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 Editorials | January 2006 
US: State of the Union in Havoc
 Prensa Latina
On the eve of the President´s State of the Union address, the United States suffers from huge budget and trade deficits, a nonexistent energy strategy, spiralling federal spending and the greatest income inequality in half a century.
And that is only the state of the economy. In political terms, George W. Bush is being questioned for lying about the arguments for starting the war on Iraq, being nearer defeat than victory three years later, authorizing torture and indefinite detention and spying on thousands of ordinary Americans.
The word "impeachment" is popping up increasingly these days. At least one powerful senator, Arlene Specter, R-Pa., chairman of the Senate Judiciary Committee has openly expressed the president should be impeached for those crimes.
The New York Times editorial commentator Bob Herbert wrote last week that Bush´s arrogance is only surpassed by his incompetence. The weight of having sent over two thousand Americans to their deaths in Iraq due to the greed to grab Middle East oil reserves is surely giving Bush increasingly bad press reviews.
The economy´s future depends on the source consulted. The Organization for Cooperation and Economic Development, that groups about 25 developed countries for instance, gives a rosy picture of 3.5 per cent growth in the Gross Domestic Product (GDP) this year.
The forecast was evidently prepared long before the fall to 1.1 per cent registered in the last quarter of 2005. According to Robert Samuelson, there could be five dark clouds to burst on the last half of Bush´s second term: the collapse of the housing market, bankruptcy of General Motors and oil prices climbing to 85 dollars a barrel.
Also, the curve of interest rate yields goes in reverse. Since 1965, there have been seven such episodes, five of which were followed by recessions.
Last, but not least, there is the “fall” of the dollar. In 2005, US trade deficit closed at 712 billion dollars, according to Moody´s Economy.com, while one year before it ended at 624 billion.
Much depends on foreign investors, who if they triggered a massive sale of the greenback, would severely damage the housing market and consumer spending. There is no previous experience, but places have changed at the top and China is now the fourth economy of the planet, with billions invested in US Treasury bonds.
The change at the head of the Federal Reserve Board, as of this week in the hands of Ben S.
Bernanke, Princeton academic and member of the Fed board for the last two years, will probably won´t produce any surprises compared to its preceding leader, Alan Greenspan.
Greenspan salvaged Bill Clinton´s administration from several tough spots, like banking deregulation and the financial crises in Mexico and Asia, but since the arrival of this Bush to the White House, the financial wizard´s advice was largely ignored.
Fed watchers sometimes grumble that Greenspan should have stuck to interest rates. Mr. Bernanke himself intimated in his confirmation hearings that he was likely to say less about non-monetary matters.
That would be unfortunate.
Bernanke´s credibility is further heightened by his impeccable academic credentials, previous service at the Federal Reserve and reputation for speaking directly. His unanimous recommendation from the Senate Banking Committee underscores the political capital and goodwill with which he arrives.
Being approved for the post is one thing, but making the White House heed his advice is another very different thing. Greenspan has spoken out against this narrow approach, a cousin of the old method of setting a target for the size of the money supply, but that is not necessarily wrong.
The United States is sorely in need of economic wisdom, but it remains to be seen if the current government is ready to heed a fresh voice. |
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