Cratering economy puts even Habitat homes out of reach

You know the economy is completely in the toilet when applications for low-cost, no-interest-loan Habitat homes are down.

From the Bowling Green (KY) Daily News:

They just want to help people get homes - but a plunging economy has made that task more difficult for local Habitat for Humanity officials.

"We are in the business of helping people have homes," said Don Ritter, secretary of the board and chairman of the family selection committee. "We really want to help them have a home, that's what we're about."

The number of qualified applicants for a Habitat home plummeted last year, leaving Habitat officials searching for local residents who can apply.

"We are desperately wanting to get applications," Ritter said. "We're trying to find people who might possibly qualify for a home."

When Ritter began working with the family selection committee about five years ago, about 25 people applied for a Habitat home. Last year, the organization received just four applications.

"And this is the part that hurts," Ritter said. "They all failed the test."

To receive a Habitat home, applicants must meet three basic qualifications: They must need a home; they must be willing to help construct their home; and they must be able to make payments on the home.

"These are not giveaway homes," Ritter said. "These are homes people purchase with a non-interest loan from Habitat."

The ability to purchase a home is one qualification some might lack in the midst of rising unemployment.

"The economy, I'm sure has been hurting us some," Ritter said, "and it's probably getting worse."

SNIP

But the local branch is not the only Habitat organization suffering from a lack of applicants.

Mendoza said he contacted Habitat's state executive director, who said others are experiencing a decrease in applications, and neighboring organizations are "going through the same issues," he said.

SNIP

The city recently donated five lots to Habitat, and the organization is eyeing a few prospects, who hopefully will apply, Mendoza said.

"Right now is a perfect time to buy," he said. "People are just holding back."

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Bush's Last 10 Days, Part 1: Recipe For Fiscal Disaster

As the countdown to Bush as ex-"president" begins, it might be good to put into context why some Americans, even some U.S. historians, regard Il Doofus as the worst "president" of modern times.

The federal deficit for the current fiscal year is being projected at $1.2 trillion. That's more than the entire national debt was at the time Jimmy Carter left office in January 1981.

The Congressional Budget Office report lays much of the blame for this spike on lower tax revenues due to the recession, and on $400 billion spent to bail out Fannie Mae, Freddie Mac and various financial institutions amid the mortgage crisis. Bush policies did a great deal to contribute to all of the above, but that's another post. For now, let's stick to the budget.

The deficit for fiscal 2007-08 was about $455 billion, consistent in real dollars with what was being run annually during the Reagan and Bush I presidencies. It's not too shocking, until you consider that Bush II inherited what had been the largest surplus the federal government has ever run, some $230 billion in fiscal 1999-2000, from departing President Bill Clinton's administration.

Onward.

The surplus decreased to $158 billion during fiscal 2000-01, which Bush presided over some of. Bush apologists have tried to make an end run out of this, saying that declining revenues due to a briefly sour economy were responsible. They've also pointed out that the Clinton surpluses occurred even though federal tax cuts were passed in 1997, an apparent argument for supply-side policies.

That's fair enough, up to a point. But by 2001-02, the federal government was in the red again, and that continued year after year until the aforementioned $455 billion deficit was reached. How did this happen?

Bush spent the first months of his presidency pushing tax bonanzas, mainly for his rich friends, through the Congress, along with scraps from the rich man's table for the rest of us, amounting to $300 per person. His economic plan basically rolled back the relatively modest Clinton tax increases on the wealthy, passed by the narrowest of margins in 1993.

Students of fiscal policy know that it's anything but simple, but a few policy effects during this administration seem clear. It didn't take long to turn surpluses into deficits, and arguments that this isn't related to tax policy are, at the very least, unconvincing.

Then, after 9-11, Bush the "decider" decided to take the country to war(s). The first one, in Afghanistan, seemed and still seems like a defensible action, despite the toll on the Afghan people. The second, the March 2003 invasion of Iraq, was in hindsight clearly elective. Aside from being an act of aggression, it turned out to be one of the most expensive mistakes a U.S. administration has ever made.

