As soon as George Bush was inaugurated president, he made peace with the Washington Establishment and ran his government accordingly.
Less than two years later, polls show that 73 percent of the voters believe the United States has "seriously gotten off on the wrong track," while only 20 percent say it is still going in the right direction.This is an extraordinary development because, unlike Ronald Reagan, Bush inherited an expanding economy with low inflation and low interest rates.
When Reagan was inaugurated, the prime interest rate was 21 percent and inflation was registering more than 13 percent. What did Bush do to cause such a serious deterioration in the economic outlook? The answer is all of the following:
Bush, who wants to be the "environmental president," has it in for the American motorist. He combined a large increase in the gasoline tax with a belligerent policy toward Iraq that doubled the price of oil, thus gouging our pocketbooks twice every time we fill the tank.
Bush also has it in for the American worker. Just as the economy teeters on recession, Bush demanded a clean-air bill that will destroy jobs for everyone but lawyers with six-figure incomes. To evade the high costs of the Bush bill, more and more production will move offshore, bringing to an end the phenomenal job growth of the Reagan years.
Bush doesn't like the American homeowner either. His government, panicked by the S&L crisis, responded with ill-considered legislation that forced even more S&Ls into the red, thus magnifying the downward pressure on real estate prices. Bush then co-sponsored a tax hike that curtails the tax deduction for mortgage interest and real estate taxes.
As expensive homes now shrink in value, middle and lower income house prices will be forced down also.
In addition, Bush is working overtime to undermine the U.S. dollar, which has reached a new low against the German mark. Bush, whose government is advised on its dollar policy by the former Carter official who engineered the sharp decline in the dollar during the 1970s, mistakenly believes that dollar devaluation is the key to American competitiveness in international trade.
Moreover, Bush intends to replace the current chairman of the Federal Reserve with Martin Feldstein, who shares the view that the key to American success is a worthless currency.
If a weak currency is the key to success, why are Brazil, Argentina and Peru - countries that have consistently followed weak currency policies - in such deteriorated economic condition, while Japan and Germany with strong currencies enjoy such economic success? Clearly, Bush hasn't thought this one out either.
Bush's weak dollar policy is extremely dangerous, because the dollar remains the linchpin of the international monetary system. It is the international currency used to settle accounts in world markets.
A sinking dollar is identical to a sinking world economy.
In the phase-out of tax deductions, Bush has engineered the biggest expansion of government power in our history. Initially, the new tax affects only those with $100,000 incomes (in 1991 dollars). That is upper income today, but it only takes 20 years of 4 percent inflation (the current rate) until cost-of-living adjustments ratchet the average taxpayers up to nominal incomes that cost them deductions while providing no additional purchasing power.
Meanwhile, charitable contributions will have dried up, and the loss of state and local tax deductions will force cuts in state and local government, thus shifting more political power to Washington.
If Americans value their independence, they will find some way to block the phase-out of personal exemptions and deductions for charitable giving, mortgage interest and state and local taxes.