It's the economy, stupid

By Jack H. Knowlan Sr.

Everyone remembers the famous words of James Carville that helped Bill Clinton get elected. Yet with all the debates among presidential candidates about how we need a change, there has been little detailed discussion of our economy, how bad it is and how to improve it.

There have been plenty of discussions about health care and illegal immigration, but these have a lot to do with the economy. Of course, there are those who still think the economy is in great shape. Actually, it is so vast that it is difficult to pinpoint the problem.

Articles last month in the Southeast Missourian by Dr. Mark W. Hendrickson of Grove City College, "Anatomy of a Financial Crisis," covered such problems as cheap money from the Federal Reserve and poor lending practices by the banks with practically no money down, which resulted in a boom in house building, a boom in bank loans, foreclosures and eventually a crisis for the builders, the banks and the mortgage companies. This crisis is serious. It affects the economy, but it is really an effect of an economic problem: loss of jobs or low salaries.

The Iraq war is, of course, a substantial economic drain, eating up our financial and other resources with no return. Someone recently came up with the figure that it cost the average U.S. household $7,500 (total cost divided by the number of households).

One of the largest hidden problems is the trillion-dollar debt we owe ($800 million to Japan, $600 million to China, $200 or $300 million to Saudi Arabia and the United Kingdom, caused by our poor trade policies of buying more than we sell, outsourcing jobs and transporting our manufacturing operations to other countries and buying the products back. To pay for this we either borrow money or print more, thus reducing the value of the dollar.

What we have now is runaway inflation, which will inevitably lead to depression if not corrected. The devalued dollar is a major factor in the increased cost of crude oil and consequently the cost of diesel fuel and gasoline. This in turn is fueling the inflation by increasing the cost of virtually everything we buy. In addition, the manufacture of biofuels, ethanol and biodiesel has already doubled the cost of milk and eggs and will soon do the same for pork, beef and poultry products.

When George W. Bush took office, he assured us there would be no increase in taxes and the increased budget would be taken care of by the increase in the economy. The only problem is that the no increase in taxes applied primarily to the multimillionaires, and the increased economy was due to the tax breaks for the huge corporations such as Chevron, ExxonMobil, Amoco-BP, Wal-Mart, Lowes, Home Depot, AT&T, Merck and Pfizer. Most of these have made record profits, paid limited salaries, paid low dividends, paid a lower percentage of taxes than their employees and gobbled up their competition without worrying about any monopoly interference from Uncle Sam.

So what do they do with all that profit? The corporate bigwigs decide that they have done such a good job that they grant themselves huge salaries, stock options, pensions and termination pay. Do they really need tax breaks? Most of their employees have their tax deducted from their paychecks and sometimes even pay a higher rate.

Forbes magazine used to list the top 500 wealthiest people in the U.S., mostly millionaires. Now most of the top 500 are billionaires.

The first President Bush started trickle-down economics years ago. It didn't work then, and it isn't working.

One thing seems perfectly clear: If we eliminate all the tax loopholes, do away with subsidies to multimillionaire corporations and biofuel plants, eliminate some of the pork in our spending bills and relieve the billionaires and multimillionaires of some of their excess cash, we would probably have enough money to afford health care and pay some on out national debt.

If we eliminated all the subsidies and incentives for outsourcing jobs and moving manufacturing operations out of the country, thus bringing jobs back to the United States, we could begin to see our economy improve. If we want to give subsidies or incentives, we should be giving them to firms in the U.S. for goods shipped out of the United States. Right now we are doing it backward.

The crude-oil crisis is destined to be a major problem for our economy. Biofuels are certainly not the answer. We should not refer to it as an energy crisis. Electricity can easily be increased through use of coal, geothermal, solar and nuclear sources, but liquid fossil fuel and natural gas cannot.

According to an editorial by Mortimer B. Zuckerman last September in U.S. News and World Report, the world demand for oil is growing by 2 or 3 million barrels a day, and new discoveries are not keeping up with the 30 billion barrels consumed (2005). The major change however, is that the American, British and Dutch oil companies which once dominated the world's oil and natural gas production now only control about 10 percent of the production and about 3 percent of the reserve. The nationally owned companies in Saudi Arabia, Russia, China, Venezuela, Iran, Brazil and Malaysia control more than 30 percent of the production and a large portion of the reserve. With the exception of Saudi Arabia and possibly Malaysia, we can no longer depend on the others as suppliers.

Our survival is going to depend on our ability to conserve and reduce our dependency on crude oil and natural gas and our ability to build alliances and negotiate with the nationally owned producers to supply our current exorbitant requirements until we can become less dependent on fossil fuels.

Jack H. Knowlan Sr. is a Jackson resident.