According to a July 2008 update, military operations alone in Iraq and Afghanistan have cost $872.6 billion. Some $661.1 billion of that was for ops in Iraq. Source: Congressional Research Service data.

Even conservatives need to put this into perspective. Would Winston Churchill have held fast to big tax cuts for the wealthy during an expensive war, and even have audaciously pushed for more such cuts?

George W. Bush did. And in so doing, the U.S. was set up, and knocked down like bowling pins, for the $1.2 trillion annual deficit we now face. Now tell me that, as a "president," this buffoon didn't suck great big green ones, with warts on them. His decisions were consistently the worst that could have been made, and yet he stubbornly continues to defend them. I don't think future generations will find his defense convincing.

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Repug Solution to Budget Crisis: Soak the Middle Class

It's not often that corporate-owned repugs come right out and admit that what they really want is income redistribution.

That is, redistribute the last pennies of the poor and middle class from them to the already too rich.

But some Kentucky repug lawmakers are out, loud and proud about their determination to re-create the feudal economy of the 13th century.

Amid the financial worries and talk of state shortfalls, some House Republicans are suggesting that now is the time to eliminate the state’s corporate and individual income taxes.

Not only that, but they’re also calling for dropping the sales tax from 6 cents to a nickel on every dollar of goods purchased.

So how will taking away all that revenue stabilize the shaky status of the state’s coffers?

The legislation drafted by Reps. Bill Farmer of Lexington and David Floyd of Bardstown would replace the income tax by spreading the sales tax to a host of services that are currently exempt, including plumbing, roofing and other contracting work, and some consulting work.

Brilliant! Absolutely fucking brilliant.

Because, of course, income and corporate taxes, minimal as they are, fall more heavily on the wealthy than the middle-class. And the sales tax, of course, takes a far greater percentage of income from the poor and middle-class than it does from the rich.

Vastly expanding the items subject to the sales tax while eliminating income and corporate taxes will create a giant vacuum cleaner, sucking money away from the middle-class and depositing it in the bank accounts of the rich.

Before you know it, everyone earning less than six figures will be economic sharecroppers, feudal serfs barely surviving on the crumbs that fall from the corporate lord's table.

While we're all weak from hunger, illness and despair, we won't even notice when the congressional servants of the plutocrats take away our rights to vote.

Congratulations, Rep. Farmer, on your plan. It's perfect!

Cross-posted at Blue in the Bluegrass.

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Save Yourself, Save the Economy, Save Others: Give More

Do you still have a job? A house? Health insurance? Enough to eat every day? Then you are, in this deteriorating economy, among the fortunate. And therefore at risk of karmic correction.

You don't need me or anyone else to tell you that the ranks of the hungry, the sick, the homeless, the unemployed grow daily. You're spending less this Christmas because of fear that you may soon be among their ranks.

But just as the Obama administration will be able to restore the economy only by spending to create jobs rather than slashing the budget, cutting your family spending is also counter-productive.

No, don't run out to Wal-mart to buy more useless plastic crap. Spend to help the economy, help others and help yourself: give more to charity.

I could be laid off soon, but despite that - no, because of that - I am increasing my charitable contributions this year. I also added a local food bank to the homeless shelter, rehab program, low-income housing, family planning and AIDS treatment already on my list.

And if you want to kill three birds with one stone, turn those contributions into holiday gifts. We've all got somebody we exchange gifts with every year, somebody who doesn't need any more crap, but to whom we want to express affection.

Give that person the gift of philanthropy. Most national and international charities have online forms for making contributions in someone else's name, and will send that person an acknowledgement.

But I'm sure if you sent a check to a local charity, with a note asking them to notify your friend that the contribution was made in their name, the charity would be happy to do so.

As you know if you've ever given to charity, not even the joy of getting the one thing you've wanted all year compares with the feeling you get from giving to others.

Besides, you don't want to spend your next life as a cockroach, do you?

Cross-posted at They Gave Us A Republic ....

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Fearmongering Finally Blows Up in GOP's Face

At one time, fearmongering was the best thing that ever happened to George W. Bush and the NeoCons, as they cynically exploited 9/11 to advance their agenda. But now it's backfiring, as fear is fueling the economic meltdown.

