Tuesday, June 17, 2003

There's no telling how far wacky ideology will obstruct the Republicans long-term goal of economic growth. The Bush policy seems designed to boost the stock market first and foremost, then boost investment secondarily, which is supposed to thus boost economic growth and eventually someday down the road boost employment. It utterly fails, of course, to take note of the overaccumulation of capital in the late 1990s. A policy focused on tax cuts for the little guy (e.g. cutting payroll taxes) designed to boost consumer spending -- which would also boost inflation -- seems to make a lot more sense.

To the General's mind, manipulating interest rates seems an awfully blunt tool. What will happen when the Fed lowers rates another 25 basis points next week? More money flowing into housing and the stock market, most likely, both of which are already bubbling if you know what I mean. Capital has shown for three years now that it isn't keen on investing to produce more capacity. Just today the Fed reported that industry is operating at 74.3% of capacity, same as April and down from March. Industrial production of consumer goods continued to fall in May (-0.1%) and production of business equipment remained unchanged. We haven't seen rates of underutilization this low since 1983. And Dubya and his cronies think we need more investment??

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