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Das amerikanische Märchen / interessanter Artikel mises.org

verfasst von --- ELLI ---, 14.08.2002, 15:55

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http://www.mises.org/fullstory.asp?control=1019
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Assigning Blame
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by William L. Anderson

[Posted August 14, 2002]

[img][/img] Regular
readers of this website know that the various writers who have recently
appeared have not been kind to the economic"program" (if one can
call it that) which has come forth from the George W. Bush administration. As
the markets continue to wallow in bear territory, and as consumer--and, more
important, investor--confidence falls, writers and commentators of all stripes
have weighed in to give their two cents' worth.

Not surprisingly, Democrats have fired the latest salvos,
claiming that this economic downturn is entirely the fault of the Bush
administration. <st1:PersonName>
<st2:GivenName>
Hillary</st2:GivenName>
<st2:Sn>
Clinton</st2:Sn>
</st1:PersonName>
 recently told a party gathering that the government
headed by her husband had provided prosperity and"fiscal restraint,"
and that this latest downturn in the market was caused by the modest tax cuts <st2:Sn>
Bush</st2:Sn>
 had pushed through Congress in 2001.

Not to be outdone, her husband himself placed the blame
squarely on his successor, claiming that the boom that occurred in the late
1990s was genuine prosperity that only came undone the minute Congress passed
the tax cuts. <st1:PersonName>
<st2:GivenName>
Al</st2:GivenName>
<st2:Sn>
Gore</st2:Sn>
</st1:PersonName>
 told supporters that the Clinton-Gore administration had created"the
strongest economy in history."

While I give no quarter in criticizing the <st1:PersonName>
<st2:GivenName>
Hooveresque</st2:GivenName>
 <st2:Sn>
Bush</st2:Sn>
</st1:PersonName>
policies that have been totally wrongheaded, someone needs to answer the
Democrats’ latest claims that they had provided a"permanent"
prosperity that somehow became undone when Congress voted to cut some taxes. Granted,
Democratic political operatives who pose as economists (i.e., <st1:PersonName>
<st2:GivenName>
Paul</st2:GivenName>
<st2:Sn>
Krugman</st2:Sn>
</st1:PersonName>
) have been saying the same thing, all of which proves once again that
politicians and bad economists are natural bedfellows.

All together now, let us repeat the following: <st1:PersonName>
<st2:GivenName>
Bill</st2:GivenName>
 <st2:Sn>
Clinton</st2:Sn>
</st1:PersonName>
did not, repeat, did not give us an era of permanent prosperity. Nor
did his administration present the picture of"fiscal restraint"
that we are now being told was the state of affairs in Washington a few years
ago, and that includes the vaunted budget"surplus" that was nothing
more than a sham set of numbers reflecting the built-in Social Security
surpluses that had been planned for the system all along.

Let us begin with <st1:City>
<st1:place>
<st2:Sn>
Clinton'</st2:Sn>
</st1:place>
</st1:City>
s"prosperity." Yes, during the late 1990s, unemployment was
low, and the stock market was booming. The problem was that this boom was
driven by unwarranted expansion of credit by <st1:City>
<st1:place>
<st2:Sn>
Clinton</st2:Sn>
</st1:place>
</st1:City>
’s new political ally, <st1:PersonName>
Federal Reserve Chairman <st2:GivenName>
Alan</st2:GivenName>
 <st2:Sn>
Greenspan,</st2:Sn>
</st1:PersonName>
and was in no way sustainable.

In fact, by 2000, the boom already had run its course, and
the markets were showing weaknesses. Moreover, the massive number of new
regulations the Clinton administration placed upon business
activities--especially on the environmental front--were sure to become even
more burdensome once a slowdown hit the economy, and would also impede
any recovery.

That the boom was driven by the Fed’s credit expansion is
obvious. The figure above demonstrates money growth from 1983 to 2000,
and we can see that growth in M2 and M3 was especially steep, particularly
after the 1994 elections when the Republican took both houses of Congress.

Even more telling is the growth of debt from 1995 to 2000,
as household debt rose by 46.4 percent, corporate debt by 62.8 percent, and
state government debt by 19.5 percent. For households, mortgage debt rose
by an astounding 94 percent during that period.<a title href="http://www.mises.org/fullstory.asp?control=1019#_edn1" name="_ednref1"></a>

Granted, there were real investment opportunities that arose
during this period, something that was lost in much of the"dot.com"
hype that engulfed the markets during the late 1990s. First, deregulation
of transportation and telecommunications, a process that began during the late
1970s, made certain sectors of the economy more attractive to
investment--something that would have happened even without Greenspan's credit
expansion.

