Speaking of Political Hacks

We have been discussing the incompetent political hacks in FEMA and The Department of Homeland Security the last week but now we have another one to talk about, U.S. Treasury Secretary John Snow.
Snow sees brief Katrina hit to GDP

NEW YORK (Reuters) - U.S. Treasury Secretary John Snow told Bloomberg Television on Friday that U.S. economic growth would probably dip by closer to 1/2 percentage point in the second half of this year because of the Hurricane Katrina.

Responding to a question on the accuracy of the Congressional Budget Office's estimate that Katrina would cut near-term gross domestic product growth by 1 percentage point, Snow said he reckoned that estimate was too high.

"I think it's probably on the high side. I've seen other estimates more in line with a half-percent hurt to GDP growth in the third quarter and fourth quarter -- but with a pick-up of roughly that order for '06," Snow said.

Now what Snow said might be true if the economy was "really strong", but it's not. I discussed the Greenspan "recovery the other day.
Alan Greenspan, smoke and mirrors economics

Like everything else, the economic policy of the Bush administration has been driven by politics. The so called "recovery" has not created new wealth, only debt and Alan Greenspan has been a good Republican soldier first and an economist last. A recovery based only on debt is not a recovery and can't be sustained.

Yesterday James Wolcott brought us this interview with Lee Mikles and Mark Miller in Barrons.

Barron's asks: "Why do you think we are at an inflection point?

"Mikles: Bottom line, the consumer is broke and he doesn't know it yet. But he is about to find out. All the buckets that propelled consumer spending are empty now, whether it is the increase in mortgage debt, the increase in consumer debt or the reduction in the savings rate. No one statistic will tip the scale at the end of the day. But one very obvious and very curious statistic is that we have dipped into a negative savings rate for the first time. That is not only unsustainable, it is sustainable only for a few months. That's important to note because it tells you consumers are borrowing money to make debt payments. The U.S. consumer has become payment driven. He is driven not by the aggregate amount of debt he possesses but by the amount of the payment. And now the consumer has not only taken his savings rate to nothing, it has turned negative.

"Miller: Every month there is some increase in consumer borrowing that has to occur just for the consumer to stay level. The consumer is treating his balance sheet much the way the government is treating theirs, but, of course, the consumer can't create currency like the government can. The point is the consumer cannot continue to borrow to make his debt-service payments for very long. How did we get here? We got here because of the huge differential between wage growth and what we spend and what we consume.

"Q: What about the argument that consumers may not be saving but the appreciation they have seen on their houses is a form of savings?

"Mikles: The consumer doesn't know he is broke because his house hasn't stopped going up yet. It hasn't starting going down, it just hasn't stopped going up. Once it stops going up, the consumer will immediately -- and I mean a matter of months -- find out that he is, in fact, broke."

The so called "recovery" was not sustainable anyway. Increased energy costs will make it harder if not impossible for consumers to keep what they have much less continue to buy.