Salon.com > Merrill Goozner

The economic scaremongers

Wed, 06 Dec 2000 19:43:00 +0000

Before Tuesday's dramatic stock-market surge, a gloomy pall had descended on the pundits and politicians who follow the U.S. economy. In recent weeks, they were handed lots of grist for their mills. On NBC's "Meet the Press" Sunday, no less than George W. Bush's running mate Dick Cheney ominously warned that "we may well be on the front edge of a recession here."

Indeed, there are signs that the economy is cooling off a bit. Until posting its largest gain ever on Tuesday, the tech-heavy NASDAQ was off by half. Big Business - as in those old economy companies that actually make something - is cutting back on purchases of new machinery like (Woe is Silicon Valley!) computers. Auto sales are down. And consumers say they feel less confident about next year, even as they spend a bit more this holiday season than they did a year ago.

But the real problem lies in Washington's spin culture, not the economy itself. While a ton of negative economic news has made it into the headlines in recent weeks, none by itself or in concert should tip the economy into recession. Unless, that is, someone wants one.

What Social Security crisis?

Wed, 05 Apr 2000 16:00:00 +0000

Bid goodbye to the Social Security crisis -- prosperity killed it. Too bad the presidential candidates didn't get the news.

The trustees of the nation's publicly funded retirement program reported last week that the booming economy has pushed back the system's date with insolvency by three more years, this time to 2037. And the Medicare program will remain solvent for an additional eight years, until 2025, the healthiest projection for the senior health care program since it began operating in the mid-1960s.

It was the third straight year of increasingly bullish projections, and you'd think the legacy-hungry Clinton administration would spin the optimistic report as the latest evidence of the wisdom of its economic stewardship. Hardly. One by one, the Clinton-appointed trustees stepped up to the podium of the steamy Treasury Department conference room Thursday to warn that when it comes to "saving Social Security," this is no time for complacency

Den of thieves

Thu, 23 Mar 2000 17:00:00 +0000

If size is your thing, just flip through the proxy statements of publicly traded companies that will be arriving in mailboxes over the next month or so. The releases provide shareholders with a fleeting glimpse into the surreal world of executive compensation -- where company boards never let tanking stock prices, paltry earnings or massive worker layoffs get in the way of hefty raises and bonuses. CEO paychecks are swelling like never before.

And this year's Oscar for the most undeserved Titanic-size raise goes to Hugh McColl, the 64-year-old chief executive of Bank of America. According to the company's just released proxy, McColl pulled down a compensation package worth nearly $50 million for his 1999 performance, which reached its nadir with the layoff of nearly 20,000 employees.

The Charlotte, N.C., company was quick to point out that the bulk of the package consists of stock options, which aren't worth much in the short term, since Bank of America's stock price has fallen by a third in the past year. Why? Despite wholesale layoffs, profits from the merger between San Francisco's Bank of America and NationsBank have fallen below expectations.

Where's the beef?

Wed, 20 Oct 1999 11:00:00 +0000

Tuesday night, after the government had released its latest inflation report, I tooled over to a local gas station. Yep, Uncle Sam was right: Gas prices are up -- a good 25 cents a gallon since last spring.

But let's take the long view, here. This puts the price of gas back where it was during the Gulf War. Or, if you want to take the really long view, back where it was in 1967, before the Vietnam War sent prices surging.

And that's exactly what the folks over at the Federal Reserve Board should be thinking about when they contemplate the potential evils of inflation in this economy. If they do, they will no doubt conclude that inflation is still well within a tolerable range.

This week's inflation report showed prices rising at a 2.6 percent annual clip, up nearly a full percentage point from a year ago. But what was happening a year ago?

Many of the East Asian countries had just watched their currencies collapse in global financial markets, sending their local economies over a cliff.

The result was a sharp plunge in the price of oil, copper, imported parts and other industrial commodities, since what were once called the "Tiger economies" suddenly had to severely curtail their demand.

Crash of '99?

Fri, 01 Oct 1999 16:00:00 +0000

When future historians look over the list of the 400 richest Americans at the close of this millennium, as compiled by Forbes magazine, they'll see irrefutable evidence of the dawn of the Information Technology Age.

Four of the five top names on the list are software or hardware barons -- Bill Gates, Paul Allen, Steve Ballmer and Michael Dell. Of the 60 people who made the magazine's annual list for the first time this year, no fewer than 19 earned their fortunes from floating stock in their Web businesses. Overall, there are now 5 million millionaires in the United States and 268 billionaires -- including 79 new ones, a 42 percent increase over a year ago -- the magazine that bills itself as the "Capitalist Tool" informs us. So, what does this expanding crop of Internet billionaires and millionaires tell us about the distribution of wealth in America? Has it, at long last, grown more democratic?

Guess again.

A number of recent studies document that wealth and income are more concentrated now than any time since the 1920s. In fact, the fabulous new riches of the Information Age are concentrated in precious few hands -- and that could spell bad news for those who dream of a "long boom" or a "36,000 Dow."

Clinton poverty plan: Let them eat tax breaks

Tue, 06 Jul 1999 10:00:00 +0000

Summer isn't a fun time to visit East St. Louis, Ill., but then again, neither is fall, winter or spring. So President Clinton deserves credit for braving the Midwest's daunting heat and humidity on Tuesday to call attention to the plight of one of America's most degraded urban landscapes, where a spiritually as well as financially bankrupt city administration auctioned off its City Hall a few years back to pay bills.

Tuesday's visit is part of a four-day trip designed to call attention to the administration's New Markets Initiative, its fledgling effort to jump-start economic development efforts in areas of the country that have been bypassed by the now 8-year-old economic expansion. The president began his tour in Appalachia, and later in the week he will visit a rundown section of Phoenix and finish his tour in the Watts neighborhood of Los Angeles.

Clinton's trip is designed to make a political and social point: Nationwide unemployment may be down to 4.3 percent, but in the rubble-strewn lots of America's older inner cities, and even in the downtrodden parts of its fast-growing Sunbelt ones, too many neighborhoods continue to suffer from substandard housing, high unemployment and the growing concentration of the nation's dwindling but hardest-to-employ welfare population.