In Bush v. Obama, Bush Wins in a Rout
Peter Wehner â July 2010
According to Reuters:
â¦Obama said the former presidentâs âdisastrousâ policies had driven the U.S. economy into the ground and turned budget surpluses into deficits.
Obama defended his repeated references to Bushâs policies, saying they were necessary to remind Americans of the weak economy he inherited from Bush in January 2009â¦
In the wake of a recession that began roughly seven weeks after President Bush took office, America experienced six years of uninterrupted economic growth and a record 52 straight months of job creation that produced more than 8 million new jobs. During the Bush presidency, the unemployment rate averaged 5.3 percent. We saw labor-productivity gains that averaged 2.5 percent annually â a rate that exceeds the averages of the 1970s, 1980s, and 1990s. Real after-tax income per capita increased by more than 11 percent. And from 2000 to 2007, real GDP grew by more than 17 percent, a gain of nearly $2.1 trillion.
As for Obamaâs claim that Bush âturned a budget surplus into a deficitâ: by January 2001, when Bush was inaugurated, the budget surpluses were already evaporating as the economy was skidding toward recession (it officially began in March 2001). Combined with the devastating economic effects of 9/11, when we lost around 1 million jobs over 90 days, the surplus went into deficit.
Rather than whine incessantly about the situation, President Bush proposed policies that triggered the kind of sustained growth that saw the deficit fall to 1 percent of GDP ($162 billion) by 2007. Indeed, before the financial crisis of 2008 Bushâs budget deficits were 0.6 percentage points below the historical average.
Now letâs consider Mr. Obamaâs record: an unemployment rate of 9.5 percent, with 131,000 jobs lost in July, during our so-called Recovery Summer (Vice President Biden promised us up to 500,000 new jobs a month back in April). The overall unemployment rate, incorporating people who want jobs but did not look during July, is now 16.5 percent.
According to J.D. Foster, Obamaâs âjob deficitâ â the difference between current employment and the jobs Obama promised to create by the end of 2010 â stands at a staggering 7.6 million workers. The 2010 deficit is $1.471 trillion, or 10 percent of GDP, while the debt is $9.2 trillion, or 62.7 percent of GDP. (From January 20, 2001, to January 20, 2009, the debt held by the public grew $3 trillion under Bush, from $3.3 trillion to $6.3 trillion; in 20 months, Mr. Obama will add as much debt as Mr. Bush ran up in eight years.) And letâs not forget that the Obama administration passed an $862 billion stimulus package and assured us that unemployment would not exceed 8 percent; instead, unemployment topped 10 percent â a figure higher than what the Obama administration said would occur if the stimulus package wasnât passed.
Sales of new homes collapsed earlier this year, sinking 33 percent to the lowest level on record (new home sales rose in June from Mayâs historical low, but the overall pace was still the second slowest on record, the Commerce Department reported.
Not surprisingly, the Conference Board Consumer Confidence Index now stands at 50.4. As a reference point, a reading above 90 indicates that the economy is on solid footing, while above 100 signals strong growth. We also learned on Tuesday that the Federal Reserve, downgrading its assessment of the economy, announced that the pace of recovery is âmore modestâ than it had anticipated. âThe Fed noted that high unemployment, modest income growth, lower housing wealth and tight credit were holding back household spending,â according to the Wall Street Journal.
Consider this as well: according to the Obama administrationâs own projections, in the first term weâll see an average unemployment rate of 9.0 percent, real GDP growth of 1.1 percent, federal spending as a percentage of GDP at 24 percent, budget deficits as a percentage of GDP at 7.8 percent, and the deficits as a percentage of GDP at 6.2 percent (see here).
These projections are, across-the-board, depressing.
Now, unlike Obama, whose intellectual dishonesty can be striking at times, some of us are willing to concede that things need to be placed within a proper context. Obama took the oath of office in the wake of a financial collapse that made every economic indicator much worse... But even here, in characterizing what happened, Obama has to present a cartoon image, distorted and disfigured, pretending that it was wholly and completely the fault of President Bush and Republicans.
In fact, it was a complex set of factors that both Republicans and Democrats were complicit in. In addition, itâs worth noting that Democrats were in control of Congress beginning in January ...
