WEST PALM BEACH, Fla. — Pass the president's budget with its ruinous taxes, and the nation will be doomed. Two-earner families will become one-earner families. People will retire young. Fewer students will stay in college. And much more. But the dire prediction from then that I want to look into now is this one: "Investors will shift into tax shelters and tax-free bonds."
The budget that was going to ruin us was President Clinton's first. The economist, whose predictions I have copied from a 1993 issue of Reader's Digest, still practices. In February, he wrote that the worldwide recession that began last September amounts to only a speed bump. He has become much calmer in 16 years, since writing that the new president was about to create "a full-blown economic crisis."
Maybe that's because the current full-blown economic crisis resulted in large measure from policies this economist favors.
As you recall, that Clinton budget was enacted into law and led to the last budget surpluses we likely will ever see. Chicken Little blew it. Spouses didn't quit their jobs; masses didn't retire young or drop out of college.
Investors surely didn't flee into tax dodges to avoid Mr. Clinton's taxes, either. Recall: The boom at the end of his administration was produced by investors throwing money at anything — good, bad or goofy — that had a dot and a com. My colleague Dan Moffett found the TV sets at sports bars tuned to CNBC stock market shows as Jets fans turned into day-traders.
That was a bubble. Hastened to its inevitable doom by the gloomy visions of Vice President Dick Cheney, the bubble burst in 2001.
George W. Bush met the burst by reducing the taxes on investors. The investors were to be steered into productive investments that would produce jobs and end federal budget deficits. Investors dutifully plunged into real estate. When home sales became an all-out lemming run, day-traders turned into house-flippers.
That was another bubble. The boom at the end of the Clinton years began in the notion that things that real buyers would ignore at a mall would jump off the virtual shelves of the Internet. The boom at the end of the Bush years was produced by valuing $250,000 houses at $500,000. Different fantasies, same "pop!" at the end.
What does that mean? It means that it has been at least two two-term presidencies since last we had economic good times that were realistically based on making things and providing services the world needs. Our good times have come while we were living on one bubble or the other.
Last week, we noted that Census Bureau reports show that it took four years after earlier recessions for people in the lower three quintiles — 60 percent of the population — to start making as much money as they made before the recession. After the 2001 recession, though, they never got back.
The story for the people in the highest 20 percent is different. Their incomes grew right through the recessions of 1981-82 and of 1991-92. That helps to explain why there was investment money available to start blowing up the next bubble. It also suggests who had to pay — and who didn't pay — for the economic delinquency that caused the previous bubble.
In 2001, though, the high-income quintile — the top 20 percent — took a hit like everyone else. Unlike the rest of us, they came back, but it took them six years. Hardly had their incomes returned to the pre-recession level when, wham! They hit the speed bump or full-blown economic crisis, whatever you want to call it.
Last week, we saw cause for concern that the consumers on whom we depend for roughly 70 percent of the gross domestic product will be short of disposable income for a long time. We can worry this week that the seed money for the next bubble also won't be available anytime soon.
It's enough to drive a drinking economist back to sober economic reality.
Tom Blackburn is a former member of The Palm Beach Post Editorial Board. E-mail: tom(underscore)blackburn(at)juno.com.
