Antibiotics have saved the lives of countless millions. However over-prescription causes unintended side-effects. They are less effective in time because our immune systems have developed a tolerance. Pain medications have provided significant benefits to millions on a daily basis– again, overuse proves harmful. They sometimes have side effects, and their effects are short term—when they wear off, the root cause of the pain is still apparent. Antibiotics and pain medication are treatments. Neither provide an absolute cure.

Founded under Franklin D. Roosevelt’s New Deal, the U.S. welfare system was designed as a short term assistance plan, but as a result of misuse, has proven to be a long term problem. Some say it has helped a class of Americans sink deeper into debt, locked them into poor living conditions, and has created a dependency on others that is not positive for individual growth and or the ability to support oneself.

While medications and the U.S. welfare system appear to have nothing in common with the economy, a look at the Bush administration’s prescription for the ailing economy, shows us a connection.

The U.S. Commerce Department reported that for the month of July, key indicators of personal income and expenditures were markedly down. Disposable income directly drives spending and economic activity. The U.S. commerce numbers expose the reality of the economic temperature of the country.

The report tells us that for the month of July, personal income decreased $89.9 billion, or 0.7 percent. This is in contrast to an increase of $7.4 billion, or 0.1 percent, in June and an increase of $218.0 billion, or 1.8 percent, in May. Also indicated is that disposable personal income (or DPI, which represents gross income minus taxes) decreased $114.7 billion, or 1.1 percent, compared with a decrease of $208.0 billion, or 1.9 percent, in June and an increase of $595.9 billion, or 5.7 percent in May. Real DPI decreased 1.7 percent in July, compared with a decrease of 2.6 percent in June.

Buying less

Americans consumption has also declined in July. Personal consumption expenditures (PCE) increased to $24.1 billion, or 0.2 percent in July– compared with an increase of $65.5 billion, or 0.6 percent, in June. Real PCE decreased 0.4 percent, compared with a decrease of 0.1 percent.

The shot in the arm has worn off

The Bush administration’s prescription for the sagging economy, The Economic Stimulus Act of 2008, provided rebate payments to qualified individual taxpayers and tax reductions for some businesses. This shot in the arm is expected to total $106.7 billion for fiscal year 2008. The majority of rebates began in April, and continued on a weekly basis through mid-July. It appeared that this cash handout had a very short term effect, even the Commerce Department acknowledges this. They iterated that the pattern of changes in income reflects the pattern of payments associated with the Economic Stimulus Act of 2008. In other words, the shot in the arm provided short term adrenaline for income and spending that had been heading downward. After that rush, income and spending continued on its downward trajectory, but now the country as a whole, is an additional $106.7 billion in debt as a result of the stimulus program. The symptoms are back, our economy is not well, and the injection has left us the side effect of $106.7 billion of debt with no cure in sight. The high point of pump prices for gasoline was in June and July of 2008; many indications were that consumers simply used their stimulus checks to pay for necessities like food, and gasoline– and not for discretionary items, such as vacations or one-time purchases. The reality of the situation is that the administration’s plans for the stimulus act were crafted in early year and were designed specifically to drive discretionary spending. As the year wore on, companies began to cut payroll, inflation rose– driven by soaring food and gasoline prices, and the handout of cash provided by the government was used for many to get by, not to raise their standard of living. Somehow this situation was not projected by the administration’s economic experts.

A four month checkup

Rebate payments to the tune of $1.9 billion were issued in April, $48.1 billion in May, $27.9 billion in June, and $13.7 billion in July. The commerce department presents an argument that these rebates increased government social benefit payments, reduced personal current taxes, and were the driving force that boosted the change in DPI– $23.3 billion in April and $553.8 billion in May, and reduced the change in DPI by $242.7 billion in June and by $170.3 billion in July. An argument can be made that the payments may have helped contribute to lessening steeper decline, but by no means have they provided any type of fix, cure, or even contributed to a bigger solution of expanding the economy for the short or future term periods.

Revising the future health of Income and Disposable Income

The Commerce Department has revised it estimates for personal income and DPI for the remainder of the year. Looking forward, much concern is voiced by economic experts about the consumer spending that drives nearly two thirds of the U.S. economy. With no remaining tax cuts, inflation at a 17 year high, and scaling food prices continuing to have a major effect on households, a grim situation is apparent. Even the slight decline of gasoline prices during the month of July did not provide for positive signals from experts. At the core of the U.S. economy lies the vulnerability of energy costs. They are having a significant effect and will continue to do so in a wide range of industries from the airline industry, to food prices, to purchases of large items such as automobiles.

Positive news, undone by the reality behind the numbers

U.S. Secretary of Commerce Carlos M. Gutierrez released a statement that the preliminary estimate of real gross domestic product (GDP), indicated that the U.S. economy grew at a rate of 3.3 percent in the second quarter of 2008. These are respectable numbers and generally indicate positive economic conditions. This calmed financial markets, and sent a message that the economic conditions of the country were in a positive situation. However, what followed was the reality of inflation rising to 4.5 percent, the steepest in 17 years, and a sharp decline in personal income in July. This reality is what many Americans have already come to know– that the costs of life’s essentials has risen steeply and their lifeblood to acquire them, their income, is on the decline.