The Bush administration is doing at the end of its term exactly the reverse of what it did before entering office. In 2000, Bush's mantra was that the economy was in bad shape. Here's a reality check: back then, thoughtful discussions of the economy revolved around whether paying off the national debt was such a great idea. After 6 years of a boom under Clinton, the economy was perhaps overdue for a modest correction, which occurred after Bush took office and was deepened by the fall in consumer confidence following 9/11.
Now, the administration is denying clear signs that this economy is on life support. Only the fiscal stimulus of budget deficits and the monetary stimulus of cheap money staves off recession or worse. The cumulative federal budget deficit is enormous and projected to continue growing by hundreds of billions for many years. The dollar has lost nearly half its value, which is one more reason why oil is $90/bbl and gas is $3/gal. The trade deficit sets new records every month. The administration proposes applying a band-aid to the sub prime mortgage crisis, which is only a symptom of hemorrhaging debt. Just as with the 'surge' in Iraq, the administration is desperately pumping money into the economy, hoping to dump the mess into the lap of the next president.
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Fed Chair Bernanke is now hinting at a half-point reduction in the prime. We are approaching the stage in the intensive care unit where the docs are ready to inject a stimulus straight into the heart. Meanwhile, the Europeans are going to increase their rate to fight inflation. If the US sinks into 'stagflation' (stagnant growth with inflation), the cause can be clearly laid at the door of the Bush administration.
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