If you're feeling in the mood for a stinging, biting, razor-sharp dissection of everything George W. Bush has done wrong as the keeper of the American economy, run, don't walk, to the December issue of Vanity Fair and read Joseph Stiglitz's "The Economic Consequences of Mr. Bush."
For the moment, Stiglitz, former chief economist of the World Bank and a Nobel laureate, may even have dislodged Paul Krugman from his endowed chair as Most Devastating Bush Critic Alive. That isn't easy, and it requires a complete reading to appreciate it. But here's a taste:
You'll still hear some -- and, loudly, the president himself -- argue that the administration's tax cuts were meant to stimulate the economy, but this was never true. The bang for the buck -- the amount of stimulus per dollar of deficit -- was astonishingly low. Therefore, the job of economic stimulation fell to the Federal Reserve Board, which stepped on the accelerator in a historically unprecedented way, driving interest rates down to 1 percent. In real terms, taking inflation into account, interest rates actually dropped to negative 2 percent. The predictable result was a consumer spending spree. Looked at another way, Bush's own fiscal irresponsibility fostered irresponsibility in everyone else. Credit was shoveled out the door, and subprime mortgages were made available to anyone this side of life support. Credit-card debt mounted to a whopping $900 billion by the summer of 2007. "Qualified at birth" became the drunken slogan of the Bush era. American households took advantage of the low interest rates, signed up for new mortgages with "teaser" initial rates, and went to town on the proceeds.
All of this spending made the economy look better for a while; the president could (and did) boast about the economic statistics. But the consequences for many families would become apparent within a few years, when interest rates rose and mortgages proved impossible to repay. The president undoubtedly hoped the reckoning would come sometime after 2008. It arrived 18 months early. As many as 1.7 million Americans are expected to lose their homes in the months ahead. For many, this will mean the beginning of a downward spiral into poverty...
Globalization means that America's economy and the rest of the world have become increasingly interwoven. Consider those bad American mortgages. As families default, the owners of the mortgages find themselves holding worthless pieces of paper. The originators of these problem mortgages had already sold them to others, who packaged them, in a non-transparent way, with other assets, and passed them on once again to unidentified others. When the problems became apparent, global financial markets faced real tremors: it was discovered that billions in bad mortgages were hidden in portfolios in Europe, China, and Australia, and even in star American investment banks such as Goldman Sachs and Bear Stearns. Indonesia and other developing countries -- innocent bystanders, really -- suffered as global risk premiums soared, and investors pulled money out of these emerging markets, looking for safer havens. It will take years to sort out this mess.
The title of the essay, incidentally, is a play on "The Economic Consequences of the Peace," the bestseller written by John Maynard Keynes in 1920, in which the economist argued that the Treaty of Versailles imposed unduly harsh conditions on Germany. If you take the line of argument that holds that the Treaty of Versailles enabled the rise of Adolph Hitler, well, then, you'd have to concede that the winners of World War I monumentally screwed up. And so, implies Stiglitz, did the voters (and Supreme Court justices) who elected George Bush president of the United States.