Thursday, March 13, 2008

President Bush is out of touch with reality

Republican Politics, American Style
Published on March 13th in Metro Eireann By Charles Laffiteau

Today I want to turn my attention to the results of the March 4th primaries. My forecast was wrong in that Clinton barely held off Obama’s advance in Texas. But Clinton continues to weaken as Obama rolls into Wyoming on Saturday and Mississippi on Tuesday with no real chance of strengthening before the August convention season. Thus I remain more optimistic about the long range forecast for positive impacts from political climate change in the US than for progress on ecological climate change.
In my columns a few weeks ago I said that the number one US Presidential election issue was not going to be the war in Iraq, universal healthcare or global warming, rather it would be the sad state of the US economy. This does not bode well for Senator John McCain, the likely Republican Presidential nominee, and Republicans running for Congress since he and other Republicans in Congress are closely tied to our lame-duck President and his short-sighted economic and irresponsible fiscal policies.
Our current President seems to be increasingly irrelevant and hopelessly out of touch with the economic malaise that is enveloping the United States. Americans are now getting their first good hard look at the bills which are coming due for our President’s ill fated war in Iraq and failure to reign in government spending over the last seven years. He and his Republican cohorts in Congress still try to tout their 2001 and 2003 tax cuts as having been a boon for the US economy but more and more Americans are starting to realize that the economic prosperity of the last 6 years was actually a false prosperity financed by easy bank credit and irresponsible mortgage lending practices.
President Bush recently returned from a week long tour of Africa where he attempted to draw attention to one of the few good things that his administration has done during his two terms in office, which was to increase humanitarian assistance to many of the impoverished countries in this region. Unfortunately even these positive contributions have become lost in the chatter surrounding the President Bush’s numerous failed economic and foreign policies. Worse still is the impact those policies are now having on future aid to African countries.
As I write this the U.S. Agency for International Development is drafting plans to reduce the number of countries and or the amount of humanitarian aid it provides them because of a 41% increase in the price of wheat, corn and other grains over the past year. This food price inflation can also bee seen in the cost of bread and cereals by consumers in the US, Ireland and the rest of the world. While rising demand for theses grains in the booming economies of China and India is a factor in food price inflation, it is by no means the only or the biggest cause.
Another factor has been the drive to produce more alternative bio-fuels which reduce CO² pollution, an admirable but short sighted attempt to address the one of the causes of global climate change. Bio-fuel production is rising quickly in part as a reaction to the soaring price of oil which at $103 last Monday surpassed its1980 peak price of $38 a barrel before inflation adjustments. Surprised? Don’t be. The wisdom of using bio-fuels as an alternative to oil and gasoline for transportation needs was a subject under serious discussion at the Berlin environmental conference I attended two weeks ago. I will devote a separate column to a more in-depth discussion of this issue at a later date however.
That is because I want to discuss the biggest factor driving food inflation, which is the declining value of the dollar that has caused the prices of all commodities to soar in recent years. Most commodities and contracts for them around the world are priced in dollars because for decades the US dollar was the most stable and reliable currency in the world. But the huge US budget deficits (caused by the Iraq war and other irresponsible fiscal policies) coupled with trade imbalances due to US consumer demand for imported goods (which was fuelled by easy credit and inflated housing prices) has led to a drastic reduction in the value of the dollar compared to all other major currencies in the world.
Oil producers have raised the price of oil because the dollars oil prices are quoted in have lost value while demand for their oil production has held steady or increased. Thus much of the price increase for oil has not been driven by increased demand or a shortage of supply, but rather by a need to reflect the weakening value of the US dollar.
Producers of food grains use oil to transport their production to market and as their transportation costs have increased with the price of oil, so has their need to raise the price of their food stuffs. It usually takes a couple of years for a weaker dollar to translate this weakness into higher prices for oil and other goods that consumers buy and that is what US consumers are now beginning to grapple with. Only now are the true costs for President Bush’s use of the federal government’s credit card becoming apparent.
The good news in all of this is that by the time Election Day rolls around eight months from now, the US economy should be well into an Iraq war and budget deficit induced recession, one that Bush and his Republican cohorts will not be able to evade responsibility for. This may lead American voters to not only elect a Democrat named Barack Obama as their next President, but to do so in a landslide election that also ushers in a bigger Democratic majority in Congress as well as many state legislatures.

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