For the past seven years, the GOP repeatedly did its best to scare the living bejesus out of the American people.

It's a strategy that worked, time and time again, and even played a key role in returning Bush to the White House in 2004.

The American people have been kept in a state of fear ever since 9/11, thanks to Bush's fearmongering. But it's a strategy that's now blowing up in the face of Bush and the GOP.

Fear, after all, is what fuels stock market crashes and panic selling. And fear is clearly playing a big role in the current economic debacle. Although the underlying economic reasons for the crisis are real enough, it's clear that panic and fear among investors and consumers is making the crisis even worse.

The American people are increasingly afraid of doing anything with their money, outside of stuffing it into a mattress. They don't trust mutual funds. They don't trust banks. They don't trust Wall Street. And they don't trust the Fed. Increasingly, they're embracing the mindset that Americans shared during the 1930s Great Depression.

For seven long years, Bush cynically used the fear of terrorism to manipulate the American people. As a result, Bush even got the American people to initially support his disastrous invasion of Iraq.

Between color-coded terror alerts and the constant scare words and language of fear and confusion, Bush got the American people so scared that they were ready to accept anything he wanted. As a result, Bush got whatever he sought, from shredding the Constitutions to embracing torture as official state policy.

But now it's backfiring. A terrified and fearful American people are simply going to stop spending money. They're going to sell their stocks. They're going to bail out of their mutual funds. And the U.S. is going to enter a lengthy and brutal second Great Depression. By the time this nightmare is over, the U.S. could easily become a Third World-like nation. It will almost certainly lose its status as the world's only economic superpower, as the world's balance of power shifts to East Asia.

And now, along with the Project for the New American Century, the Republican brand is now severely tarnished, perhaps forever.

There's more: "Fearmongering Finally Blows Up in GOP's Face" >>

How the American Economy Became a Sleazy Carnival Freak Show

Whatever happened to the once-mighty American economy?

The United States once had the mightiest economic juggernaut of any nation in history. Our "Arsenal of Democracy" played a big role in winning World War II. During that conflict, we overwhelmed our enemies with a tidal wave of efficient industrial production of everything from bombers to jeeps to battleships.

During the 1950s, America's industrial might was at its peak. We were the richest, most prosperous nation in history. U.S. workers earned the highest wages in the world. We enjoyed the most generous benefits and vacation time of any First World nation. American products, from planes to cars to televisions, were second to none in quality and were in demand worldwide. The Great American Middle Class was a prosperous and growing club that saw its fortunes improve, year after year.

Today, all of this seems like a distant memory. America's economy today is a joke. "Made in the U.S.A." is no longer a symbol of quality. In fact, our nation doesn't make much of anything these days. Our trade deficits are at nightmarish levels. And in three short decades, we've gone from being the world's biggest creditor nation to its biggest debtor nation.

Since we don't manufacture anything these days, all we Americans do these days is buy stuff made in other nations. And we really don't even have the money to do that, so we borrow trillions of dollars from prosperous nations in East Asia.

In fact, the U.S. economy today resembles a sleazy carnival midway. Rather than producing useful goods and services, our Carnival Freak Show Economy these days spends more and more time running scams and swindling people (think Wall Street). We've exported most of the good-paying jobs that sustained our once-mighty middle class. And the gulf between the haves and have-nots has grown to its widest since the infamous Gilded Age of the late 19th century.

A half-century ago, General Motors was the nation's biggest employer. Today it's Wal-Mart, a company that offers such paltry wages and benefits that many of its workers have to file for public assistance just to make ends meet.

And that's just one of the ways that Wal-Mart, and other Fortune 500 companies, pocket corporate welfare. In fact, corporate welfare plays a big role in today's Carnival Freak Show Economy.

Not only have the good middle-class jobs disappeared from the U.S. economy, but ordinary workers who do still have jobs have seen their wages stagnate for the past 30 years. Meanwhile, the richest 1 percent now garner the largest share of the national income since 1929.

One might ask: if the once-great American economy no longer produces anything useful, what exactly does it do these days?

