The Hindu Business Line : A special Thanksgiving Day

We are at that time of the year when Americans gather with family and friends to take stock of their lives and to have a grand meal comprising turkey. Americans have a tradition of celebrating the fourth Thursday of November each year as Thanksgiving Day. They express their gratitude for their possessions and successes. It is significant that the expression of gratitude occurs at the end of the harvest season.

The tradition goes back to the early settlers, and at least 200 years before 1776, the year America became an independent republic. Then America’s presidents got deeply involved. George Washington gave it due national importance through proclamation. Abraham Lincoln brought it to the fore through national designation. Franklin Roosevelt then signed a federal law in 1941. This law designated the fourth Thursday of every November as Thanksgiving Day.

Bitter harvest

Thanksgiving in 2008 will be particularly special. It will be the last with President George Walker Bush in the White House. Americans will recall Mr Bush’s Thanksgiving speech in 2006. He had said, “We’re grateful to live in a land of plenty and during a time of great prosperity.... I encourage all Americans to look for a way to help those in need -- from tutoring a child, to working in a shelter, to giving a hand to a neighbour.” They will also recall Mr Bush’s speech in 2007. He had said, “And we give thanks for the many gifts that come from this prosperous land... Since America’s first Thanksgiving, we have changed in many ways... Our people have prospered.”

Many Americans may now want to disagree with Mr Bush’s emphatic claims pertinent to prosperity. There is a big gap between what appeared real then and what has become real since then. Many Americans have lost their jobs, their incomes, their savings and their wealth. Instead of volunteering to work in shelters, some have had to leave their homes and seek the security of shelters. The lines of people waiting at food banks are getting longer. Out-of-work neighbours have fled prosperous communities because of their inability to afford the nice things. Entire neighbourhoods are now up for sale following home foreclosures.

Rising indebtedness

As a consequence, America’s financial industry has been pushed into deep trouble. Though many claim that Wall Street has pushed Main Street into trouble, the truth is Main Street got into trouble first because of the Bush administration’s policies. America’s finance minister is its president. America has a secretary of the treasury, but the scope of that job is smaller than that of a finance minister’s. America’s president is its finance minister. Mr Barack Obama, its president-elect, understands this very well.

Poor and inapt policy choices by the president could lead to two unfavourable outcomes. First, the economy’s gross domestic product (GDP) falters first and then falls.

Therefore, tax revenues too fall. Second, America’s indebtedness rises since the government has to borrow more to fund its expenditure. When the government borrows more, interest rates go up. Private investments decline. Job creation slows down, or stops altogether. And, people without jobs will have trouble paying down their mortgage obligations. This is exactly what has happened in the two-term presidency of Mr Bush. When Mr Bush took charge of the presidency in 2001 from Mr William Jefferson Clinton, America’s indebtedness was 57.4 per cent of its GDP. Mr Bush managed to push the indebtedness to 64.3 per cent of GDP at the end of his first term in 2005. That is a serious exacerbation and enfeeblement. It would be 69 per cent or more when Mr Bush hands over the reins to Mr Obama on January 20, 2009.

Very prophetic

Mr Bush’s Thanksgiving address in 2001 — his first — was made 72 days after the tragic killing of about 3,000 people and the felling of the World Trade Centre by terrorists. He said, “And we’re thankful to God, who turned suffering into strength, and grief into grace. Offering thanks in the midst of tragedy is an American tradition... help someone in need of shelter, or food, or words of hope; and continue to pray for America. We will face difficult times ahead.”

America’s economic crisis is a tragedy that most Americans could not have imagined they would be pushed into. It is a suffering that has worsened by the hour and by the day.

The 2001 Thanksgiving speech had terror as its foundation. Nevertheless, Mr Bush spoke of the need for Americans to be generous in offering food, shelter and words of hope to those that needed these.

He had prophetically spoken of the need for prayer amidst prolonged difficulty. His Thanksgiving address in 2008 — his last — would most likely have the same content and emphasis.

It would be a pity that food, shelter and words of hope would have to be central to one more Thanksgiving speech.

Worse, they would be central because of the manner in which Mr Bush has managed the economy. Therefore, it would inspire very little hope.

Democrats deliver

America’s president-elect, Mr Obama, inspires hope, a whole lot of hope ‘by design’.

The ‘by design’ characteristic is an empirical property of fiscal governance by America’s Democrats. They have the track record to show. Presidents Carter and Clinton — both Democrats — left office after knocking down the indebtedness to GDP ratio. Mr Carter brought down the indebtedness ratio from 35.8 to 32.6 per cent.

Mr Clinton brought down the indebtedness ratio from 66.2 to 57.4 per cent. By contrast, Republican presidents have accomplished the opposite. The late Ronald Reagan (Mr Carter’s successor) pushed the indebtedness from 32.6 to a whopping 53.1 per cent in his two-term presidency. His successor — Mr George Herbert Walker Bush (Mr Bush’s father) — pushed it further up to 66.2 per cent.

Though America’s Republicans have built a reputation for responsible fiscal management and for growing the economy, it is the Democrats that deliver. The truth is the Republicans end up wasting taxpayer’s monies. They then describe the Democrats as the tax-and-spend vultures.

Mr Obama’s priorities

Mr Obama would be aware of his party’s excellent track record pertinent to fiscal correctness as also the burdens of political and economic mismanagement created by the Bush administration. His administration would have to carry these soon.

Managing the economic crises is a big priority. The Obama economic team looks comprehensive. It is capable of delivering what America needs now.

In the course of presenting his team, Mr Obama asserted that America had the capacity to summon enormous determination and optimism and to move forward in a new direction to create new jobs. As a speech before Thanksgiving Day, it stirs confidence.

(The author is managing partner of HedgeGear. This article is from his book America’s economic crisis: The twists, the turns and the truth, to be published by ICFAI University Press. blfeedback@thehindu.co.in)