And more tough times are ahead. Analysts warn that the US economy is heading for a "correction" in the winter (i.e. post-election nosedive), due to a variety of factors including out-of-control military spending, an unsustainable housing bubble, Asian lenders increasingly eager to dump US assets, and the Bush administration's inclination to stop propping up the economy if the resulting downturn can be blamed on the Democrats come 2008.
military Keynesianism is an obvious replacement for the housing industry as an engine of demand growth. That is, out-of-control military spending pumps up the US economy, all else constant. So do tax cuts for the rich, though not as effectively as benefits for the poor would. Rising government deficits due to tax cuts for the rich and increased militarism encourage higher interest rates (cet. par., of course). This props up the dollar by attracting foreign funds to US dollar assets. The Bushies don't seem to think far enough ahead to "stop propping up the economy if the resulting downturn can be blamed on the Democrats come 2008." To stop propping it up means that the GOPpers would have to cut military spending (since civilian spending has already been cut dramatically, even before they took power) and/or raise taxes. Neither of these seem likely. As for monetary policy, which was forgotten in the article, the Fed serves the financial community, not the government (to the extent that they serve anyone). What they care most about is keeping the inflation rate in line. I doubt that they do anything with the idea of blaming one or the other political party for it. Isn't Bernanke a liberal Republican of sorts? -- Jim Devine / "Mathematicians are like Frenchmen: whatever you say to them, they translate it into their own language, and forthwith it means something entirely different." -- Johann Wolfgang von Goethe
