WASHINGTON, July 1 (UPI) -- "There is nothing new in the world," President Harry S. Truman liked to say, "Except the history you don't already know."
He must have been reading United Press International analysis on "The decline and fall of the American economy."
Ten months ago, on Aug. 30, 2001 -- less than two weeks before the Sept. 11 terrorist attacks that destroyed the World Trade Center and mangled the Pentagon -- this column said, "The continued slide of the U.S. economy into serious recession and the failure of the Bush administration to either recognize the fact or prevent it happening ..."
That information could have been written this Monday.
Consider the news at the start of this far-from-festive Fourth of July week when it comes to economic indicators. The Nasdaq high-tech composite index, the Holy Grail of the great Clinton "Roaring Nineties" bull market over the last decade, collapsed to a five-year low, dropping even below the Sept. 21 base line it touched after the mega-terrorist attacks that killed 3,000 Americans.
The same day, USA Today reported at the top of its Money section, "Stocks on course for three straight losing years." Nasdaq, it reported, had lost 20.7 percent, or more than one-fifth of its value, in the most recent trading quarter. The DowJones industrial average itself was not far behind it, losing 11.2 percent, or more than one-tenth of its value during the same period of time.
These stories, of course, followed the latest great catastrophic meltdown of a multi-billion dollar giant information technology corporation, the WorldCom meltdown. As with Enron half a year ago, one of the largest corporations in the world was caught out in an enormous accounting fraud. They even had the same accountants the now-universally discredited Arthur Andersen Co.
Once again, locking the stable door after the horse has bolted, the Securities Exchange Commission has pledged to file fraud charges against WorldCom and to make sure that no cover-up takes place. Of course, as was the case with Enron, the crucial cover-up had already taken place when the trusting investors in the corporation were effectively robbed blind by behind-the-scenes scams before the public collapse finally took place.
But Enron and WorldCom are only two in a huge forest of falling trees. Global Crossing, Qwest Communications, Tyco, Xerox and ImClone are reeling from their own scandals. Mighty PsiNet has already been laid low.
UPI's wise, cynical old professional market bear, Business and Economics Editor Martin Hutchinson, has been warning in his weekly Bear's Lair column repeatedly over the past half year that Enron would indeed be only the first of many, and that the curse of naïve -- and worse -- accounting and assessing practices based on the delusion of an eternally-rising high-tech market meant many more business shipwrecks to come.
Sure enough, the floor of Wall Street is now littered with the wrecks of business Titanics and more of them seem to be hitting the iceberg of harsh reality and public exposure every day.
This development came as no surprise to us in UPI analysis either. Ever since the dot-com bubble burst, 2 1/2 years ago, we have repeatedly warned that the pattern of economic depressions going back to the time of the Dutch tulip craze in the 1620s and the South Sea bubble in the City of London a century later has always taught the same lesson.
That is: the initial bursting of the great speculative bubble is then followed by a long and painful -- often agonizing -- downslide of the general economy that usually lasts years. And in each case, the greatest loss is suffered not in the original, sudden, triggering market-crash but in the far slower but longer and inexorable market slide that then follows.
This is what happened after the Wall Street crash of Black Tuesday in October 1929. And it is the pattern that the plummeting U.S. business indices have followed since.
Just review some other USA Today headlines we reviewed in this column last August:
"Consumer confidence fall comes as a surprise;"
"Sharp drop hints recovery won't be arriving soon;"
"Gateway to lay off a quarter of workforce."
In the light of the WorldCom collapse, that headline assumes special significance. The Gateway Corp. has been one of the top personal computer manufacturers in the United States, but, USA Today reported, "Like nearly all high-tech companies, Gateway has been battered by the U.S. economic slump and weak global PC sales, which are expected to fall this year for the first time ever."
That was 10 months ago. But only last week, the New York Times soberly reported that even after WorldCom had laid off 17,000 of its own workers, some 10 percent of all the remaining workers in the U.S. high-tech industry looked certain to lose their jobs in the contraction of the coming months.
