How Bad Will The Bush Depression Be?

It looks like Bush is racing in his final days as occupant of the White House to see if he can beat Herbert Hoover's economic record as the most disastrous U.S. president for American families. Today's employment report puts Bush in good shape to go down as the worst of the worst.

With the economy deteriorating rapidly, the nation’s employers shed 533,000 jobs in November, the 11th consecutive monthly decline, the government reported Friday morning, and the unemployment rate rose to 6.7 percent.

The decline, the largest one-month loss since December 1974, was fresh evidence that the economic contraction accelerated in November, promising to make the current recession, already 12 months old, the longest since the Great Depression. The previous record was 16 months, in the severe recessions of the mid-1970s and early 1980s.

The alarming job decline suggests that consumers and businesses have pulled back sharply on spending in response to the worsening credit crisis. That has put pressure on Congress and the White House to come up with a stimulus package that would substitute for the missing private sector outlays.

Over all, the losses since the recession began now total about 1.9 million, with most coming in the last three months.

“We have gone from recession into something that looks more like collapse,” said Ian Shepherdson, chief domestic economist at High Frequency Economics, referring to the accelerating job losses in recent months.

The losses in November far exceeded the 350,000 figure that was the consensus expectation of economists.

And real unemployment numbers are far worse than what is being reported! Meanwhile, the Republican Party has every intention of using it's last dying gasps of power-- in the White House and in the Senate-- to deal the economy a real death blow. Let's hope to God if that happens, it falls particularly hard on Georgia voters who decided that what the country needs is more Republican orthodoxy and more narrow partisan obstructionism. Barney Frank came as close to anyone today to predicting that if GOP extremists are allowed to force the auto manufacturers into bankruptcy, as they have vowed to do, we will soon be wishing it was just a deep recession we are facing.

Although the GOP has been exceedingly generous about some things, when it comes to ordinary working families, all they're willing to extend is the middle finger. Robert Shapiro, chief economist for progressive think tank, the New Democratic Network (NDN) explored the nexus between the current financial crisis and the kind of crony capitalism that has become the defining hallmark of Republican Party economic policy-- and of much of our corrupt, self-serving Insider political class.

Crony capitalism is usually associated with the way many governments in Africa, Asia and Latin America conduct public business, where government contracts, budgets and other public activities are routinely channeled to the families, friends and associates of political elites, rather than being allocated through some open bidding or other democratic processes. Variants of crony capitalism occur in the United States, too. In one infamous example, Halliburton “won” billions of dollars in no-bid contracts for Iraq while its former CEO was Vice President; and crony capitalism lurks behind billions in pork barrel appropriations passed every year by Congress. But when it begins to infect huge government operations taken to deal with an emergency, it has more serious and insidious effects. Japan famously practiced crony capitalism in its multi-trillion-yen “rescue” operations for its failing banking system in the 1990s, and bought itself a decade of stagnation and at least another decade as the worst-performing advanced economy in the world.

he terms of the Citigroup deal raise the specter of crony capitalism. The taxpayers will invest $20 billion in the company, receiving preferred stock that will pay 8 percent dividends, and Citigroup will bear the first $29 billion in losses from its current portfolio of $306 billion in troubled loans and assets. After that, the taxpayers absorb 90 percent of any additional losses in exchange for another $7 billion in preferred stock. The likelihood that Citigroup’s losses will far exceed the first $29 billion is disturbingly high. The financial crisis almost certainly will deliver additional shocks, because the current policies have done little to address the forces driving the crisis. The housing market continues to unravel; and with business investment, consumption and jobs all contracting rapidly, foreclosures continue to rise. As they do, more mortgage-backed securities and the derivatives based on them will go bad, and the consequent losses could claim much of the capital infusions that taxpayers have already provided. As the IMF and others have warned, large additional losses also could come from other sources. Most notably, the spreading global recession, on top of national banking crises in other countries, are producing enormous pressures on government financing operations in a number of nations, including some in the Eurozone, which in turn may produce sovereign debt defaults. And most of the sovereign debt that could well default in coming months is held today by financial institutions, especially ours.

Obama has to do better, much better. And universal health care is a good way to start. Daschle hits the nail on the head when he says that "high health costs hurt the ability of U.S. businesses to stay competitive and create new jobs, making it a 'high priority.'"