Good question.

Decades ago, America's great corporations were widely admired. Most Americans back then felt they were a positive force in American society. Back then, corporations created good jobs and produced things of value. They also paid taxes (back in the 1950s, for example, corporations paid half of all taxes---today, it's less than 10 percent).

Contrast that to today. Today's biggest corporations, from ExxonMobil to Wal-Mart, are increasingly feared and hated. Many Americans regard them as greedy money-grubbing entities that can't be trusted.

The same could be said of today's CEOs in general. As recently as 1982, the average CEO made around 42 times what the average worker earned. By 2005, CEOs made around 431 times what the average worker earned.

And what, exactly, have CEOs done to earn this phenomenal increase in pay? It's hard to say. In fact, in recent years, there has been an increasingly disconnect between soaring CEO pay and the performance of U.S. corporations.

Take Peter Cartwright of Calpine, a maker of gas-fired power plants, for example. In 2005, Forbes reported that Calpine's average annual return to shareholders over the past six years had been minus 7 percent. During the same period, Cartwright pocketed an average annual $13 million. So much for the wisdom of the "free market."

In fact, the "free market" has nothing to do with it. It's a rigged game---just like the crooked games one encounters at a sleazy carnival midway.

When you go to a carnival midway, it's wise to keep an eye on your wallet. And America's Carnival Freak Show economy is no different these days.

The Military-Industrial Complex: A Profiteering Monster

As an example, take a look at America's military-industrial complex, a major pillar of the modern U.S. economy.

Today's military-industrial complex has turned into the very threat to democracy that Dwight D. Eisenhower warned us about in 1961.

It's a bloated, inefficient, tax dollar-devouring, profiteering monster that is out of control. And for all the trillions of dollars it consumes, it's difficult to really see how the nation benefits from it. After all, for all the ocean of dollars our nation has sunk into the Pentagon, it wasn't able to prevent 19 young men armed with nothing more than box cutters from inflicting on our nation the worst terrorist attack in history.

Curiously, for such a major, and costly, part of our economy, the military-industrial complex gets little scrutiny from our politicians these days. They're happy to continue feeding the monster, with little oversight, as long as the big defense contractors are generous with their campaign contributions.

And although Halliburton has garnered the most headlines as the biggest piglet at the trough, it's hardly the only defense contractor reaping fat, no-bid, "cost-plus" contracts, year after year.

In fact, the Center for Public Integrity revealed in 2005 that some $900 billion in defense contracts since 1998 had been awarded without competitive bidding or effective oversight. It's crony "capitalism" at its finest. And the suckers on the carnival midway are We The People: the taxpayers who fund the whole racket.

Wall Street: Crony Capitalism

Continuing our tour of America's Freak Show economy, lets take a look at a second major pillar of the modern U.S. economy: Wall Street.

While never universally loved, Wall Street has captured the American imagination over the decades as a symbol of U.S. economic might. But these days, most Americans fear and detest Wall Street---and for good reason.

Wall Street once played an indispensable role in the U.S. economy. But it's increasingly difficult to determine what, exactly, Wall Street does that is useful these days. Wall Street's idea of "innovation" these days is to create ever-increasingly complex financial instruments that no one can figure out. It's all a scam that is becoming unglued as investors become increasingly wary of what they're putting their money into.

And like the military-industrial complex, it seems Wall Street can only function these days with a hefty dose of billions of U.S. taxpayer dollars. (Take, for example, the Fed's recent bailout of investment bank, Bear Stearns). Although U.S. Treasury Secretary, Henry Paulson defended the bailout as necessary, ordinary American saw it as yet another example of rigged crony, "capitalism."

The Great American Prison Industry

Continuing our tour of America's Carnival Freak Show Economy, let's not leave out what has emerged in recent decades as the fastest-growing sector of our economy: the Great American Prison Industry.

America, the "land of the free," now has the world's biggest prison population, with a staggering 2.3 million people behind bars. Not surprisingly, the prison industry has become one of America's leading employers. And towns with bleak economic prospects now court new prisons the way they once courted new factories. Increasingly, Americans are either in prison, or working for a prison (a strange trend for a nation likes to think of itself as a beacon of freedom).

