THE BUSH ECONOMY:
BACK TO THE SOMBER SEVENTIES?

The economy is zipping along. Corporate profits exceed expectations. Economists praise our growth in GDP. Jobs are being created. Wall Streeters are salivating over their year-end bonuses. Jubilation abounds in New York. Is everybody happy?

No. Workers and consumers are so mad they may need Ritalin to calm down.

How can Wall Street be so happy and Main Street so angry?

It's the money.

Prices are going up faster than wages, so real income for the man on the street is going down.

With great aplomb, President Bush has taken our economy back to the seventies -- that somber economic period that followed the nifty fifties and the sizzling sixties.

During the fifties and sixties, Main Street was really happy. It had nothing to do with muscle cars, soda fountains, poodle skirts, Elvis Presley, the Beach Boys, Coca-Cola or any other popular symbols of the times. It was all about money. (Actually, worker and consumer happiness is always about money.)

In the 1950 - 1970 period, real income zoomed upward, allowing middle-class families to buy more luxuries, better food, better healthcare and increasingly larger houses. Those "happy days" were subsidized by falling energy prices and food costs which greatly increased our real income. The economy wasn't perfect, there being some inflation. Back then food costs went up 54% while energy increased 51%. But here's the kicker: wages went up 162%, resulting in rapidly rising real income. During the fifties and sixties, your father's real income zoomed 51%.

In the fifties and sixties, dad's paycheck should have been called a "power check," because its purchasing power went up each time he cashed it. As the percentage of his check that went for food, beverages and tobacco went down 21 percent, he was able to use the (huge) leftovers to buy a bigger house. With gasoline and heating oil dropping at the same time, he could afford to buy bigger and fancier cars. The good times really rolled under Presidents Truman, Eisenhower, Kennedy and Johnson. Dad and Mom were joyfully living "the American Dream." Wall Street and Main Street danced happily together.

Then came Nixon, Ford, Carter and the somber seventies. The good times ended.

First, the Arab oil boycott in 1972 caused energy prices to triple. Then food zoomed up in price, caused by a perfect storm of bad growing weather, worldwide crop shortages, a ill-thought-out Soviet grain deal and the failure of the anchovy catch, which resulted in a shortage of protein animal feed. Housing prices doubled between 1970 and 1976.

During this time of booming energy prices, food prices and housing prices, the average wage remained almost flat, resulting in steep declines in real income. In short, daddy went from cashing a growing power check to cashing a shrinking sickly check. Factory workers referred to their pay as "my weakly check." White-collar workers and middle-level executives coined the term "my semi-monthly insult."

A big recession didn't help matters, as Main Street went through the successive emotions of shock, disbelief, anger, resentment and eventually to outright defeatism. In 1976, real estate mogul Harry Helmsley broke down at work, crying, "I can't move my buildings out of New York!"

Hope seemed lost as three Presidents seemed out to sea in dealing with a struggling economy. Nixon avoided the unpleasant task of confronting the issue by running off to China and then resigning before he got himself impeached. President Ford created so much ill will pardoning Nixon that he had little political capital to spend on the economy. President Carter was so overwhelmed by the office that failed to do anything about the economy other than work his worry beads while complaining about the nation's "malaise." Interest rates and inflation soared into a perfect storm called "stagflation." Wall Street and Main Street danced together in a misery exemplified the screaming voice of Janis Joplin.

Then in 1981, Ronald Reagan rode out of the West to save us. Borrowing money like Franklin Roosevelt, Reagan built condos, increased defense spending, ran up a big deficit, created confidence on Main Street and, in the process, destroyed Carter's stagflation and malaise, along with the Soviet Empire. He set the country off into an unparalleled 20-year period of prosperity which was effectively managed by Presidents George H.W. Bush and Bill Clinton.

But now the Reagan-Bush-Clinton prosperity is gone. Prices are rising. Wages are flat. Real income is going down. The word "stagflation" is being whispered about by economists. Good jobs are being outsourced to China and India. Major U.S. industries (think airline, auto, steel) are nearing bankruptcy. Over 40% of Americans have no health insurance. Medicaid is breaking city and state budgets. Social Security and Medicare are headed toward bankruptcy. The Federal Pension Guarantee Fund is so far under water, it may never be seen again. We have run up unsustainable Federal deficits and huge trade deficits which threaten the health of the American dollar.

Is President Bush going to leave us in Carter-like stagflation and malaise?

He will if any three of the following storms merge:

1. The federal deficit increases

2. The trade deficit widens

3. China and India stop buying American Treasury Bonds

4. The U.S. housing bubble bursts

5. Medicaid and Medicare remain insolvent

6. Social Security continues on its downward financial spiral

7. Corporations stop offering pensions to employees

8. Corporations stop offering health insurance to employees

9. Wal-Mart becomes the living standard for the nation

My guess?

We will elect another President or two who have no grasp of economic matters and fall into a Jimmy Carter malaise. Then, when things look really bleak, some unknown will again ride out of the West to lead us back to the promised land.