US economic folly should worry us all

[T_i_B]

http://www.guardian.co.uk/comment/story/0,3604,1043494,00.html

In 2001, President Bush misled the American people. He said that a tax cut that was not designed to stimulate the economy would stimulate it. But it did not. He told Americans that the large surpluses that were part of President Clinton's legacy meant the US could afford to cut taxes massively. Wrong again. He did not warn Americans how dubious such estimates can be.
This year President Bush again misled the American people about the economy. Weeks after persuading Congress to pass another tax cut - in some ways even more inequitable than the first - his administration revealed how bad the fiscal position had become. The $230bn surplus inherited from Clinton had turned into a $450bn deficit.

Now, after handing billions to rich Americans through tax cuts, the Bush administration is passing the hat around, asking for contributions from other countries to help to pay for the Iraq war. Even setting aside other dubious aspects of Bush's Iraq policy, the conjunction of misguided giveaways to America's richest people with an international US begging bowl is hardly likely to evoke an outpouring of sympathy.

Meanwhile, the US trade deficit is mounting. America, the world's richest country, evidently can't live within its means, borrowing more than a billion dollars a day. As the US thrashes around for someone to blame, it is inevitable that it will focus on China, with its large trade surplus, just as the deficits of the Reagan era led to a focus on Japan two decades ago.

[maha]

1. Bookmark this one, people

Stiglitz is a Nobel Price Winning economist. His opinion carries some weight.

[indepat]

2. Any sane, reasonable and fair course of action would be to rescind

most of the tax cuts, especially those that are regressive when taking into account all taxes, including payroll taxes, levied at all levels of government. But that ain't going to happen because rewarding patrons and further concentrating the nation's wealth among a relatively precious few are much more important to those ideologues calling the shots than is the fiscal soundness of the Federal government.