In past decades, Americans used industry and manufacturing to build our nation into the greatest superpower the world had ever seen. Today, we've "outsourced" our manufacturing and made shopping (with borrowed dollars) the main pillar of our nation's Carnival Freak Show economy.

Of course, it's all a big Ponzi scheme that is unsustainable. The nations that hold our increasingly worthless currency are likely to eventually get spooked and start off-loading their dollars. When that day comes, Americans will finally realize that whatever "prosperity" our economy has seen over the past three decades has been nothing more than a credit-fueled mirage.

When that day comes, we Americans will finally realize that we've been swindled like suckers at a sleazy carnival midway. P.T. Barnum would be proud.

There's more: "How the American Economy Became a Sleazy Carnival Freak Show" >>

The Great Depression of 2008

Until last week, most economists were divided on whether the U.S. was in a recession or not. Now, with the ailing mortgage agencies Fannie Mae and Freddie Mac on the ropes, it's clear that what's unfolding is far worse than any recession.

As Britain's normally staid The Telegraph newspaper notes, we could be on the verge of a new Great Depression. That might seem far-fetched until you consider that last month, the Dow suffered its worst June since 1930.

But The Telegraph is hardly alone in using such apocalyptic language these days. The "D" word is starting to be mentioned more and more in the business media, as well as by economic commentators. As David Bullock, managing director of investment fund Advent Capital Management, put it in a comment to The New York Times on Tuesday, "We are closer to the Depression scenario than not."

Yes, a real Depression, complete with tent cities now springing up in what once were prosperous suburbs.

This doom-and-gloom language in describing the U.S. economy first began to pick up steam after investment bank Bear Stearns had to be bailed out by the government in May. In describing the bailout, the Associated Press said that Bear Stearns was "On the verge of a collapse that could have shaken the very foundations of the U.S. financial system."

The current crisis with Fannie Mae and Freddie Mac is infinitely larger than Bear Stearns. The two companies either hold or guarantee a staggering $5.3 trillion worth of mortgages. Indeed, the investment magazine MoneyWeek has noted that the crisis is big enough to doom the dollar.

As MoneyWeek notes:

Fannie Mae and Freddie Mac might have been deemed too big to fail---but who's big enough to bail out the US? When investors start seriously asking themselves that question, expect the dollar to plunge.

Make no mistake, a catastrophic U.S. economic collapse is on the way. Such is the inevitable fate of any Ponzi scheme economy that has been running on nothing more than smoke and mirrors (and oceans of foreign capital) now for many years.

Of course, those who are poor or working class know first-hand that the U.S. economy has been in increasingly serious trouble since around 1980. Wages have been steadily declining for everyone but the very rich. And working class people now toil more hours for less pay than their counterparts in any other First World nation. (They have to, as a 40-hour workweek no longer is enough to put groceries on the table).

But as long as America had a tiny elite of prosperous super wealthy, we could always point to them and try to convince ourselves that our economy couldn't be all bad. After all, we would note, there are some people out there making a fortune. All it takes is hard work and ambition, right?

Today, with the stock market in the toilet, and the Fed having to step in to bail out the financial sector, it should be clear to anyone that the U.S. economy is in crisis.

If the U.S. economy actually produced anything of value, this would be nothing more than just another typical downturn in the economic cycle.

The problem is, the U.S. economy no longer produces anything of value. Our economic activity basically consists of importing trillions of dollars from central banks in East Asia---which we then use to prop up our Ponzi scheme economy. The ocean of foreign capital that flows into our nation daily is used to pay for the shopping habits of U.S. consumers.

In fact, in recent years, the Great American Consumer has been hailed by U.S. economists as the "locomotive" of the world economy. There was only one problem: U.S. consumers had zero savings and were depending on foreign capital to finance their shopping binges.

Now, with the stock market crisis and the ongoing housing mortgage crisis, nobody is in much of a mood to do any spending these days. And with the dollar rapidly declining, it's only a matter of time before the East Asian central banks start to unload their depreciating greenbacks (which will accelerate the dollar's fall even further in a vicious cycle).

