The Miserable Bush Economy

The "misery index" -- the rate of unemployment plus the rate of inflation -- has been used since the 70s to measure the nation's economic health. The higher the score, i.e. the higher the sum of the unemployment and inflation rates, the greater the economic misery. Under this old-style misery index, the Bush economy still looks fairly strong when compared with recent decades and the nations of the E.U.

But then why are so many actual Americans feeling pinched?

As the Economist reports, Merrill Lynch's more comprehensive look at the state of the economy under G.W. Bush may have the answer:

Merrill Lynch's economists have come up with a broader, international index. In addition to unemployment and inflation, it also adds interest rates and the budget and current-account balances, but then subtracts GDP growth (a good thing). In other words, the index not only reflects how cheery an economy feels today, but, by including budget and external balances, it also captures the ability of a country to sustain its merriment. For example, a large budget deficit probably implies higher taxes in future.

This new index could wipe the smile off the faces of exuberant Americans. The United States has the highest score (see chart), ie, it has the most wretched economy among the big G7 countries, thanks to its huge deficits. In the 1990s, by contrast, before its imbalances exploded, its index was one of the lowest. The United States is the only country to have seen a large increase in its misery index over the past decade. Virtually all the other G7 countries—including Europe—have seen sizeable improvements.

In sum, Merrill Lynch's economists warn that the Bush administration's policy of borrowing from the Chinese to finance tax cuts for the rich is not sustainable.

As if anyone in this White House gives half a damn about anything beyond the oil industry's next quarterly report or the mid-term election.

UPDATE: The new Pew Research Center poll indicates that just a third of Americans (34%) rate economic conditions as "excellent" or "good". Nearly twice as many -- 64% -- call conditions economic conditions "fair" or "poor".