For the week of  October 17 - 23, 2001

Wishful thinking

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When George Herbert Walker Bush ran for the 1980 Republican presidential nomination, he dubbed opponent Ronald Reagan’s fiscal promises "voodoo economics."

After losing the primary but becoming Reagan’s vice president, Bush forever abandoned the "voodoo economics" accusation out of loyalty, although some believe that history ultimately proved him to be more correct than in error.

But, irony of ironies, Bush the Elder’s son, President George W. Bush, seems mired 20 years later in "voodoo economics."

Why?

Bush the Junior’s $1.8 trillion tax cut earlier this year wiped out the nation’s hefty rainy day federal surplus without noticeably lifting the economy out of its malaise. Now, as if to multiply his original error, he believes more tax cuts are the salvation, along with huge spending programs that have soared past $100 billion for emergency aid to nose-diving airlines, fighting the terrorism war, helping rebuild New York and relief for the jobless.

But there’s more: Lavish spending will be needed to eliminate the U.S. vulnerability to biological and chemical warfare; expensive new airport security measures; more billions for aiding millions of Afghanistan refugees that Bush promises not to "walk away" from; billions for Bush’s exotic outer space missile defense system plus his major new spending on domestic programs.

Surely, wiping out a surplus, cutting taxes and increasing spending is not a prescription for stimulating a nation’s stumbling economy.

Instead, it’s a formula for crippling new deficits; for dipping into Social Security surpluses that candidate Bush vowed he’d never touch, plus federal borrowing that’ll create new debt and lead to higher inflation.

Only the foolhardy believe that the terrorism war of 2001 will resemble the economic boom inspired by World War II’s all-out defense spending. In 1944, defense accounted for 38 percent of the Gross Domestic Product; today’s defense spending will barely be 4 percent of GDP.

Mind you, Federal Reserve chairman Alan Greenspan also dreamed of manipulating the sliding economy, only to see 15 changes in the interest in 27 months (six times up, nine times down) fizzle.

President Lyndon Johnson (1963-65) unwittingly gave his White House successors a valuable, but painful, economic lesson— that Americans cannot wage a major war in Vietnam and enjoy the bounty of carefree "Great Society" spending at home.

LBJ’s stubborn "guns and butter" mind set—described in author Irving Bernstein’s 1996 book, "Guns or Butter: The Presidency of Lyndon Johnson" (Oxford University Press) as "a tragedy of epic proportions"—seems to have escaped the current brash young wishful-thinking president who seems short on U.S. history.

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