The frightening thing is that East Asian central banks haven't even begun seriously dumping their dollars and yet the dollar is already plunging.

And the dollar has already lost an astonishing 40 percent against an index of U.S. trading partners' currencies over the past seven years.

The key numbers which measure the current U.S. economic crisis are so far off the chart that it is difficult to even fathom them. As economics writer Eamonn Fingleton has noted, the U.S. current account deficit (the widest and most meaningful measure of our trade position) now represents an astounding 6.5 percent of our gross domestic product.

As Fingleton notes, only one other major nation has ever exceeded this figure: Italy in 1924. That was just before Benito Mussolini seized dictatorial power.

This BBC video takes a look at tent cities that are springing up outside Los Angeles:

There's more: "The Great Depression of 2008" >>

For Millions Of Americans, Economic Crisis Is Old News

Things are looking grim for the U.S. economy these days, the politicians and the MSM pundits tell us.

I'm glad they finally noticed. The fact is, tens of millions of Americans have already been living through increasingly lean times over the past decade.

It took a stock market crisis for the Wall Street crowd to finally notice that the nation's economy is going down the tubes.

But that's hardly news for millions of average American workers, who've seen their incomes stagnate since 1980.

For years, the pundits and the politicians celebrated "strong" economic growth when the rest of us were wondering what they were talking about. The pundits also cheered America's low jobless rate. But the rest of us knew it was all a sham, in an era when millions of jobs pay such low wages that nobody could possibly live on them.

Hard economic times are nothing new for the tens of millions of Americans who already work two or three jobs, just to make ends meet. Or the nearly 50 million Americans who can't afford health insurance. Or the 2 million Americans who are about to lose their homes in the mortgage crisis.

I once had a friend from Europe who came to visit me in New York City. He told me that the American economy was widely celebrated then in Europe and that many Europeans marveled at America's entrepreneurial spirit and low unemployment rate.

I explained to my European friend that although America's economy was then in the midst of what the pundits called "prosperity" and was enjoying a stock market boom, the reality was that millions of Americans were left out in the cold and were still struggling.

At the time, my friend and I were in a bustling, prosperous part of Manhattan. Looking around, it appeared that the nation was indeed economically prosperous. I then took my friend on a short tour through surrounding areas, including Harlem, Brooklyn, and Newark. My friend was astonished at the stark difference between the prosperity he'd just seen in Manhattan and the horrible, Third World-like poverty that was only a short distance away.

This episode reminds me of what is going on today. The pundits and politicians are finally starting to wake up to something that's been obvious to millions of us for years. The American economy is in the toilet.

Sure, a tiny elite wealthy class has been enjoying strong stock market gains for years. Now, they're going to have to share some of the pain, like the rest of us.

In fact, in looking at the economic hard times ahead, I think there's actually a silver lining to all of this. That is: an economically distressed America will finally be forced to end its illegal and immoral occupation of Iraq.

There's more: "For Millions Of Americans, Economic Crisis Is Old News" >>

Bush's Absurd Tax Rebate Scheme Won't Save Economy

By Marc McDonald
BeggarsCanBeChoosers.com

With the titanic cost of the Iraq War fiasco, along with his reckless tax cuts for the wealthy, George W. Bush has driven the U.S. economy off of a cliff.

Now, Bush aims to save the economy with an absurd tax rebate scheme, which will amount to about $140 billion, equal to about 1 percent of U.S. gross domestic product.

It's clear that this rebate scheme will be nothing more than a mere Band-Aid on a bleeding economy that is in deep crisis.

First of all, there's the matter of the nation's disastrous mortgage crisis. It's bad enough that 2 million people could lose their homes. What's equally ominous is that the housing bubble has been the main thing propping up the U.S. economy since Bush took office. Beside those losing their homes, some 44.5 million Americans will watch the value of their homes diminish.

Bear in mind that the "wealth effect" of inflated home values has been the main factor in getting Americans to spend money, powering our consumption-led economy.

