Assessing Bush: The Economy
Jeff Alworth
"It's sad to say, but we really went nowhere for almost ten years, after you extract the boost provided by the housing and mortgage boom. It's almost a lost economic decade."
--Mark Zandi, Chief Economist at Moody's
On Monday I began a series of posts on the Bush years, starting with a look at the administration's handling of foreign policy. The Iraq war will be one of a small number of major initiatives against which history will judge the Bush administration; another is the economy. There are parallels. In Iraq, Bush tested the hypotheses of a radical group of ideologues on the efficacy of "anticipatory defense." He turned the economy over to a different cadre of ideologues who tested out different hypotheses: running deficits to put money in the hands of the very rich; further deregulation of industries; hobbling government regulators to allow for more free-wheeling, Darwinian markets. The results of the economic experiment was no more successful than the one Bush ran in Iraq.
Let's start with a few key statistics, which rise like gravestones from the Bush economy, before working backward:
- Unemployment up from 4.2% to 6.7%
- Families in poverty up from 6.4 million to 7.6 million
- People lacking health insurance up from 39.8 million to 45.7 million
- US budget went from a surplus of $236 billion to a deficit of $1.2 trillion
- Median incomes fell $324
- GDP is up from $9.8 to $11.7 trillion
- Per-capita GDP is up from $34,700 to $38,500
Bush arrived in Washington as the first "MBA president," and he promised to run the government like a CEO. How apt a metaphor. As you can see in the statistics I cite above, not everything was bad. People at the top did fine. The country got richer, and if you average all those riches out, individuals got richer, too--per-capita GDP went up nearly $4000 (11%). But median incomes were down. This tells us that the riches were spread not uniformly across the income spectrum, but collected among the already-rich. Sound familiar? CEOs spent the decade reaping obscene amounts of money even as their companies foundered, while line-workers got peanuts (or pink slips--see the rise in unemployment).
But even this doesn't tell the whole story. When he was elected, there was an operating philosophy in Washington, birthed in conservative think tanks and propagated for decades in the media, that if government gets out of the way and lets business do business, we will all reap the rewards. The idea was that this business environment would create so much wealth that we would all get a piece of the pie. (To Dems who spent the 00s moaning that infrastructure was collapsing, wages stagnating, and education declining, the GOP offered vague bromides about the riches to come.)
The irony, of course, is that the CEO in Chief had the same blind spots in running a government in this environment as Lehman Brothers CEO Richard Fuld. The US won't go bankrupt like Lehman, but the effect was related. In the end, the CEOs got fired, but they kept the money; workers got laid off. Now tax-payers get the bill, but financial executives keep their jobs.
Bush's Corporatism
There were other elements of the way Bush ran Washington that didn't look high minded even when we could nurture the belief that the overall economy was doing fine. Now they look obscene. Chief among these was the pipeline that funneled billions to corporations (which in turned sent millions back to Bush in fundraising support). Here's one example, though there are dozens to choose from:
Agricultural subsidies were doubled between 2002 and 2005. Tax expenditures—the vast system of subsidies and preferences hidden in the tax code—increased more than a quarter. Tax breaks for the president’s friends in the oil-and-gas industry increased by billions and billions of dollars. Yes, in the five years after 9/11, defense expenditures did increase (by some 70 percent), though much of the growth wasn’t helping to fight the War on Terror at all, but was being lost or outsourced in failed missions in Iraq.
This made Bush's assault on the poor (with, in some cases, the help of Democrats) even more unseemly. Even though their wages were stagnating while their medical bills rose, Bush pushed through a vindictive, banking-industry-backed personal bankruptcy bill that made it far harder to get out of debt. As a consequence, personal debt skyrocketed 53% under Bush. At every stop along his presidency, Bush sacrificed the needs of regular (tax-paying) Americans to help bloated corporations. The nested relationship between the Bush administration, former and future lobbyists, and K Street will be remembered as one of the most corrupt in history. This wasn't an ideological feature of Bush's economic plan, it was hardball politics.
Burst Bubbles, Foreclosures, Ruin
As a coda to the Bush years, 2008 was bad for everyone. The housing bubble popped, and a million people lost their homes to foreclosure. The Dow Jones Industrial Average lost 4,700 points--over a third of its value. That one stung even a few in the upper income brackets. And of course, the financial sector collapsed, forcing the biggest bailout in US history. The results are written in the statistics, but the overall effect will last far longer than the the Bush recession. With the exit of Bush, a governing philosophy with mighty currency among conservatives has proved a fraud. Long after the US digs out of the massive crater left by the Bush administration's economic policies, the ideology that led us to this point will remembered as a cautionary tale of greed and corruption. So perhaps there's one silver lining.
