Friday, October 3, 2008

It’s Still the Economy, Stupid

The House gets ready to vote — again — on the bailout.

Leaders of both parties said they were optimistic that they would be able to marshal more support for the Bush administration’s $700 billion bailout than they mustered on Monday, when the House delivered a shocking defeat to the measure and sent the Dow Jones industrial average plummeting 778 points, or about 7 percent.

The market’s gut-wrenching reaction offered lawmakers a glimpse of the consequences they could face if they don’t approve the bailout package. Since Monday, investors’ angst over the fate of the legislation has contributed to a gloomy week on Wall Street. The Dow fell more than 3 percent yesterday, with losses extending beyond the financial services industry to include agriculture, construction and industrial stocks.

Meanwhile, indicators have shown the outlook for the economy to be bleak. Yesterday, the Commerce Department reported that orders for manufactured goods dipped 4 percent in August, the largest decline since October 2006. Last week, new claims for unemployment benefits jumped to a seven-year high.

Some analysts say the economy will not pick up until the middle of next year, even if the Bush administration succeeds on Capitol Hill today. And even if Congress approves the bailout, it may be too little, too late to unfreeze global credit markets. The package might not do much to help offset shrinking bank balance sheets or free up capital for nonfinancial companies, experts say.

As a good friend wrote me, “This is incredible. I think GWB just wasn’t happy enough with the damage he caused us, so he had to leave one last turd for the Republicans to step in.” And he’s a Republican.