Second, near-exponential developments in computer technology
again opened new avenues for investment. However, because the Fed chose
to open the money spigots, the amounts of new money pouring into the
above-mentioned sectors was far greater than could be sustained in a
profitable manner. Yes, a number of investors benefited early in the
process, but as the bubble in technology stocks increased, it became clear
that the markets could not continue to absorb all of the new cash, and the
bubble finally burst.  

Finally, the Clinton administration's anti-Microsoft jihad
put the finishing touches upon any hopes for the technology sector to be able
to profitably deal with all of the new investment.

In other words, it was clear that malinvestments were
occurring on a massive scale in the <st1:country-region>
<st1:place>
U.S.</st1:place>
</st1:country-region>
 economy, and it was only a matter of time before the inevitable
liquidation process had to begin. In one sense, it would have been poetic
justice for Gore to have won the 2000 election, in that his administration
would have been the one in power when the crash finally became reality. He
would have had no Republicans to blame for the mess.

Unfortunately for Bush, however, the brunt of the crash has
fallen upon his shoulders, and he has done little to make things better. Yes,
his administration pushed through modest, back-loaded tax cuts in 2001,
although the cuts were marketed as an economic"stimulus" when they
should have been touted as a way to unburden the economy from the shackles of
government.

Moreover, while he has recently spoken of the financial
bubbles that occurred during the <st2:Sn>
<st1:City>
<st1:place>
Clinton </st1:place>
</st1:City>
</st2:Sn>
presidency, neither Bush nor anyone else in his administration has the
knowledge or training to articulate anything that approximates an Austrian
business cycle theory. This would be a golden opportunity for someone at
the presidential level to explain what really happened. Instead, we get a
bad mixture of Keynesian claptrap (tax cuts as a"stimulus" package
and vast increases in government spending) and <st1:PersonName>
<st2:GivenName>
Herbert</st2:GivenName>
<st2:Sn>
Hooveresque</st2:Sn>
</st1:PersonName>
maneuvers like new tariffs on steel and lumber.

As for increasing the burdens of the state, <st2:Sn>
Bush</st2:Sn>
 is doing it in style. In order to retaliate for the September 11
attacks that probably cost, at most, about a million dollars to carry out, he
is leading the charge for the U.S. government to spend hundreds of [i]billions of
dollars in new taxes for military operations and a war that even he says is
likely to last for our lifetimes. The federal budget has increased so
quickly and massively that it is unlikely we shall have any kind of handle on
government spending for a decade or more. In other words, <st2:Sn>
Bush</st2:Sn>
has brought back out-of-control government.

The burden of government does not extend just to spending. Instead
of pointing out that the latest attacks upon the business community are going
to have long-lasting negative effects upon investment and economic growth,
Bush has entered into a"race to the bottom" competition with
Democrats to see who can most vociferously demonize investors and
businesspeople.

At one level, <st2:Sn>
Clinton</st2:Sn>
 and his acolytes are dead wrong: the economic downturn was an inevitable
end to years of financial binging that was the product of government's unholy
alliance with the Federal Reserve System. Had <st1:City>
<st1:place>
<st2:Sn>
Clinton</st2:Sn>
</st1:place>
</st1:City>
made it to a third term, or had <st1:PersonName>
<st2:GivenName>
Al</st2:GivenName>
<st2:Sn>
Gore</st2:Sn>
</st1:PersonName>
prevailed in <st1:State>
<st1:place>
Florida</st1:place>
</st1:State>
, we still would have had a recession.

Bush's response to this whole mess, however, has been
absolutely disheartening. He has made wrong choices at every turn, and
the economy will pay. He is making sure that the political classes will
prosper, and that the economic burdens upon the rest of us will grow. The
president could have done the right thing. Instead, he has taken a bad
situation and made it worse.


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William Anderson, an adjunct scholar of the Mises Institute,
teaches economics at Frostburg State University. Send him MAIL. 
See his Mises.org Articles
Archive. See also the Austrian
Study Guide on Business Cycles. Also See Higgs' How
FDR Made the Depression Worse.
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<a title href="http://www.mises.org/fullstory.asp?control=1019#_ednref1" name="_edn1">[i]</a>
<st1:country-region>
<st1:place>
U.S.</st1:place>
</st1:country-region>
Statistical Abstracts, 2001.  <st1:country-region>
<st1:place>
U.S.</st1:place>
</st1:country-region>
Department of Commerce.
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Das amerikanische Märchen / interessanter Artikel mises.org - --- ELLI ---, 14.08.2002, 15:55