomes in America increasingly favors the wealthy. The Census Bureau said the richest one-fifth of the population received 50% of all household income last year, up from 45% in 1985. The poorest one-fifth got 3.5% of total household income, down from 4% in 1985. This suggests that even though most of Bush's huge tax cuts for the wealthy haven't even kicked in yet, the nation is already moving toward greater inequality. Just imagine where we'll be in a few years.

The rich will need wheelbarrows, perhaps 18-wheelers, to haul their share of the nation's income to the bank.

Robert Greenstein, executive director of the liberal-leaning Center on Budget and Policy Priorities, says the census data show that "income inequality either set a record in 2001 or tied for the highest level on record".

It's entirely possible that people will not blame Bush for a depressed stock market any more than they will hold him accountable for the corporate scandals that began with his dear friends at Enron and are still working their pernicious way through the system with devastating effect on share prices. This would suggest that they have been so grateful for Bush's inspired leadership since Sept. 11, 2001, that they will follow him blindly off a cliff if necessary. But it is just as possible they won't, which could mean that people will peruse their 401(k) results and have a fit that provokes them to punish Republicans in the November elections.

Meanwhile, the person most responsible for keeping stock markets honest is Harvey Pitt, the President's choice to chair the Securities and Exchange Commission. This could turn out to be unfortunate because Pitt has gotten his fanny wedged into a crack. A lot of angry congressional critics, including Sen. John McCain (R-AZ), are beginning to wonder if Pitt won't soon be toast. In a letter to Bush, Senate Majority Leader Thomas Daschle (D-SD) and House Minority Leader Richard Gephardt (D-MO) heaped withering scorn on Pitt.

"At best, Chairman Pitt's repeated insensitivity suggests an arrogant indifference to the appearance of conflict of interest", they said. "At worst, Chairman Pitt has allowed associations with past clients and the industries he is regulating to influence his judgment and actions in ways that are improper or unethical."

Pitt's past associations, of course, include large accounting firms and major investment banks which stand accused of bullying stock analysts into recommending stocks they knew were junk or, in the words of one embarrassing e-mail, "crap".