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Jan 14, '09
Some other relevant data:
Federal spending as a percent of GDP: 1992: 22.1% 2000: 18.4% 2008: 20.5%
If Clinton hadn't reduced spending as a percent of GDP, he would have left us with a deficit of $121 billion rather than the surplus of $236 billion.
The solution to too much spending and too much debt is not more spending and more debt.
Jan 14, '09
Nice set of economic data to support the dismal performance of the Bush Admin. Like a putrid aroma, as the Admin's history ripens with age, the smell remains - putrid. Why W thinks history will judge him less harshly is beyond me. The data just doesn't change. I hope his library features a "Bush Reality Tour" which descends underground to the Cheney bunker with a tour of the executive "Torture Chamber" featuring the water boarding dunk tank. I personally think history will hold W accountable for the mess we are in and he will suffer some karmic retribution for the legacy he leaves. Bush living with his legacy is sufficient accountability for his behavior. Cheney, the puppet master, on the other hand should be prosecuted for war crimes/torture, and outing an operative with the CIA. He should serve his sentence in the "Bush Reality Tour" dunk tank.
Jan 14, '09
Ted Piccolo has done his best to dismantle this entire post over on his blog.
Ted Piccolo of course will not comment on it over here in the belly of the beast because he cannot "Comment has removed by Blog Administrator," which he uses whenever someone seriously questions his logic from a viewpoint that he considers "moonbat."
Give NW Republican some hits (they seriously need it compared to BO), but be warned that if you start dismantling Ted Piccolo's theory, then he will "Comment has has been removed by Blog Administrator," ad hominem attack you as a moonbat, and say "Buh Bye."
Jan 14, '09
Are you willing to be as critical of Kulongoski, Jeff? This state has pretty much been run by Democrats for thirty years and the state is facing massive budget deficits, soaring hunger and homeless rates, highest in the nation unemployment, etc. It has lagged in the good times and plummets in the bad ones. Using your logic, the Democrat leadership in Oregon is to blame.
Just curious.
Jan 14, '09
Heck no, Chris. He is going to blame Kulongoski's failures on Bush!
4:24 p.m.
Jan 14, '09
Are Republicans exempt from accountability? Yes, Kulongoski's performance should be examined when he leaves office--if for no other reason than to learn from our mistakes. But to ignore that any mistakes were made, to perpetually try to change the subject or place blame elsewhere--it underscores the culpability, doesn't it?
Look at the post I wrote, rather than the one you wished I'd written. I know it looks like I'm giving Bush hell. But as Truman (a man who understood where the buck stopped, unlike our current blame-shifter), I'm telling the truth and you just think it's hell.
If I've mistated the facts, why not refute them?
Jan 14, '09
Easy Jeff... don't get your hackles up.
My point is this:
Why do a post mortem on Bush? He's gone. It's over. Yes, he was a major F-up, and I as a Republican believe it. But it's done.
You guys have the ball now. You have the White House. You have the Congress. You have the State House. It's your turn.
I want to see you guys fix all these problems. And I want to see you do it without blaming George Bush for the next eight years.
Jan 14, '09
Chris,
Everything that you are saying would be right if we were living under a dictatorship where the Executive Branch dictated everything including the Legislative Branch. We all know that is not the case.
Seeing as how you got me worked up, let me pose some questions to you:
Would you agree that Republicans had a majority in the Oregon State Legislature from 1994 until 2006?
Would you agree that during the period from 1994 to 2006 that Republicans cut taxes?
Would agree that under Republican stewardship from 1994 to 2006 that the majority of the State of Oregon agency budgets grew a marginal 1 to 5% every biennium?
Say what you want, but Oregon Republicans are more liable for this mess we are currently in than the Democrats.
Don't tell me that all of this has been the consequence of the Democrats who got a majority a scad 2 years ago, when Republicans had reign of the State budget for a solid 12 years from 1994 until 2006.
Jan 14, '09
I am not done with the Republicans who want to blame everything on Ted, Kitzhaber and the Dems in the legislature.
