Democrats Talk Economy Down: Liberals Pine for Recession and Higher Taxes

The prospect that the bear market might soon turn around throws a monkey wrench into the Democratic strategy for holding the Senate and seizing the House in this November’s elections.

The Democrats have been hoping—praying?—that the stock market will continue to drop, that the economy will follow it down, that millions of Americans will be thrown out of work and that they will be able to exploit widespread human misery to take control of the federal government again so they can increase taxes and expand the welfare state.

If good days are coming, they are arriving at a bad time for Democratic demagogues.

This is a far cry from two years ago, when Democrats were lamely decrying President-elect Bush for "talking down" the economy.

When Bush was elected in November 2000, the economy was indeed on its way down into the Clinton Recession. The economy fell off a cliff in the third quarter of 2000, with the annualized growth in the Gross Domestic Product (GDP) dropping from 4.8% to 0.6%. Considering that the nation had seen a decade-long economic expansion, that the business cycle had not been repealed, that the Federal Reserve had raised interest rates six times in the previous two years, that the stock market had been dropping since March, and that the regulatory excesses of the second Clinton term had to bite into the economy at some point, it seemed pretty obvious a recession was on the way. The real question was what to do about it.

When President-elect Bush and Vice President-elect Cheney suggested that quickly enacting the tax cut they had promised in their campaign could help the economy, Democrats went wild.

It started when Cheney stated the truth on NBC’s "Meet the Press" on Dec. 3, 2000. "We may well be on the front edge of a recession here," he said. "And I would hope that would change people’s calculations with respect to the wisdom of the kind of tax cuts that Gov. Bush has recommended."

When Bush backed Cheney up, saying there were "warning signs on the horizon" and that his tax-cut plan was "an insurance policy against any economic downturn," the lame-duck Clinton White House immediately kicked into war-room mode, spitting out one last volley of Clintonite lies.

White House economic adviser Gene Sperling did a long run of interviews accusing Bush of trying to tank the economy. "What you’re seeing," Sperling told Reuters, "is President-elect Bush and his team actually talking down our economy, actually probably injecting more fear and anxiety into the economy than is justified." On CNN, Sperling said, "To talk down your own economy just because you think it might help your political positioning, or put a little more blame on your predecessor, or try to give you a little more credit, is really a very short-term strategy."

In fact, Bush had a long-term strategy: cut taxes and put more money back in the private sector, where it could spur economic growth.

In 2001, the Clinton Recession hit as predicted. In the first quarter of that year GDP went down on annualized basis by 0.6%, in the second quarter it went down 1.6%, in the third quarter it went down 0.3%.

In the meantime, Bush pushed through a modest $1.3-trillion tax cut that would be phased in over ten years. He did it over the opposition of the vast majority of Democrats in both the House and Senate.

What rival economic strategy did the Democrats propose? Simple: In a recession, keep taxes high so Americans can keep less of their own money to spend and invest.

In the fourth quarter of last year something amazing happened. Despite the terrorist attacks of September 11, the U.S. economy began growing again. Between October 1 and New Year’s Day, GDP bounced back 2.7%. In the first quarter of this year, it soared at an annualized rate of 5%.

Inflation is now holding steady at a low 2.7%, and unemployment is at an unexceptional 5.9%. Interest rates are way down, with the average 30-year housing mortgage recently hitting its lowest level since the 1960s.

On July 16, Federal Reserve Chairman Alan Greenspan, no conservative hero, had nothing but good news for the Senate Banking Committee. "To sum up," said Greenspan, "the U.S. economy has confronted very significant challenges over the past year or so. Those problems, however, led to only a relatively brief and mild downturn in economic activity, reflecting the underlying strength and increased resiliency that the economy has achieved in recent years."

The future, Greenspan said, promises a U.S. economy "poised to resume a pattern of sustainable growth." The economy, he predicted, will grow by 31¼2% to 33¼4% this year, and by another 31¼2% to 4% next year. Unemployment will go down, he said, and inflation will stay down.