The tax rebate of several hundred dollars that most ordinary taxpayers will get under Bush's plan may come in handy for many people who are paying off bills. But it won't save our rotten-to-the-core, faltering economy.

Even worse than the mortgage crisis is the ongoing U.S. deficit crisis that has soared out of control under Bush's watch. The U.S. national debt now stands at a staggering $9 trillion. That amounts to over $30,000 for every man, woman and child in the country.

The national debt is a ticking time bomb that Bush has completely ignored the past seven years. The Iraq War fiasco will add another $2 trillion to the nation's debt.

Bush and the NeoCons have never shown any concern about the deficit. But the East Asian nations that fund America's national debt are increasingly concerned.

Under Bush's watch, the dollar has taken a beating. This has added to the anxiety of nations like China and Japan, which hold trillions of dollars in their central bank reserves. The crisis is a vicious cycle: the more the dollar declines, the more incentive China and Japan have to sell their dollars (which, in turn, will force the dollar's value even lower).

When the dollar melts down in value, America's reign as a superpower will be over. Once upon a time, that seemed like a remote possibility. Under the disastrous Bush administration, it looks like something that could very well happen any day now.

During the brief period in his life when he tried his hand in the private sector, Bush drove all three of his companies into the ground. Despite the fact that his father and grandfather were powerful politicians, Bush was a bust in the private sector (even with his family's powerful connections and wealth).

Now, Bush is on the verge of doing to America what he did to his failed companies in the private sector. And its role in the collapse of America's economy is the main thing future historians will remember about this administration.

It's a crisis that Bush's tax rebate Band-Aid won't fix.

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Why Are Free-Market Economists Still Taken Seriously?

They've been shown to be wrong time and time again. And their policies have led to widespread disaster and misery for millions of people.

Who am I talking about?

The NeoCons and their wrong-headed views on Iraq?

Nope, I'm talking about free-market economists.

No group of "experts" has a worse track record on accurate information about how our world really works. And yet, mysteriously, free-market economists are still held in reverence and awe by many. And their proclamations are hailed as the gospel truth by everyone from politicians to academia to the mainstream media.

Free-market economics seemingly got an enormous boost in credibility in the 1980s and has reigned supreme as the only conceivable policy for running America's economy ever since.

There's only one problem with free-market economists and their followers: they're full of sh*t and they have a dismal track record on the truth. And worse, the world simply doesn't operate the way they believe it does.

Free-market economists are rabid advocates of a unfettered, dog-eat-dog, ruthless form of capitalism. Leaving everything to the "free market" is the best way to run a society, they maintain. And at the end of the day, no other economic system can possibly compete with capitalism, they say.

As "Exhibit A," the free-market economists proudly point to capitalism's vanquishing of the Soviet Union's style of communism in the Cold War.

What more proof could one want that capitalism is the best way to create wealth and prosperity?

Actually, in the years since the Cold War ended, a few dissenting voices have started to speak up about the supposed superiority of unfettered capitalism.

First, there is the issue of whether the United States really prevailed in the Cold War, after all. A number of commentators have pointed out that, without enormous sums we borrowed from Japan in the 1980s, the U.S. wouldn't have "won" the Cold War.

Indeed, as the brilliant author Chalmers Johnson has pointed, out, it was really Japan, not the U.S. that won the Cold War. Indeed, the decade of the 1980s was nicely summed up by MIT economist Lester Thurow when he wrote: "We borrowed a trillion dollars from the Japanese and threw a party."

I should point out here the irony of celebrating an economic system that is totally dependent on vast amount of foreign capital in order to function. And make no mistake, no matter how one views the Japanese economy, it is definitely NOT anything that a Western economist would recognize as "capitalism."

Indeed, the Japanese model couldn't be further removed from U.S.-style economics. In Japan, the nation's economic destiny is shaped by powerful technocrats at the Ministry of Finance. Industrial policy is set by the government, rather than determined the whims of the private sector. It is a heavily regulated system that is a million light years removed from American-style "capitalism."

