February 06, 2008
Bush’s Economic Legacy
George W. Bush got a full eight years to shape the economy of the United States. For the first six, he had a very compliant Congress that gave him pretty much whatever he asked for.
He pushed through very large tax cuts early on, both on the highest income tax rates paid by the wealthiest, and also on capital gains and dividend income that mostly again go to the wealthiest Americans. The rationale for this was that these policies would boost investment, growth, job creation, and personal income for all Americans, and the country as a whole would prosper far more than it would without these changes. So it is fair to ask how Bush’s policies affected the American economy as compared to other Presidents of the last 60 years. Namely, did Bush’s policies in fact yield dramatic growth in income and jobs, while keeping deficits under control due to the huge increased revenue the government would supposedly get from the extra growth in spite of lower tax rates?
Let’s go through the evidence in detail and see how Bush actually fared compared to other Presidents. When it comes to the biggest picture, which is how the economy grew overall as measured by the gross domestic product, the Bush era was dismal. In his eight years, the economy grew at 1.4% per year. That compares with 3.6% annual rate for Clinton, 3.4% for both Reagan and Carter, and 5.3% for Johnson and Kennedy each. During Bush’s eight years the economy as a whole crawled forward at best.
Well, Bush might say, it would be fairer to look at after-tax per capita personal income, as that would show how real people actually benefited from my policy mix. But there too, his record is atrocious. Under Bush that rose at 1.3% annually, compared with 2.3% under Clinton, 2.7% under Reagan, and 1.8% under Carter. So again, Bush’s legacy was dismal.
How about employment growth? Under Clinton, the economy expanded enough to increase total jobs by 21%, Reagan did 18%, and even the hapless Jimmy Carter had 13% expansion in just four years. In Bush’s eight, total job growth equaled a miniscule 2% from beginning to end of his eight years. Truly pathetic by any logical standard. The additional jobs were enough to employ only 14% of the growth in the working age population, a worse performance than any President in the last 56 years.
Well how about investors? If average people did poorly, certainly the wealthiest were better off under Bush’s policies.
Unfortunately, any gains from lower taxes were more than wiped out by the wealth destruction of the stock and real estate markets under Bush. He is the only postwar President besides Ford to oversee a declining stock market over his term in office. And the pummeling in the real estate sector has wiped out the savings of many others.
While Americans saw the economy perform poorly, the overall fiscal status of the federal government deteriorated sharply. When Bush came to office, he inherited a budget surplus. Clinton had presided over a sharp decline in the national debt burden as measured as a percentage of the GDP. Under Bush, all this was thrown away.
Treasury debt outstanding grew rapidly, although not as rapidly as under the Reagan, Bush Sr., or Ford. More significantly, the debt burden as a share of GDP hit its highest level since 1952. This is ominous because of the tidal wave of retirement spending that the Baby Boomer generation is going to start drawing on in the next 10 years. It is grossly irresponsible of Bush to be running up the debt in this decade when we should have been cleaning up the national balance sheet.
Bush and the Republican ideologues loved to claim that tax cuts are always and everywhere the necessary and sufficient basis of good economic policy. In reality, the Bush policy mix led to stagnant growth in GDP, jobs, and incomes, while dramatically raising the debt burden on society. Appropriate tax rates are but one part of good economic policy, and cutting taxes is not always the correct thing to do. In fact, while the Federal Reserve was following an extremely easy monetary policy for most of this decade, the government should have been pushing the other way with tight fiscal policy. Instead the combination of Bush’s tax cuts and huge deficits with the loose money from the Fed helped inflate the massive real estate and financial sector bubble, whose popping has created massive problems. Bush is the modern Herbert Hoover.
Comments can reach me at Nali@socal.rr.com.
