Monday, April 24, 2006

Economic hazards

The Carpetbagger Report » Blog Archive » 'Having trouble' at Treasury: "Rumor has it that Treasury Secretary John Snow will get the boot any day now. Part of the problem, apparently, is that the White House is reportedly 'having trouble' finding someone qualified who wants the job. That's not a good sign."

My previous post tried to riff off of Krugman's latest "things are worse than they appear" column on the trade deficit, to make the case that Bush economic policy could result in a meltdown and a political storm.

On the economic front, things are bad, but not acutely bad, and so not "obviously" bad, to the citizen or voter, who is not paying much attention. The U.S. is on an unsustainable course, as they say, living beyond its means and failing to renew its infrastructure. It is hard to know when the crisis will come, or even if a crisis will come. Things may just continue to deteriorate gradually, and various political narratives will be generated by the right-wing corporate media, which will blame inevitable abstractions, like globalization, about which government policy can do nothing.

The gradual decline in median household incomes has been small; it adds up, of course, but it is not dramatic and acute, and so, a political crisis never comes.

But, there is some non-zero chance that an economic crisis will come, in the Bush administration. And, one of the reasons is that Bush has no competent people in key economic policy positions. Snow, the Treasury Secretary, is an incompetent, and, on the second tier at Treasury, a lot of offices are simply empty. If there were a shock to the system, the Administration might not be able to contain it, and, in fact, might actually respond in a way, which made a small shock into a full-blown crisis.

The housing bubble has burst, and the yield curve has been inverted, and oil prices are rising. At the very least, an economic recession has to be regarded as highly likely. The possibility of a political or meterological event causing a spike in oil prices has to seem probable, and the possibility of a dollar crisis has to appear no longer remote. These are circumstances, which even an Administration lousy with technical, economic competence could screw up.

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