Hissing the 'H' Word at Bush
By Martin Sieff
UPI Senior News Analyst
From the Business & Economics Desk
Published 8/22/2002 1:31 AM
WASHINGTON, Aug. 22 (UPI) -- It is time to discuss those two dreaded "H'-words. Is George W. Bush going to be Herbert Hoover? Martin Hutchinson, our Economics Editor and Bear's Lair business columnist thinks he may. And he may be right. But there is still a chance to hope otherwise.
The conclusion that Bush's economic and political record could be as catastrophic -- at least -- as that of Herbert Hoover, the hapless president who endured three and half years of the Great Depression without being able to do anything useful about it, rests on, unfortunately, on much more than the parallels between the Great Wall Street Crash of October 1929, and the one now fitfully unfolding before our eyes, although that is the obvious place to start.
First, the epochal scale of the current market slide -- even taking into account the 1,200 point rally in the Dow Jones Index we have just seen -- is now clear. And the grim dimensions of the crisis that we have been warning would come if Bush did not change his over-optimistic and, it now appears, highly irresponsible fiscal policies are now obvious to all.
Last month, USA Today noted that before the current market rally got under way, the Standard and Poor's 500 index total fall during the current bear market had come to within two percentage points of the 48.2 percent decline of the 1973-74 bear market, and that market was the worst since the Great Depression itself.
What triggered that last, most serious fall? The markets had been tumbling ever since the Internet Bubble first burst back in March 2000. Ironically, Hutchinson, our UPI resident bear, who has been eerily prescient in predicting this crisis and explaining the reasons for it, believes that the humbled NASDAQ high tech composite has now had all the speculative hot air squeezed out of it, and its current standings approximate real market value.
Currently things look much better for the Dow Jones Industrial Average. It continued its strong showing of recent weeks Wednesday, climbing back 85.16 to reclaim most of its triple digit 118-point fall Tuesday. Wednesday night it closed at 8,957.23 -- quite a contrast to its recent low of 7,702.34 on July 23.
But the jury is not yet in whether this will prove to be a continued, sustained recovery, or just a relatively short-term respite before further falls.
Hutchinson has argued in his columns that the Dow still may have far, far further to fall. He thinks it could drop to below 6,000. And, of course, there are other factors as well.
First, if the Dow starts to slide again, as it repeatedly did after apparently strong rallies in the 1929-31 period, its decline will inevitably trigger a "sympathetic falling elevator effect" in the NASDAQ, pulling that composite down further with it.
Second, the WorldCom official declaration of bankruptcy, while no surprise, clearly was closely linked with the big Dow falls the weekend right before it was announced.
The market to a large degree discounted the collapse of the huge energy corporation Enron half a year ago. But Enron by itself was an anomaly. To see a second huge "new technology" corporation implode as thoroughly as Enron did within only a few months, and for the same basic reason of highly irregular and irresponsible -- to put it mildly -- accounting turned that anomaly into a pattern.
As Hutchinson and our Chief Economics Correspondent Ian Campbell have been noting with alarming regularity in recent weeks, Bush has already fallen deeply into the classic Herbert Hoover groove of blindly and mindlessly repeating his mantra that business conditions an economic fundamentals are sound when it is clear to all that they are far from sound. And any freshman student of Economics 101 could tell you why --even if they didn't have the benefit of Yale and Harvard Business School degrees, as Bush does.
Even worse, Bush has already enthusiastically echoed Hoover -- and abandoned the great William McKinley, William Howard Taft, Warren G. Harding, Gerald Ford and Ronald Reagan traditions of tough, cool-nerved and reassuring leadership in difficult times.
Hoover froze wages trying to keep them up, much as Richard M. Nixon froze them more than 40 years later to keep them down. In so doing, he wrecked the economy's crucial mechanism for any fast and flexible recovery and froze the Great Depression into place for years to come. Now, as Hutchinson and Campbell have documented, Bush has meddled, with the enthusiastic cooperation of Federal Reserve Chairman Alan Greenspan, by keeping interest rates artificially at 40 year lows that leave the dollar and international investor confidence dangerously vulnerable any further sudden shocks from terrorist attacks to yet more Enrons.
Also, where Hoover spent Federal money during the Depression far too parsimoniously, Bush is spending far too much. He has thrown hundreds of billions of dollars at the economy without restructuring his beloved $1.35 trillion and thrown the Federal Budget wildly back deep into the red with no relief in sight.
Bush, of course, doesn't think he is Hoover. He and White House strategist Karl Rove still happily sleepwalk in their delusion that he is really the reincarnation of William McKinley, the president from 1896 to 1901 who reinvigorated and renewed the dominant ruling national Republican coalition for another 36 years. (Would that make John McCain Theodore Roosevelt come again? Bush and Rove do not seem to have considered that.)
The outcome of the midterm elections this November should settle the question of whether, in political terms at least, Bush is going to be McKinley or Hoover.
If the Republicans can rally patriotic sentiment and hold the House, then they can at least hope that they can preside over a sluggish economic recovery that at least does not plunge catastrophically. It must be said the current Wall Street rally offers hope this may indeed happen. If it continues, Bush may yet have a fighting chance of retaining his 1600 Pennsylvania Avenue NW address for another four years. That may still not make him McKinley, but it wouldn't be so bad either.
But if the markets plunge anew, and if the Democrats take both the House and the Senate this November, just as they did in November 1930, then the Bush-Hoover parallels will be flooding the airwaves and the op-ed pages. And there will be far, far worse for the president to face on Capitol Hill.
A newly Democratic House will not hesitate to launch probes into Bush's business record at Harken and Vice President Dick Cheney's at Halliburton. All the congressional investigative apparatus which the Republican House leadership in the Gingrich era so eagerly but ineffectually fired at Bill Clinton will then be fired -- with likely far more devastating effect -- at Bush.
Is Bush Herbert Hoover? The parallels are growing, but it is still too early to be sure. So far, he has been reckless but essentially lucky. If he can show more economic responsibility than he has so far, and avoid the siren calls to plunge into war with Iraq, he can still escape that dire fate. And there seems at least a little more hope of both those things than was the case even a few weeks ago. Let us keep our fingers crossed |
