Is Bush to Blame for the Economy?
By Dean Baker
The American Prospect

Monday 25 February 2008


In fairness, Bush, like all presidents, does not deserve all the blame (or credit) for the economy's performance under his watch. But he turned a blind eye to the mounting evidence of an economic crisis.
Last summer, President Bush told the American people that "the American economy is the envy of the world." He continued, "The fundamentals of our economy are strong.... Job creation is strong. Real after-tax wages are on the rise. Inflation is low." None of this was exactly true then, but it is certainly not true now. When President Bush signed the stimulus package he finally acknowledged what the rest of us already knew: The economy is in real trouble. The collapse of the housing bubble is throwing the economy into a recession, and quite possibly a very severe recession. For most workers this means that the economic situation is about to go from bad to worse.

There has been a myth spread by folks like The New York Times that the economy had been performing very well under President Bush, but that he wasn't getting proper credit because of public anger over Iraq. While pleasing to the ears of Bush supporters, this is a myth without foundation.

At the most basic level, contrary to the myth, growth has actually been very weak under President Bush. Here is the ranking of growth by presidential administrations since 1960:

Kennedy-Johnson: 5.2%
Clinton: 3.6%
Reagan: 3.4%
Carter: 3.4%
Nixon-Ford: 2.7%
Bush II: 2.6%
Bush I: 1.9%

President Bush only manages to beat out his father, and even this distinction may not hold when the final numbers are in. These data only run through the third quarter of 2007. If we fall into a recession and Bush ends his term with five quarters of near-zero growth, then Bush II could even fall behind Bush I in the growth category.

But growth is only a small part of the story. As has been widely publicized, the Bush-era deficits reversed the effects of the deficit reduction from the Clinton years. We will almost certainly end the Bush years with a higher debt-to-gross domestic product ratio than we had at the start of the Clinton presidency. That is not a disaster, but the next administration will not have the luxury of allowing the debt to increase in the same way.

Perhaps more important, the ratio of foreign debt to GDP has soared in the Bush years. By the end of the Bush presidency, we will likely have added more than $1.5 trillion (more than 10 percent of GDP) to our foreign indebtedness. This is the result of the massive trade deficits of the Bush years.

Growth and debt are, of course, abstractions for most people. What matters to the vast majority of families is what they take home in their paychecks, their job security, their health care, and their pensions. On these fronts, the Bush legacy is also one of miserable failure. Going into this year, the average hourly wage was about 3 percent higher than it was when Bush took office in 2001. This modest growth is entirely attributable to the wage momentum coming out of the late 1990s boom. Adjusted for inflation, wages have been flat since 2003. In recent months they have headed downward as energy- and food-price increases outstripped wage growth. Wage growth may still end up positive for the Bush years as a whole, but the gain will be so small that most workers will not notice it.

Job growth has been abysmal in the Bush years, averaging less than 900,000 jobs a year, compared to more than 2.5 million jobs a year during the Clinton administration. As a result, millions of young and middle-aged people have simply stopped looking for work and dropped out of the labor market.

Health-care coverage has become increasingly precarious as millions of people have lost coverage and tens of millions of workers find that they must pay much more for their health care, either in premiums, co-payments, or deductibles. Similarly, pension coverage (including 401(k) type plans) was falling sharply even before the onset of the recession. My colleague found that the percentage of workers in "good jobs" - jobs that pay at least $17 an hour, provide health insurance and pension coverage - had fallen by 2.3 percentage points under President Bush, and that was before the recession. Needless to say, job prospects for workers will look much worse by the end of the president's term.

In fairness, Bush, like all presidents, does not deserve all the blame (or credit) for the economy's performance under his watch. By the time that President Bush took office in 2001, recession was already in the cards given the collapse of the stock market bubble. The economy would have faced rough sledding regardless of who was in office. Similarly, the country was facing a large and growing trade deficit in 2001 because of an overvalued dollar.

But President Bush did not take any steps to seriously counteract these real economic problems. His strategy was to give out tax breaks that heavily favored the richest people in the country. He also gave business, including the energy companies, the defense contractors, the drug companies, the insurance companies, and the financial industry, everything they wanted from the government, at the public's expense.

