While much criticism of the Bush economic record has come in from all quarters the Wall Street Journal has weighed in with an editorial urging John McCain to separate himself from the Bush economic record. The Wall Street Journal???? Yes those conservative stalwarts have keyed in on the decline of the dollar as a major reason for the spike in commodity prices. They are right, and it is not to hard to figure out. As the dollar declined rapidly under Bush we are simply able to buy less with it, driving up commodity prices (foodstuffs and oil prominently) and reducing the American standard of living. The deliberate talking down of the dollar by the Bush Administration has been one of the many blunders committed. From the Journal:

In debates over the Bush economic record, the dollar’s decline and its companion rise in prices are the great missing links. Democrats don’t mention it because they’d rather indict the Bush tax cuts as a way to justify a huge new tax increase. Wall Street and big business don’t talk about it because they’ve been complicit in urging devaluation. And the media mostly ignore it because so few of them even think about monetary policy. The mystery is why more Republicans don’t regret it because the political consequences have cost them dearly.

It won’t be the first time that the Bush Administration and missing links are placed in the same sentence.

The Journal has focused in on the misery index, which has spiked under W. It printed a telling graph, showing the political impact of the misey index on presidential elections. (Reprinted below Wall Street Journal)

As for the political challenge that Mr. McCain faces, look no further than the “misery” spike of 2008. At 5.7% in July, the U.S. jobless rate isn’t much worse than it was (5.4%) when Mr. Clinton ran for re-election in 1996. The difference is the rolling 12-month inflation rate, which at 5.6% puts the misery mark at 11.3 — back to heights not seen since the early 1990s.

The opinion polls support what the misery index and common sense tell us. According to a Pew Research poll in July, no less than 45% of the public cited rising prices as the top economic problem. That was nearly double the 24% who cited prices in February. “Nearly two-thirds (64%) now say their incomes are not keeping up with the rising cost of living,” according to Pew. By marked contrast, only 5% mentioned unemployment as the main issue.

Of course the Fed tries to justify its blundering by talking of “core inflation” but the Journal delivers a devastating reposte to that nonsense.

Chairman Ben Bernanke insists the Fed has had no other choice to stave off recession, and that in any case “core inflation” (which excludes food and energy) is contained. We’ve tangled with those arguments many times and won’t do so again today. But there’s no denying that the result of the Fed’s reckless easing has been a spike in consumer prices, especially in food and energy, and thus a decline in real middle-class purchasing power. American consumers — aka voters — are justifiably angry about this because they don’t buy Cheerios and gasoline with “core” dollars.

Thats right. Households are not “whining” when they complain that they cannot afford food and gas to get to work. It is real. And before I have someone post that Bush is not responsible for Fed policies let the Journal address that as well.

As a political matter, President Bush appointed Mr. Bernanke and thus shares responsibility for this policy outcome. He also appointed Fed Governors Donald Kohn and Frederic Mishkin, the other intellectual architects of the Fed’s dollar neglect. More broadly, the Bush Administration has tolerated — even encouraged — a policy of dollar decline throughout its tenure.

All three of its Treasury Secretaries have lectured us that a falling dollar is useful to help exports to reduce the trade deficit. In any case, they like to add, the dollar’s price is set by a “free market” — and don’t we favor free markets? They seem not to understand that a currency is not like bananas or wheat; its supply is set by a monopoly known as the central bank.

As for exports, they are the excuse used for centuries by politicians who believe nations can devalue their way to prosperity. Exports have provided an economic lift over the last two quarters or so, though that may end as the rest of the world economy slows. But the export boom has been more than offset by the harm that the commodity price spike has done to the U.S. middle-class consumer, as well as to the auto, airline and many other industries. Rising exports are best used politically as an argument for freer trade. As a justification for dollar devaluation, they are a siren song.

A pretty stinging indictment, and even an acknowlegment that simply saying that lower taxes will solve every ill is a canard. Read the Journal editorial here. The misery index in graph form is below.