August in Washington, D.C., is about as dead as a John Kerry stump speech. Congress packs up and scatters to the 50 states. Lobbyists have no reason to be in town if their chief prey is away. The president is in Crawford, Texas, and has been for over three weeks. The only ones who are unlucky enough to still be in town are the schleps like me who don't have a good excuse to leave. Unfortunately, while Washington is on vacation, the major problems facing our nation have not taken a break.
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The weekly death toll for Americans in Iraq continues to spiral. Our new strategy is to train the Iraqi security forces as quickly as possible. Unfortunately, evidence is mounting that those same forces have been infiltrated by insurgents. This explains the increase in deaths in recent weeks.
TRENDING: May the Farce be with you
While the president refuses to give a timeline for U.S. troop withdrawal, the head of the Army, Gen. Peter Schoomaker, lowered America's expectations last week when he announced that the military is making contingency plans for keeping over 100,000 boots on Iraqi soil through the year 2009. That's four years from now. If last year's death toll remains constant – and there is no reason to think it will not – that means we will have lost another 3,500 troops by the time the majority of U.S. forces head west.
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The economic front is not much better. Gasoline is pushing $3 a gallon. I know some people who are still trying to pay last winter's heating oil bills. The airline industry is on the ropes and cannot sustain itself with current prices. Delta Airlines sold off its commuter airline, Atlantic Southeast Airlines for $425 million to Skywest in order to raise cash in a last ditch effort to avoid bankruptcy. In lay terms, they are burning the furniture to heat the house.
The picture isn't much prettier over at Northwest Airlines. Their mechanics went on strike this weekend without as much as a whisper from those whose bread is normally buttered by labor. The contract proposal that led to the strike offered the mechanics a 28 percent pay cut for those who remained after the company cut 53 percent of the mechanics' jobs. I'm not a mathematician, but for this contract to have passed, approximately 3 percent of those voting would have been voting to lose their job. Northwest Airlines spent millions of dollars to replace the workers. It's obvious that the Northwest Airlines intends to push organized labor out for good.
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Economists on both sides of the political spectrum agree that the one thing sustaining our economy to date has been low interest rates and a booming housing market. While no one knows how big the housing bubble will get before it pops, Mr. Greenspan is already raising interest rates. This wouldn't be such a big deal for current homeowners if they were locked into fixed 30-year mortgages, but many of us have turned our homes into personal ATM machines with home equity loans. According to CNN Money's April 8 edition:
The amount Americans owe on home equity lines of credit jumped to about $491 billion at the end of 2004, up 42 percent from a year earlier, and more than triple the amount at the end of 2000. Home equity lines are usually tied to the prime rate, which in turn moves in lockstep with the federal funds rate, which the Federal Reserve has boosted seven times starting last June.
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That means just the last two quarter-point hikes by the Fed will cost home equity borrowers about $2.5 billion more in interest this year. And most economists expect at least another full-point increase by the Fed this year, meaning another $5 billion in debt service for those consumers.
Meanwhile, in an attempt to get monthly payments as low as possible, approximately 20 percent of Americans have variable rates. Just about the time gasoline hits $3 a barrel, along with the season's first snowstorm, monthly home mortgage – as well as home equity – payments are going to squeeze most Americans into a financial vice.
Call me a party pooper, but I would say it's a bad time for our government to have taken a month off. I don't blame the Republicans alone. While this Republican leadership is driving us into a corner, the Democratic Party can't figure out where it's going.
As one skeptical voter said to me the other day, "The Republicans have bad ideas and the Democrats have no ideas." Perhaps Labor Day will not only signal the end of summer, but maybe the Dems and Republicans will see the light and generate some solutions. We can only hope.
