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US Economy as an Accelerated War Economy

"A recovery based on job losses, wage cuts, increased health care costs, an incomparable increase in student fees and growing poverty is not John Kerry's idea of an American economy that works for America's workers.. Business Week recommends either cancelling tax relief.."

By Dago Langhans

[This article originally published in: Junge Welt, May 12, 2004 is translated from the German on the World Wide Web,  http://www.jungewelt.de/2004/05-12/006.php.]

According to the current calculations of the official Bureau of Economic Analyses, the gross domestic product (GDP) of the US grew 4.2 percent in the first quarter of 2004. Development on the labor market also shows positive signs, the US Department of Commerce reported. Nevertheless the level of employment is still below the level of November 2001.

In connection with the massive tax cuts announced last year by president George W. Bush, US Treasury Secretary John Snow immediately declared, "the American economy is supported by long-term growth data". His mantra was oriented to the election in November. "The continuous economic leadership by the president will secure the upward trend of the economy, provide for increasing strength and create new jobs."

GDP growth of over five percent forecast by economic experts and extensive recovery of the labor market have not materialized. Euphemistic interpretations of the economic situation are sought particularly in the election campaign year.

Right after the publication of the quarterly figures, circles of the Democratic Party described this as the "second slowest recovery phase since the Second World War". Stephanie Cutter, spokesperson of the democratic presidential candidate John Kerry, declared according to the Washington Post: "A recovery based on job losses, wage cuts, increased costs, an incomparable increase in student fees and growing poverty is not John Kerry's idea of an American economy that works for America's workers."

Republicans and Democrats, the New York Times reports, do not discuss the contribution of military expenditures to the "recovery" of the US economy. The increased war spending has a decisive share in total development. Adjusted for inflation, this wage spending amounts to $17.4 billion of the $108 billion increase of the US-GDP.

The main share of military spending was for the air force for the "basic equipment of the military bases". Only a small part was spent for munitions although this could change with the actual escalation of the war, representatives of the Bureau of Economic Analyses explained. The Pentagon recently admitted that the military operations in Iraq devoured $4.7 billion every month. In late summer $4 billion more could be spent when the additional budget of $87 billion approved last year is made available. An additional increase of the war budget of $50 to $75 billion in 2004 seems inevitable given the massive problems in Iraq.

This situation is viewed very skeptically in economic circles. In the economic magazine "Business Week", one commentary titled "A Deafening Silence on War Costs" emphasized the striking reserve of the Bush administration in concretizing the financial burdens of the Iraq war. Alarming comparisons with the military-political disaster of US policy in Southeast Asia call us to rethinking. "Like his predecessors a generation ago, Bush refuses summoning citizens to pay for a foreign conflict that turns out far more costly than originally announced. President Lyndon Johnson played down the costs of the warfare in Southeast Asia. In 1965 his economic experts proposed a tax increase. But Johnson waited until 1968 before he introduced a ten-percent income tax hike. In Richard Nixon's term in office, the actual extent of the costs was also veiled. "Business Week" moaned about the immense loss of trust of citizens in government and the economic side effects. "The budget deficits jump, inflation-rates land in double digits and the economy rests from one crisis to the next."

Whether Bush's PR-strategy for the reelection, as the resolved war president and tax cutter, will fall into place is doubtful. "Business Week" recommends either canceling the long-term tax relief or alternatively introducing an income tax to cover the costs of the Iraq war. "His father found an innovative way to a sound budget policy in war times. America's foreign allies picked up the tab for the first Gulf war. However the present administration is too isolated internationally to repeat this technique."

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That's Part Of It, But... 01.Jun.2004 23:46


Probably the biggest impact on our economic "recovery" is the fact that Bush not only repealed the corporate minimum alternative tax (that was passed by Clinton, for those of you who think Republicans and Democrats are all the same), but made it retroactive. So many companies are able to write off all the taxes they paid during the great boom cycle of the 90s. So what you are seeing is a Wall St. flourishing with EBITDA, but not NOI.

Bush fiscal policy, as his own conservative Sec'y of Treasury, Paul O'Neill revealed in "The Price of Loyalty," is just a grand shell game that's front loaded to lure players (voters) into reelecting him.