Second, spending would have been much higher during the Bush presidency if Democrats had their way. To take just one example: Democrats proposed creating a prescription-drug program as an alternative to the one Bush proposed that would have cost a projected $800 billion over 10 years. The Bush prescription-drug law was originally expected to cost half that amount â and today it costs a third less than initial projections because it uses market forces to drive prices down.
Third, Democrats bear the majority of the blame for blocking reforms that could have mitigated the effects of the housing crisis, which in turn led to the broader financial crisis.
As Stuart Taylor put it in 2008: The pretense of many Democrats that this crisis is altogether a Republican creation is simplistic and dangerous. It is simplistic because Democrats have been a big part of the problem, in part by supporting governmental distortions of the marketplace through mortgage giants Fannie Mae and Freddie Mac, whose reckless lending practices necessitated a $200 billion government rescue [in September 2008]. ⦠Fannie and Freddie appear to have played a major role in causing the current crisis, in part because their quasi-governmental status violated basic principles of a healthy free enterprise system by allowing them to privatize profit while socializing risk.
The Bush administration warned as early as April 2001 that Fannie and Freddie were too large and overleveraged and that their failure âcould cause strong repercussions in financial markets, affecting federally insured entities and economic activityâ well beyond housing. Bushâs plan would have subjected Fannie and Freddie to the kinds of federal regulation that banks, credit unions, and savings and loans have to comply with. In addition, Republican Richard Shelby, then chairman of the Senate Banking Committee, pushed for comprehensive GSE (government-sponsored enterprises) reform in 2005. And who blocked these efforts at reforming Fannie and Freddie? Democrats such as Christopher Dodd and Representative Barney Frank, along with the then-junior senator from Illinois, Barack Obama, who backed Doddâs threat of a filibuster (Obama was the third-largest recipient of campaign gifts from Fannie and Freddie employees in 2004).
So Obama and his party bear a substantial (though not exclusive) responsibility in creating the economic crisis that Obama himself inherited.
Even if you set all this aside, Obama entered office knowing what he faced, including a deficit and debt that was exploding. And rather than promote policies that accelerated economic growth and began to address our fiscal entitlement crisis, Obama went in exactly the opposite direction. For example, Obama succeeded in passing a massive new entitlement program (ObamaCare) rather than trimming existing ones.
Upon taking office, George W. Bush inherited an economy heading for recession and championed policies that made things better; upon taking office, Barack Obama inherited an economy in a deeper recession and championed policies that have made things worse. That is a key different between the two.
The problem for President Obama is that he and his party cannot escape the record he has amassed. As Karl Rove has written:
Voters know it is Mr. Obama and Democratic leaders who approved a $410 billion supplemental (complete with 8,500 earmarks) in the middle of the last fiscal year, and then passed a record-spending budget for this one. Mr. Obama and Democrats approved an $862 billion stimulus and a $1 trillion health-care overhaul, and they now are trying to add $266 billion in âtemporaryâ stimulus spending to permanently raise the budget baseline.
It is the president and Congressional allies who refuse to return the $447 billion unspent stimulus dollars and want to use repayments of TARP loans for more spending rather than reducing the deficit. It is the president who gave Fannie and Freddie carte blanche to draw hundreds of billions from the Treasury. It is the Democratsâ profligacy that raised the share of the GDP taken by the federal government to 24% this fiscal year.
This is what Obama has done now that he has been given the keys to the car (to use a favorite metaphor of his). Heâs taken us from a ditch, one largely of his and his partyâs making, and driven us into the side of mountain.
On his worst day, the economic decisions by Obamaâs predecessor were better, more responsible, and more enlightened that anything President Obama has done.
The Economic Urban Legend carefully created by Barack Obama is breaking apart. According to some polls, more Americans now hold Obama responsible for the bad state of the economy than they do Bush. Bushâs favorability ratings are climbing, while Obamaâs approval ratings are tumblingâ¦
George W. Bushâs presidency was certainly not perfect; none are. But like Truman before him, Bushâs achievements will be vindicated. Unless he changes course fairly dramatically, I rather doubt the same thing will be said about Mr. Obama.
