Enron is like the thread in the fabric that once pulled; the whole elaborate social tapestry comes down in tatters. Enron is much more than just a simple massive financial fraud. The tangled roots of its financial disarray are buried deep in our current political and economic system. As the overall investigation progresses it will open a window for all to see how this sleazy scam could only have happened within a system that supported such malfeasance from the very top of society. By midsummer 2002, the Enron fallout will have severely impacted financial markets, our economy, and our political system.
The financial markets will get hammered because savvy investors know that a number of other large companies, in varying degrees, are about to be revealed as no better than Enron when it comes to cooking the numbers to enable sweetheart get rich deals for a select few. As these companies are exposed and their market values topple overnight, many more billions in equity will be wiped out.
When the equity markets crack and fall, investor confidence in the overall economy tumbles right along with them. As this Wall Street gloom spreads throughout society, consumer confidence gets whacked as well. And as consumer spending accounts for 75% of the U.S. economy, any pullback in this key spending area also means loss of corporate incomes. Many more thousands of jobs will thus be shed in increasingly frantic cost cutting, further exacerbating a vicious cycle.
Moreover, as ordinary Americans begin to see how pervasive these one sided and unfair get rich schemes are, their confidence and belief in our overall system will get hammered. If there is one thing that defines American values it is a sense of equality and fairness. If those basic beliefs and values crack or come under severe strain, the whole body politic suffers, and the institutions that govern our nation will come under intense pressure. The politicians will naturally think this is just business as usual and offer up the typical rhetoric and quick fix Band-Aids.
But as the depth and reach of this Enron-initiated mess become ever more apparent, such fast food fixes will quickly be seen as so much cover your ass politics to preserve the privileges of a select few. What apparently passes as business as usual in America may therefore be about to be brought to an abrupt halt, and with it, our economy, which in turn also happens to be the primary engine for the global economy. What started as an Enron ripple suddenly becomes a worldwide tsunami.
The Bush administration is especially vulnerable. A number of high ranking people within the administration, including Bush himself, had very close Enron ties. Politics being what it is, those connections are not going to be dismissed or overlooked in a hurry, which means an ever widening investigation, and ultimately, the probable naming of an independent consul. Given that 2002 is an election year with many House and Senate Republican seats up for reelection, it will prove politically difficult, if not impossible, for Bush's party to further risk the public's ire by refusing to go along with such an independent consul investigation. That means more political stonewalling and gridlock, which only begets further erosion of consumer confidence.
Moreover, the fact that a constitutional crisis also now appears likely over executive privilege, precipitated by the refusal of Cheney to hand over the names of those who attended his secret energy policy meetings; will only add to a public's ever growing suspicions and to the increasing political gridlock.
In such a poisoned trifecta of bad equity markets, a poor economy, and a soured body politic, tax cuts to even zero rates still will not bounce the economy back. Finally, add in a war time budget that cuts down on such social assistance programs like winter fuel aid for the poor, as well as cuts in financial assistance to already cash strapped teaching hospitals, plus cuts in such favorite congressional pork like highway construction and you have a budget battle royale that effects all strata of society -- not exactly what the country needs right now.
2002 may turn out to be the year in which the great incestuous dance of greed, politics and influence finally stopped. But while the music isn't playing, millions of unfortunate people are going to tragically be paying the piper.
Francis Vale, Copyright 2002, All Rights Reserved
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