Ponder This: Nation’s Economy Doesn’t Need Another Tax Cut for the Wealthy

by Tula Connell, Jan 7, 2008

When the Labor Department’s jobs report revealed on Friday that U.S. unemployment had worsened to 5 percent, two major newspapers ran telling headlines the same day.

The Wall Street Journal:

Bush is mulling a potential economic stimulus package amid worries about a possible recession, the housing slump and rising oil prices. (Subscription required.)

The Washington Post:

Bush Exploring Economic Stimulus Package 

“Mulling” and “exploring” aren’t exactly the verbs we could hope to hear from the Economist in Chief this far into the nation’s subprime crisis, soaring oil prices, worsening income inequality and tanking job market.

Bush is making noises now about including some steps to revive the economy in his last State of the Union address this month. Not because the Bush administration believes anything should be done. Just today, Treasury Secretary Henry Paulson warned against “rushing economic stimulus.” More likely, if Bush gives any indication the U.S. economy is nothing less than “sound“—a description he used as late as Friday—it has something to do with elections this November.

And as long as he’s forced to do something about the economy, might as well give his rich friends another tax cut.

Meanwhile, the signs of a tottering economy continue.

• The number of part-time workers rose 9 percent from 2006 to 2007 because of slower business condition, according to Labor Department data reported by The Wall Street Journal.

Since August of 2007, the upward trend has accelerated, and it ticked up again in December to 3.1 million people, the highest monthly figure in four years.

The Labor Department defines part-time work as fewer than 35 hours per week.

• Delinquency on credit card debt in America is rising at shocking levels, Consumer Affairs writes,

with more and more people falling behind on payments and spikes in accounts with over 90 days of missed payments, according to an Associated Press [AP] report.

The AP surveyed 17 large lenders and credit card issuers and found that payment delinquencies of 30 days jumped 26 percent from 2006, to a total of $17.3 billion. Delinquencies of 90 days or more were up 50 percent, and defaults, where the lender writes off the debt as uncollectible, surged 18 percent to $961 million. 

• Late payments on a cluster of consumer loans, including those for autos, home improvement and certain home equity loans, climbed in the summer to their highest point since the country’s last recession in 2001.

The American Bankers Association reported Thursday that the delinquency rate on a composite of consumer loans increased to 2.44 percent in the July-to-September quarter. That was up sharply from 2.27 percent in the previous quarter and was the highest late-payment rate since the second quarter of 2001, when the economy was suffering through a recession. 

Bloomberg News reports today that one of the nation’s leading economists says the latest economic data mean the odds of a recession are now more than 50–50. 

Harvard University economist Martin Feldstein, head of the group that dates U.S. economic cycles, said the odds of a recession have risen to more than 50 percent after a report showing unemployment jumped in December. 

“We are now talking about more likely than not,” Feldstein, president of the National Bureau of Economic Research, said in an interview in New Orleans two days ago. “I have been saying about 50 percent. This now pushes it up a bit above that.”  

On his way to the Mideast this week, Bush told Yonit Levi of Israel’s Channel 2 News he has high hopes for his legacy. The American Dialect Society might be able to help define his terms in office. Last week, the organization selected the 2007 “word of the year,” pinpointing an adjective we’ve all become too familiar with in the past months:

Subprime.

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