Democratic leaders had no interest in this good news. Because it suited their purposes, they ignored Greenspan, and swept aside all economic indicators except the volatility in the stock market—which for them shone as the one bright beacon pointing the way toward the misery and bad times they need to succeed.

Last Monday, a meeting of the allegedly "moderate" Democratic Leadership Council turned into an orgy of Bush and U.S. economy bashing. As the New York Times described it, "[A] parade of prospective Democratic presidential candidates assailed . . . Bush’s handling of the economy." The Democrats, the Times reported, accused Bush "of squandering a thriving economy left for him by President Clinton to pursue policies that benefited wealthy Americans."

"The economy is in trouble, and there is no economic leadership coming from the White House today" said Senate Majority Leader Tom Daschle (D.-S.D.).

"When it comes to fiscal responsibility and economic growth, this administration is all blame and no game plan, all response and no responsibility," said Sen. Hillary Rodham Clinton (D.-N.Y.), sounding like her buddy Jesse Jackson.

What do the Democrats propose to do to solve the economic crisis they hope is coming? Raise taxes, of course, and use the revenue to expand entitlement programs (i.e. undoing the welfare reform of 1996) to make more Americans dependent on government instead of on their own initiative and hard work.

"We must be prepared to postpone the Bush tax cuts that have not yet gone into effect," said Sen. Joseph Lieberman (D.-Conn.).

Former Clinton Treasury Secretary Robert Rubin told Newsweek the Bush tax cut was a "threat to the economy." "We don’t have to ‘raise’ taxes," he said, "we just have to postpone or cancel what would otherwise happen in the later years."

This was classic Clintonite double talk: A raise in taxes may not mean a raise in taxes depending on what the meaning of the word "raise" is.

Vermont’s Democratic Gov. Howard Dean, already stumping for his party’s 2004 presidential nomination, was more candid. "I think most of the President’s tax cut ought to be repealed," he said on "Meet the Press" July 21. "It’s very bad economic policy."

Curiously, the stock market refused to cooperate with the Democratic strategy. The same day they convened at the DLC meeting to use the market decline to dump on Bush and the economy, the market rebounded almost 500 points. In a four-day span, it came back 1000 points.

Whether the bear market has yet reached a bottom or not, there are just two secrets to long-term economic growth in the USA: the first is freedom and the second is the character of the American people in using that freedom with the wit and energy needed to create wealth.

The basic strategy of the Republican Party has always been to maintain that freedom and promote that character. The basic strategic of the Democratic Party is to restrict that freedom and destroy that character by seducing people into government dependency (i.e., as in creating a massive new prescription drug entitlement).

In their ploy of talking down the economy, and recommending a reversal of the Bush tax cuts, Democrats have given Republicans an opportunity in this election cycle to clearly drive home this basic difference between the parties. Between now and November the GOP should not let voters forget it.

This nicely sums up what the RAT party thinks of ALL Americans. Nice post.

This "talking down the economy" nonsense isn't any more true of the Democrats now that it was of Bush when Clinton accused him of doing it during the campaign.

The markets are ebbing as part of a natural, long term cycle. There is very little Bush or anyone else can do to stoop it, short of major structural reforms (tax reductions) that are unpalatable to both parties. There is a lot of 90's binge debt to be worked off, and the process is only just beginning.

This "talking down the economy" nonsense isn't any more true of the Democrats now that it was of Bush when Clinton accused him of doing it during the campaign.

It is more true of the Democrats than it was of Bush.
Bush was making an observation which was proven to be a valid and accurate assessment of economic conditions at the time.

The Democrats on the other hand have been exploiting instability and uncertainty in the stock market which could in fact have a negative effect on the economy if they are succesful in spooking investors even more than they are.
And they have been talking down the economy at a time when it has actually been in recovery. The opposite of Bush.

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