ALONG THE COLOR LINE — FEBRUARY 2003
The Bush administration’s decision to invade Iraq may be driven not primarily by the “threat” represented by Saddam Hussein’s regime to U.S. economic and geopolitical interests in the region. Over the vigorous objections and protests of nearly the entire international community and most member states of the United Nations, the Bush regime has amply shown utter contempt for the opinions of billions of people. Yet Bush, Cheney, Rumsfeld, and Company may be using war to divert the American public’s attention from another, more serious crisis much closer to home.
Since Bush’s “Electoral College coup d’etat” in January 2001, the country has experienced an economic decline that, by almost any measurement, represents the most serious crisis since the Great Depression of the 1930s. The most visible damage has been in the stock market. In the first two years of Bush’s administration, the total value of U.S. stocks fell from $14.7 trillion to $9.9 trillion, a total decline of $4.8 trillion, or about one-third of the market’s total value. This is, by far, the greatest percentage drop in the stock market during any other two-year period. By way of contrast, even the two-year period following the October 1929 stock market crash during the administration of Herbert Hoover, the stock market fell 29 percent. Millions of Americans have lost billions of dollars in their pension funds, and many who planned to begin their retirement at age sixty-five are being forced to continue working years longer.
Falling stock prices and the economic uncertainty created by Bush’s war plans to the Middle East have contributed directly to growing, widespread unemployment. Nationwide, unemployment rose to 6 percent, a 43 percent increase under Bush during his first two years in office. Hardest hit have been urban areas. During the past 24 months, for example, New York City has lost 176,000 jobs, with its unemployment rate soaring from 5.3 to 8.4 percent. Many of the unemployed have been jobless for six to twelve months or more, and tens of thousands have exhausted their unemployment insurance benefits but remain out of work. Homeless shelters in the city filled beyond capacity, with more than 30,000 indigent men, women, and children filling beds every night.
The impact of the current economic downturn can be measured in many different ways. On my college campus, for example, I’ve noticed a striking increase in the number of students looking for part-time employment, or requesting additional financial aid. Parents who’ve lost their jobs are no longer able to handle their children’s tuitions, and many students are now scrambling to stay in school.
A recent story in the New York Times confirms these impressions. Financial aid requests at the University of Michigan this spring semester, for example, are up 39 percent over last year. At hundreds of other colleges, the same trend is happening: at Bowdoin College, financial aid requests are up 30 percent; 14 percent at Barnard College; 20 percent at the University of California; and 50 percent at Skidmore College. Government Pell Grants, which covered 80 percent of the costs of tuition, room and board at public universities back in 1980, now cover less than 30 percent of typical college costs. States are aggressively slashing subsidies for higher education, and major public universities like the University of Massachusetts may be soon “privatized,” pushing tuition charges through the roof.
The only good news that one can point to in the current economy is the unprecedented drop in interest rates. But even here, bad news is just around the corner. Over the past two years, a majority of homeowners have taken advantage of the lower rates and have refinanced their mortgages. The refinancing boom pumped an estimated $420 billion back into the economy—which explains why the overall economy did not sink into a major recession or depression.
But the Bush administration’s ideological zeal for tax cuts for the rich will quickly generate hundreds of billions of dollars of deficits in the federal budget. Back in 2001, the Congressional Budget Office projected a $5.6 trillion surplus for the 2002-2011 fiscal years. Now it projects a 10-year deficit of at least $1.8 trillion. The 2003 fiscal year budget alone could be as high as $300 billion. A new wave of tax cuts by the Republican-controlled Congress and White House will put Social Security and Medicare in serious jeopardy. The federal government will probably be forced to pay for these programs through deficit spending, borrowing several trillion dollars to pay its bills.
When that happens, the Federal Reserve Board, the governing body that controls monetary policy, will push up interest rates significantly. As economic writer Paul Krugman recently observed, “from a fiscal point of view, the impending war is a lose-lose proposition. If it goes badly, the resulting mess will be a disaster for the budget. If it goes well, administration officials have made it clear that they will use any bump in the polls to ram through more big tax cuts, which will also be a disaster for the budget. “Either way,” Krugman notes, “the tide of red ink will keep on rising … (and) there are much higher interest rates in our future.”
What does all this mean to working class, low-income and unemployed people? Economic and financial disaster: bigger cuts in health care, education, and social services, students forced to drop out of college, higher interest rates on credit cards, and increased unemployment.
