The successor government has already made huge mistakes.
George Bush has been lucky, in one way.
Well, he’s been lucky all his life.
But he’s been especially lucky for the past six years to have presided over an economy that was growing.
Of course, it wasn’t growing very strongly.
And the fruits of that growth were not distributed equally by any means. “The increase in income inequality . . . was greater from 2003 to 2005 than over any other two-year period” in the past 25 years, according to Jared Bernstein of the Economic Policy Institute. In 2005, the top 1% hoarded 18.1% of household income, up from 14.3% in 2003. During the same three years, 80% of households saw their share of the nation’s income drop.
But at least we weren’t in a recession.
Now it looks like a recession’s coming.
The crisis in the housing market is spilling over into other sectors of the economy. Meanwhile, consumers, who are up to their necks in debt, didn’t bail out the economy over Christmas with more spending. And gas prices remain high.
As a result, the odds of a recession are increasing by the day.
“A ‘soft landing’ doesn't seem likely,” warns Mark Weisbrot of the Center for Economic and Policy Research.
“Aside from the problems in the financial system and credit markets - which do not seem to have passed -- there is the problem of falling home prices. Just as the fantasy-based prices of the late 1990s stock market were much broader than a "tech bubble," this is not just a "sub-prime" problem. In fact, foreclosure rates on prime mortgages - borrowers with good credit - are now hitting the level of sub-prime borrowers three years ago. . . . Remember that this current economic recovery, now six years old, has been driven primarily by consumers borrowing on the rising value of their homes, and spending this cash. The big increase in residential construction, as well as the real estate and related sectors, also kicked in. All of these factors - plus the credit crunch - are now working in reverse.”
For Bush, this is more bad news. His approval rating has been below freezing even while the economy was growing.
In a recession, his approval is likely to go into the deep freeze.
And that’s where it belongs.
Unfortunately, lots of Americans will needlessly suffer along the way.
Bush may lose a few percentage points in the polls. The wealthiest Americans might not make much money in the stock market. But millions of other Americans will lose their homes, their jobs, and their health insurance.
Just as the benefits of a growing economy are unequally distributed, so too are the costs.