Monday, September 15, 2008

Greed and Incompetence Come Home to Roost in the Bumbling Bush Economy

When I ask people why they vote Republican, one of the most common replies is, "They are better than Democrats on the economy."

This is one of the most dangerous myths in modern American life. It can be exploded simply by pointing these misguided souls to one of Kevin Phillips' books, particularly The Politics of Rich and Poor, Wealth and Democracy, or his latest, Bad Money.

Unfortunately, too few Americans bother to educate themselves about economics and history, so the canard that Republicans are smart with money lives on. What can save us from our own economic ignorance? Perhaps a look at recent headlines, as eight years of George W. Bush rule near an end, will do the trick.

Bad news is everywhere, much of it national in nature. Some of it has a local flavor for us in Alabama.

Perhaps the best-known story of economic disarray is the government bailout of mortgage giants Fannie Mae and Freddie Mac. And today marks one of the most extraordinary days in Wall Street history as Merrill Lynch is sold and Lehman Brothers hurtles toward liquidation.

Democratic presidential nominee Barack Obama correctly blamed the crisis on the failed policies of the past eight years, policies which Republican John McCain apparently plans to continue.

Two other stories of economic misery lurk just beneath the surface. Automotive executives last week urged Congress to provide funding for a $25-billion loan program that would help the industry boost fuel-efficiency across the vehicle lineup.

Richard Wagoner, chief executive of General Motors, led the push. And Alan Mulally, CEO of Ford, was right behind.

Mulally insisted the loan program would not be a "government bailout." And he defended the industry's decision in recent years to focus on pickup trucks and sport-utility vehicles instead of more efficient models.

"In the United States, Ford's strategy was to focus on what the customers really wanted, and those were the larger SUVs and trucks," Mulally said. "Fuel prices were low, the interest rates were low. It's what the customers chose."

There is a smidgen of truth to what Mulally said. Many Americans, even those who lived through the gasoline shocks of the 1970s, have been stupid enough to buy into the notion that they "needed" a gas-guzzling vehicle. But Mulally fails to mention this little nugget: The auto industry pushed larger, less-efficient models because it made more money on those than it did on standard automobiles.

In other words, greed ruled the day--as it almost always does under Republican rule. Want more proof?

The Birmingham News on Sunday reported on the dismal state of new-home starts in our area. "The downturn is devastating," said the director of sales and marketing for one community of high-end homes. "It has been a fiasco," said an attorney in the construction-practice group at a local law firm.

A photo from the latest phase of the Old Cahaba subdivision in Helena accompanied the story. It shows three or four homes, surrounded by vacant, weed-filled lots.

Builders are not the only ones hurting. Roofers, plumbers, electricians, carpenters, lenders, real-estate agents, and lawyers are also struggling.

A senior economist for the National Association of Home Builders says the slump is due to massive overbuilding, overlending, and price escalation in the housing market.

Dwight Sandlin, president of Signature Homes in Birmingham, saw the market losing control in 2005 and began to scale back. He reduced the amount of money he put into speculative houses and rolled back the sales prices. That has helped him weather the downturn.

Many of Sandlin's colleagues continued to build more and bigger houses, charging ever higher prices. They were gambling that good times would continue to roll. And many of them now are faltering.

Republican leadership, as Kevin Phillips has shown, tends to foster an environment of speculation, deregulation, and sheer greed. In numerous industries--mortgages, investments, automobiles, new homes--the chickens are coming home to roost.

And here's a question or two to ponder: How many executives in these fields have consistently voted Republican? Do many of them plan to vote for John McCain in November?

My guess is that the answers are "many" and "yes."

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