What's more, the Japanese economic model has been widely imitated throughout East Asia (which is now by far the most dynamic and fast-growing area on Earth). From Taiwan to South Korea to mainland China itself, Japanese economic policies are widely implemented these days. For example, China has copied elements of Japan's employment system, its mercantile policies, its emphasis on manufacturing, and even its Keiretsu system of organizing companies into powerful groups.

This important development, of course, is completely ignored by U.S. economists. Many of them maintain that "unfettered, free-market, U.S.-style capitalism" is the model that East Asia aspires to. Indeed, the "conventional wisdom" in U.S. economics is that Japan itself is "yesterday's news" and is a fading power. It's a bizarre viewpoint indeed, when one considers that the supposedly "more efficient, superior" U.S. economy would collapse were it not for the hundreds of billions of dollars in Japanese capital that props up the American economy and the dollar these days.

A big part of the problem with U.S. economists is that they are a remarkably ignorant about the rest of the world. The only country that they've studied at all, or paid any attention to (outside of the U.S.) is Britain.

Which brings me to another misconception spread by U.S. free-market economists. The latter are constantly praising the era of Margaret Thatcher.

What more proof does one need that unfettered capitalism reigns supreme than the example set by Thatcher's Britain, they ask? After all, Thatcher busted the unions, cut regulations and decimated the welfare state---and as a result, the former "Sick Man" of Europe prospered in the 1980s.

At least that's the fairy tale we've been led to believe.

As they did with Reagan's revolution, though, the economists aren't telling the whole story of the Thatcher era as they breathlessly sing the praises of the Iron Lady. Over the years, a growing number of writers, like James Howard Kunstler,
have pointed out that what really made Britain shine in the 1980s wasn't Thatcherism at all. Rather, it was the incredible bounty that Britain reaped with the North Sea oil bonanza in the 1980s.

It's this latter point that really irritates me and makes me question the honesty of the economics profession. The field's dishonesty can be summed up thusly:

1. Starting in the 1970s, free-market "Chicago School" economists urged various "reforms," from gutting the welfare state to crushing unions to abolishing any and all regulations on business.

2. In the 1980s, the above prescriptions were implemented in the U.S. and Britain, under Reagan and Thatcher.

3. The economies of both the U.S. and Britain prospered, thanks to hundreds of billions of borrowed dollars (in the case of the U.S.) and the North Sea Oil boom (in the case of Britain).

4. As the U.S. and Britain boomed, economists proclaim their free-market prescriptions "vindicated"---completely ignoring the fact that the prosperity in both nations had nothing to do with their remedies.

Free-market economists are so arrogant and sure of the wisdom of their teachings that they've become oblivious to the fact that the real world simply doesn't work the way they believe it does. (For example, the real economic success story of the past quarter century has been China---a nation which completely rejects every single tenet of how a nation's economy should be run, according to the gospel of the free-market economists).

And their ideas remain in vogue to this day among American policy-makers. Never mind the fact that the U.S. is in increasing peril, thanks to their policies. The gigantic deficits that Reagan racked up in the 1980s now seem trivial, compared to the even-more titanic deficits that America faces today.

Free-market economics has been directly responsible for America's out-of-control and spiraling fiscal and trade deficits. The latter crisis threatens to force a collapse in the value of the dollar. And when the dollar melts down, America's reign as a superpower will come to an end.

Free-market economists, of course, are blissfully unconcerned about this looming crisis. For them, the solution to anything and everything is more of the same. More tax cuts for the rich, more union busting, more elimination of any and all red tape and the complete rejection of anything remotely resembling a national industrial policy. As far as deficits go, they maintain a "Don't Worry, Be Happy" approach.

I never thought I'd find myself agreeing with anything that Pat Buchanan ever said---but actually, he of all people, once made a comment that neatly sums up the view of all those who wear free-market economics blinders: "To worship at the altar of free-market economics is no less a form of idolatry than worshipping at the altar of socialism."

Free-market economists have done at least as much damage to our nation as the NeoCons over the past quarter century. How much longer will we as a nation continue to follow their disastrous, wrong-headed advice?

By Marc McDonald of the progressive blog, BeggarsCanBeChoosers.com

There's more: "Why Are Free-Market Economists Still Taken Seriously?" >>