It's the story of a nation that went off track in June of 2001:
... Before there was 9/11, however, there was June 7, 2001. For our purposes modern economic history began that day.Well, that last part didn't pan out. The Dow is up and down right now, but we were up to 13,000 at one point. Of course if Fallows could really predict the DJIA he woudn't be writing a blog from Beijing. He also predicts economic calamity when with a 40% rise in the spot price of oil sometime around 2010 -- but we've already been through something close to that.
On June 7 President George W. Bush celebrated his first big legislative victory. Only two weeks earlier his new administration had suffered a terrible political blow, when a Republican senator left the party and gave Democrats a one-vote majority in the Senate. But the administration was nevertheless able to persuade a dozen Democratic senators to vote its way and authorize a tax cut that would decrease federal tax revenues by some $1.35 trillion between then and 2010.
This was presented at the time as a way to avoid the "problem" of paying down the federal debt too fast. According to the administration's forecasts, the government was on the way to running up $5.6 trillion in surpluses over the coming decade. The entire federal debt accumulated between the nation's founding and 2001 totaled only about $3.2 trillion—and for technical reasons at most $2 trillion of that total could be paid off within the next decade.4 Therefore some $3.6 trillion in "unusable" surplus—or about $12,000 for every American—was likely to pile up in the Treasury. The administration proposed to give slightly less than half of that back through tax cuts, saving the rest for Social Security and other obligations.
Congress agreed, and it was this achievement that the president celebrated at the White House signing ceremony on June 7. "We recognize loud and clear the surplus is not the government's money," Bush said at the time. "The surplus is the people's money, and we ought to trust them with their own money."
If the president or anyone else at that ceremony had had perfect foresight, he would have seen that no surpluses of any sort would materialize, either for the government to hoard or for taxpayers to get back. (A year later the budget would show a deficit of $158 billion; a year after that $378 billion.) By the end of Bush's second term the federal debt, rather than having nearly disappeared, as he expected, had tripled. If those in the crowd had had that kind of foresight, they would have called their brokers the next day to unload all their stock holdings. A few hours after Bush signed the tax-cut bill, the Dow Jones industrial average closed at 11,090, a level it has never reached again...
So he's not psychic. On the other hand the plummeting dollar and $400 billion plus housing market collapse happened roughly as predicted -- though we have yet to implement the massive federal trailer parks for families foreclosed from their homes. There's no discussion of global warming, but peak oil makes a brief show.
I hope I remember to take another look in 2009 ...