Don't try and fling stuff over on us. If Oregon Republicans had the balls to stay true to their principles, then they would have denied any and every budget by the Governor from 1994 until 2006 that had 1 to 5% increases in state agency budgets.
However, Republicans did not have the balls then and will not have the balls now as the whole bullshit philosophy of "small government, tax cuts, and deregulation" is as popular as corporate welfare whores who want their handouts, but anyone else asking for a sellout is a socialist pinko commy.
Please, take that philosophy, wipe your butt with it, and flush it down the toilet along with neoconservatism.
Jan 14, '09
"Why do a post mortem on Bush? He's gone. It's over."
He may be gone, or will be gone soon, but the crackpot ideas that he put into practice with disastrous results are not gone -- far from it. They are standard Republican dogma -- cut taxes for the rich, attack labor unions, deregulate corporations, dismantle the social safety net -- and have been for at least a hundred years. Much as Republicans are now trying to disown Bush and pretend that the calamitous Bush presidency was an isolated aberration, Bush was their fair-haired boy up until the 2006 congressional elections (and even beyond) and his calamitous presidency represented the full, noxious flowering of long-standing Republican ideology. In 2004, for the first time since the New Deal, the Republicans got their hands on the whole apparatus of the federal government -- executive, legislative and judicial -- and proceeded to drive the country over a cliff. THAT's why progressives are not going to let Bush slink quietly back to Crawford and pretend the last eight years never happened ... however much you may desire it.
Jan 14, '09
Maybe so. But he won. So the majority of the states thought he was better than your guy.
Jan 14, '09
Part of the point I was making Jeff, which seems to have escaped you, is that Bush's economic policies are more akin to Democrat philosophy than true fiscal conservatism.
Non-military, discretionary spending skyrocketed under Bush -- just how does that not jibe with typical Oregon Democrat-led policy? Or do you contend that Kulo is really a conservative?
Moreover, fiscal conservatives have abandoned Bush while Dems tend to turn a blind eye to the underperformers like our Governor. You'd have more credibility if you pointed out why Oregon's economy is perpetually teetering on the edge.
I make no attempt to place blame or change the subject, I content the economy is in the tank due to profligate liberal fiscal policy -- with Bush at the helm.
Jan 14, '09
Yeah that's funny Y.O.Moonbat, as if Oregon's Republican majority wasn't rife with RINOs.
If you were paying attention, you'd know that one of the main reasons the Republican party is failing is because they're not acting like Republicans.
And I suppose this $1 billion Oregon budget shortfall is the Republicans fault...
6:29 p.m.
Jan 14, '09
Jeff: I agree with your overall assessment of Bush II. But you make one factual claim that is wrong and one that is misleading. This wasn’t an era of financial deregulation. The Bush administration was, in fact, an era of massive financial re-regulation under the shadow of Sarbanes-Oxley. Most of the financial deregulation happened before Bush, largely driven by financial engineering, not faith in unregulated markets, although, to be frank, there was no consensus as to how derivatives should or could be regulated. Second, the discrepancy between the growth of per-capita GDP and median family income can in part be explained by top end growth, but most of it reflects the fact that they don’t measure the same things. Most of the growth in GDP between 2001-8 was in health care, which isn’t reflected in family income. In fact, the change in family size (smaller) accounts for as much of the discrepancy between the growth of per-capita GDP and median family income as top end growth.
Jan 14, '09
Chris,
RINOs were the only reason Republicans had a majority from 1994 until 2006. You can't sell a hard-line, Southern values philosophy here in Oregon and expect to get re-elected....Unless you are in SE Oregon.
I believe that any line of work that is paid for by tax dollars is the "government" that Republicans rail against. Under this definition "government" includes:
Law enforcement Local fire departments Teachers Military Government lawyers and many more
It ain't popular to be a proponent of "limited government" if that "small government" philosophy includes axing tax payer dollars to law enforcement, fire, education, and many other solid middle class occupations.
As for the $1 billion budget shortfall, I do blame it on Republicans allowing state government to grow for a solid 12 years from 1994 to 2006, while simultaneously contributing to inflation with tax cuts.
Frame it how you want, Republicans are part to blame for this mess along with Democrats who believe that tax dollars are created in state agencies and not from private individuals and the private sector.
I can cut the line, but I will not sit and blame Democrats when Republicans irresponsibly governed for 12 years allowing this mess to culminate into what it is now.
10:01 p.m.
