Assessing Bush: The Economy
"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.
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.
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.