THE HARD WORK AHEAD FOR BUSH

            Former Vermont Governor Howard Dean has been vindicated, as have his energetic supporters.  They feared that Senator Kerry’s relative lifelessness and his refusal to take a stronger stand against a “war” in Iraq that the majority of America is uncomfortable with would prove fatal to the Democrats’ hopes of regaining the presidency.  So it happened. 

In particular, I can’t help buy be reminded of a specific warning Dean gave early on during the primary season before-as a friend of mine put it just the other day-he was “assassinated” by the establishment media.  At one of the Democrat Party debates, Dean said that his party needed to figure out how to once again identify “with those white southern men with Confederate flags on their pickup trucks”.  As you probably remember, every one of the other candidates including Kerry-tripped over one another in their rush to condemn Dean for suggesting such a terrible thing.  Naturally, they accused Dean of advocating the Democrats embrace the Klan, racism, blah, blah, blah, rather than taking what he meant (which was plain to anyone not worried about appearing faithful to the NAACP).  That, of course, was that the Democrats could not write off the entire South and expect to win.

           They did-and they didn’t.  What now bedevils Democrat activists is that, once more, they are on the outside looking in, and that it shouldn’t have turned out this way.  As Pat Buchanan succinctly and accurately put thing on Don Imus’ radio program the day following the election, the Democrats had the benefit for months of polls consistently showing the Americans were not too keen on gibing the president a second term.  But they, and their standard-bearer, failed to find enough people willing to vote for them and close the deal.  Giving credit where it is due, the president’s political whiz Karl Rove (who has now solidified his claim as the best and most ruthless Republican strategist since the late Lee Atwater) did succeed-especially in locking up the south-in delivering the goods, and seemingly recaptured the majority of the Christian conservatives who stayed home last time.

            Enough post-mortem; for the next four years, Dick Cheney…oops, I mean George Walker Bush…will be America’s president and commander-in-chief.  The political monkey is off the family’s back, Junior having succeeded in winning the second term that was denied to Poppy.  A great consolation prize to be sure for George, Senior.

            Now, bolstered by gains in both Houses of Congress (paced by a fairly stunning gain of four seats in the Senate as the G.O.P.-among other things-swept the five Southern Senate seats vacated by sitting Democrats) Bush is ready for action.   Virtually everyone expects the president to aggressively strike while the iron is hot, and spend that “political capital” he spoke of so assuredly in his press conference.  Good enough.  Winning the popular vote by some 3.5 million votes when almost all of us expected a photo finish (or worse) entitles Bush to claim a “mandate” of sorts.

            But looking at the plate set before him one can only wonder whether Bush’s second term will end as badly as did that of the late Richard Nixon.

IT ALL SOUNDS GOOD, BUT…

The president says he will push for tax simplification, if not some type of full-fledged reform, early on.  Huzzah!!  Yet this is from a man whose prior “tax cuts” convoluted the Internal Revenue Code more than ever.  Sure, Bush says he wants to clean up at least some of that by making most of the previous cuts permanent, and by doing something about the growing creep of the alternative minimum tax, at the least (a permanent repeal of the estate tax would be nice, too).

Also, with Bush and the G.O.P. so beholder to Corporate America, is “simplification” really in the cards when seemingly any and every company with a little clout has its very own provisions in the tax code?  I hardly think a new national sales tax, for instance (which would be regressive, hitting lower-income folks harder) would fly politically if, at the same time, corporations were still able to use the tax code to do their own business planning.

In any event, I whish the president luck in his efforts to clean up the tax code, burdensome regulations, and all the rest, but I’m not holding my breath.       

President Bush also says he wants the Congress to exercise “spending discipline” in the upcoming lame duck session and beyond.  This also has to raise eyebrows when you remember that Bush is the only president in modern history never to have vetoed a single spending bill.  Forget Iraq, the Police State and the rest; under Bush, growth in discretionary spending has been higher every year of his term than at any time since the Johnson Administration.  Here again, reining in spending-and promising to cut the budget deficit in half in four or five years-sounds nice-but we’ll believe it when we see it.

CURRENCY TRADERS “VOTE”

 While Republican partisans are again confident that their president will deliver peace and prosperity (well, ok…prosperity) and everyone else either grumbles or crosses their fugers, one constituency really seems to have no doubt about what lies ahead.  They are currency traders; and they are convinced that Bush’s second term, just like the first, will bring a weaker dollar.

       It was nothing short of stunning, in a way, to see how the exchange value of the U.S. dollar dropped so easily following the election.  Perhaps it should not have been that big a surprise.  Based on his first four years’ track record, currency traders have no reason to believe that either the trade or budget deficits will be significantly dented.  Further, if the president succeeds in getting Congress to make the tax cuts permanent, partially privatize Social Security, it al, many trillions of dollars will be added to the national debt in the coming years.  This prospect has the dollar bears firmly in control.

Economic fundamentals are not helping the dollar either (which, as you read in the November 5 email update) couldn’t even catch a bid following the day’s report of much better than-expected jobs growth for October.  Consumer confidence is again slipping as “real world” inflation and anxiety over the poorer quality of many of today’s jobs take their toll.  Perversely, comments in recent weeks questioning the economy’s vitality, and that of the dollar itself, has even come from Federal Reserve officials, Dallas Fed President McTeer says “There’s only one way” the dollar can go: down.  He and Governor Ben Bernanke have both recently said that, if need be, the Fed will be slower with its rate hikes so as not to harm the economy unduly.

         This gives even less incentive for traders to buy the dollar; and more to sell it.  Among other things-and leaving aside for a moment the twin deficits-traders desire a country’s paper when that country has a strong economy and attractive (and preferably rising) interest rates.  They have just been told by men who should know that they might not be getting either; AND that on top of the biggest existing external debts in history.

          Yes, folks, it seems as though there really is only one way that the greenback can go.  The only question is whether the dollar’s decline will be an adjustment, or turn into a crisis.  The latter, you may recall, pretty much happened as former President Nixon was settling into the oval office to start his own second term.  The dollar’s decline was accelerating.  Following the closing of the government’s “gold window”.  It eventually led to rampant inflation, especially when oil prices spiked due to the embargo.  Stocks suffered their worst bear market since the 1930’s.  Bruising America’s psyche even more, we watched, as the remaining troops were pulled out of Viet Nam-a costly and unpopular war-with America unable to legitimately claim victory.

          I expect President George W. Bush to suffer each of these fates in his second term.  This is not because I wish the man any ill; far from it, but as for the economy and the markets the die is already cast.  As for my inference that Bush will find a way to extricate himself-and America-from Iraq, that is my fond hope.  The alternative is unthinkable, especially with China now inserting itself firmly into Iran next door.

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