Where does that leave the Bush administration and its strategy of "spend wildly like there's no tomorrow to keep the recession wolf from the door?"
To coin another cliché, "it leaves it up the creek without a paddle."
One remembers the old favorite line of the late Sen. Joe McCarthy in his anti-communist witch-hunts, "If it sounds like a duck and looks like a duck and quacks like a duck, it's a duck." He was referring to the way to identify Communists, but one might say with considerably more cause, "If it sounds like a recession, and looks like a recession and bites like a recession, it's a recession."
Technically, the Bushies may be able to face the November mid-term congressional elections without having the albatross of recession hung over their shoulders. A recession is literally defined as two consecutive quarters of contraction in gross domestic product.
But what we reported then, before the Sept. 11 terror attacks were used as the excuse for a wild Bushie public spending binge, is all the more true now. "The domestic U.S. economy is slowing alarmingly, and more than predicted. And it is now barely above the water line of measuring shrinkage rather than growth."
Through all of this, Federal Reserve Chairman Alan Greenspan, apparently determined to wreck all his legendary achievements of more than a decade ago, has continued to do nothing except keep interests plugged at virtually zero, despite the rapid decline of the dollar against both the yen and the euro -- neither of them models of fiscal strength -- over since the start of this year.
Ten months ago, we noted that the remorseless slowdown of the domestic U.S. economy was taking place "despite the extraordinary measures of the Federal Reserve Board in slashing interest rates seven times in only half a year. And they have also occurred despite President George W. Bush's legislative success in pushing through Congress a giant $1.3 trillion tax cut over the next decade.
"They have also occurred in an international market place where global oil prices have been dropping significantly again from their highs of two and more years ago. The recovering clout of the global oil cartel, the Organization of Oil Producing Countries, has just been undercut anew by Russia's decision to boost its own oil exports to generate needed short term hard currency income and compensate for declining revenues by boosting market share.
"Yet lower oil prices have not jumpstarted investor confidence either. One can only conclude of Wall Street investors, 'If they do these things when the wood is green, what will they do when it is dry?' In other words, how will the markets react when really bad economic news comes along?"
Well, it's coming along now.
Bush should have followed the example of former President Ronald Reagan, the iconic hero of modern Republicans, 20 years ago. Had he tightened money supply and urged Greenspan to boost interest rates right after he took over from President Bill Clinton, he could very plausibly have blamed Clinton's dizzying and irresponsible booster policies and contrasted himself as a figure of tough but reassuring prudence, much as Reagan rode out the great recession of 1981-82.
But, we warned last August, "the longer the recession is delayed, the more responsibility for it is likely to be saddled on Bush alone. And the rejection of his own father, President George Herbert Walker Bush at the polls in November 1992, bore eloquent witness to the fact that while American voters may not have long memories, they do have short ones."
The 1991-92 Bush recession was still recent enough at the time of the November 1992 election -- indeed, it was widely, though erroneously, believed to be still going on -- that voters punished the elder Bush for it at the voting stations.
As UPI analysis noted 10 months ago, the longer Bush succeeded in delaying the onset of recession, the more likely he would be to suffer for it when he came up for re-election in November 2004. Also, the longer he could delay it, the more severe it was likely to be when it finally hit. The sooner he had it, the better the chance he would have had to maintain business confidence and macroeconomic stability and riding it out.
It was already clear last spring and summer, as we noted, that Bush and his economic planners had refused to swallow that bitter pill. They still hoped they could dodge the recession bullet completely. They might still manage to put it off until after the November elections, although even that is now increasingly unlikely.
Scores of thousands of high-tech, highly paid telecom workers now know their jobs are at high risk. Scores of thousands more have already lost them and had their retirement nest eggs wiped out as a result. Hundreds of thousands, perhaps millions, more Americans now fear the same thing could happen to them.
Does anyone -- apart from Bush, his political strategy Karl Rove and his exceptionally complacent and inept team of economic advisers -- believe that business confidence sufficient to prevent a recession can be maintained in such a climate and with such policies?
Up to a couple of weeks ago, the answer to that might even have been "yes." But it is not now.