However, the massive handouts to the rich and the corporate lobbies didn't produce growth. For this, President Bush needed the housing bubble. The unprecedented run-up in house prices produced a record construction boom. More important, the $8 trillion housing bubble led to a consumption boom as people eagerly borrowed against their new housing wealth, sending the saving rate to zero.

While President Bush likes to pretend that the crash of the housing-market bubble is a surprise event, like a hurricane, for which we could not have possibly prepared, the reality is that it was an entirely predictable event, which was in fact predicted. President Bush's decision to ignore the growth of the housing bubble and the madness in the mortgage market was one of the most disastrous economic mistakes in the country's history.

The meltdown of the housing market has already led to record rates of foreclosures and multibillion-dollar write-downs at the country's leading financial institutions. But this is just the beginning. The current double-digit rate of house-price decline will destroy between $2 trillion and $4 trillion in additional housing wealth over the course of the year. In short, it looks like President Bush will go out with a real bang.




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Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer (www.conservativenannystate.org). He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues. You can find it at the American Prospect's web site.
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I tell you I love reading your stuff. Thank you and keep it rolling!

Or was it the GOP Congress that gets the credit during Slick Willie's term? Of the end of the cold war compliments of Ron Reagan? Or is the Democratic Congress to blame?

Seems like everyone is ok with a nanny state if the nanny takes care of their constituents.

gee I wonder who wrote that article...

"About The American Prospect
Our Mission

The American Prospect was founded in 1990 as an authoritative magazine of liberal ideas, committed to a just society, an enriched democracy, and effective liberal politics. Robert Kuttner, Robert Reich, and Paul Starr launched the magazine initially as a quarterly."

they sure do want to push liberal ideas huh...

Bush, cannot be blamed for the entire severe problems, but he has been entirely irresponsible, and has greatly contributed. He took over as president, with a balanced budget and surplus. None of these former presidents , you mention, were giving such a good platform to start from. With common sense he could have been a great president. Instead he will leave office as the worst of all time. Everything he's done has been a complete disaster, you'd have to truely question his patriotism, it would seem he hates this country, everything he's done makes no sense, how terrible!

about that balanced budget and surplus...could it have anything to do with an election that was in Clinton's sights and wanting to do everythign possible to have another Democrat win..and we all know numbers can be moved around...

Unlikely, Clinton loved his job, was a hard working president. In fact he loved his job so much, he wouldn't even take time off for a BJ, just got it while talking business on the phone in the white house, while taking care of business
Also Monica wasn't all that bad looking.

so that's a reasonable response?...oh ok...

good one!!!!

I seriously think Madisonman and Dragoness should mate...just a thought

Yes George is responsible for the economy - new cars, new computers and laptops, i pods, cell phones, new houses, ........................................................

and everybody wants something for nothing.......................

Not everyone, I am firm believer in you get what you pay for and I always go for the high end stuff. Yes it is more expensive but I feel I get my monies worth.

I think that Ruining the economy, is part of the KHAZAR plans for America, and Bush is only a puppet and does as he is told(programmed)by the Zionists. I think being a puppet is not just a figure of speech any more. I heard the old George is working on his first cloneship, and that Cheyneyis on his second cloneship, and that Henry Kissinger is on his 5th cloneship. If that is true we are seeing a new meaning to the word puppets. Keep in mind their is a real live person and persons behind the puppets, that you can barely see, They are almost invisible. But almost does not count, like it does in horse shoes. Ever heard of the ELITE or the Illuminati?? Let's get rid of the federal reserve and fix our economy, those 1% PARASITES, we don't need them sucking our blood. I read where the PARASITES brag that the Farmers farm the Ground, and We FARM the FARMERS!!! What do you think they are doing to YOU??

Matchmaker!

Yes, he has been irresponsible.

it is not her stuff

it is copy paste post

with no input

she is a great lady

and i would like to see her thoughts

on her copy

put oh well

Dragoness.....

Damn, first you start a thread saying Bush is to blame for teen age pregnancy. Now Bush is to blame for the economy. I had an accident on January 8th, really hurt myself pretty bad. Oh, my God ...... Bush is to blame! Damn, how did I miss that?