Jan 14, '09
Part of the point I was making Jeff, which seems to have escaped you, is that Bush's economic policies are more akin to Democrat philosophy than true fiscal conservatism.
Again, Chris, that's your hobby horse. I don't give two figs about whether Bush was a "true conservative." My post was about Bush.
I make no attempt to place blame or change the subject, I content the economy is in the tank due to profligate liberal fiscal policy -- with Bush at the helm.
Well, we agree about Bush, anyway. In my lifetime there's been no "liberal fiscal policy." I'm happy to run that experiment.
Fred, you know a lot more about this than I. (As our friend Patrick tells me--or used to, before he started a blog--"they don't just give those to anyone. Of course, I'm paid commensurately with my knowledge.)
Since you do know more than I, what would you, as an economist, say about the Bush administration's performance?
Jan 15, '09
I don't consider the Bush economic policy of "Give all the money to the rich people and screw everybody else" to be at all consistent with Democratic economic policy. Progressive Democrats believe everybody should prosper including the rich instead of only the rich.
Jan 15, '09
[Apologies for not being here to respond closer to when it was written, but it needs a response, IMHO.]
Moderate Republican wrote:
"You guys have the ball now. You have the White House. You have the Congress. You have the State House. It's your turn.
I want to see you guys fix all these problems. And I want to see you do it without blaming George Bush for the next eight years."
Can we please get past the us vs them BS?!?!?
An incredibly un-American policy spread around Washington, DC, as the Reich took power. What about the "K" Street project and the efforts to make the Justice Department red? When the Reich sought to eliminate the Left, this country fell apart. After eight years, we now know how far from reality the Reich went with their fascist agenda.
Moderate Repuublican, this is still your country. Stop seeing your countrymen as them. For more then 200 years both sides have worked together to "create a more perfect union". The tactics of the Reich have nothing to do with union, nothing at all. It was soely to exert their own power in the face of any opposition.
Barack Hussein Obama is making every effort to bring this country together. He has broken bread with the Reich Writers, George Will, Billy Crystal[sp?] and others.
This is your White House, your Congress and your, State House and it is still your turn. Over the last eight years, it was our turn as well, but the Reich made every effort to skip the Lefts turn, going so far as to hold hearings like thieves in the middle of the night.
It is critical to look back and it is critical to look at the Reich for its responsibility in the mess in which we are at present. There are some strong voices coming out against Obama that were silent while George II trampled the Consitution, and by their silence they were complicit.
BTW, as we dissect what happened, there will be Democrats with some culpability. We on the Left are willing to see those people held to account. It is part of our values because we believe, above all else, in the rule of law.
8:50 p.m.
Jan 15, '09
Jeff asked "what would you, as an economist, say about the Bush administration's performance?"
I agree that this era will be "will remembered as a cautionary tale of greed and corruption" and financial excess. So far as that has anything to do with the federal government, the era was mostly shaped by a hard-ball Republican congress with the concurrence of a supine president. I don't see any evidence of a "governing philosophy," except maybe reward our supporters and to heck with everyone else. The 2001 and 2003 tax cuts weren't all that bad and might have been better if the Ds in Congress had been more forthcoming on Social Security tax cuts of the kind proposed by Treasury in 2001 and now endorsed by Obama. Increasing PI taxes in 2005/6 would have been a very good idea, but wasn't on anyone's agenda. Trade, agriculture, transport policy were especially bad, but monetary policy was, if not stellar, OK. We could have done a better job of policy coordination, monetary in 2006-7, fiscal now. Maybe, if our foreign/climate change policies had been more agreeable, the Europeans/Germans would have been more forthcoming on these issues. Who knows?
I think the president has actually done an OK job the last two years, with a Democratic congress. Last spring's stimulus package was well designed and, arguably, quite effective. Up to the Lehman Bros collapse, it looked like we had dodged a bullet. TARP was IMHO a really good idea, if it could have been enacted expeditiously as originally proposed, unfortunately it was enacted too late and so constrained it couldn't be used to do anything but buy banks and play ersatz RFC. Well, that seems to be working. And, maybe TARP was too clever by half.
On financial regulation, see An Agenda for Reform by Lawrence J. White
In terms of economic policy, if Clinton and Reagan earned an A-/B+, Bush Sr. a C+, and Jerry Ford a C, Shrub doesn't deserve better than a C- or D. Probably better than LBJ, RMN, or Jimmy Carter though. That's as far as I can go as an economist.
Jan 27, '09