Subject: [big campaign] The Bush Legacy: Economy Made Few Gains in Bush Years
From: "Brad Woodhouse" <[email-masked]>
Date: Mon, 12 Jan 2009 18:30:46 -0500
List-Id: <bigcampaign.googlegroups.com>

What we've been arguing all along:

President Bush
<http://www.washingtonpost.com/ac2/related/topic/George+W.+Bush?tid=info
rmline>  has presided over the weakest eight-year span for the U.S.
economy in decades, according to an analysis of key data, and economists
across the ideological spectrum increasingly view his two terms as a
time of little progress on the nation's thorniest fiscal challenges.

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Economy Made Few Gains in Bush Years

Eight-Year Period Is Weakest in Decades

By Neil Irwin and Dan Eggen
Washington Post Staff Writers
Monday, January 12, 2009; A01

President Bush
<http://www.washingtonpost.com/ac2/related/topic/George+W.+Bush?tid=info
rmline>  has presided over the weakest eight-year span for the U.S.
economy in decades, according to an analysis of key data, and economists
across the ideological spectrum increasingly view his two terms as a
time of little progress on the nation's thorniest fiscal challenges.

The number of jobs in the nation increased by about 2 percent during
Bush's tenure, the most tepid growth over any eight-year span since data
collection began seven decades ago. Gross domestic product, a broad
measure of economic output, grew at the slowest pace for a period of
that length since the Truman administration. And Americans' incomes grew
more slowly than in any presidency since the 1960s, other than that of
Bush's father.

Bush and his aides are quick to point out that they oversaw 52 straight
months of job growth in the middle of this decade, and that the economy
expanded at a steady clip from 2003 to 2007. But economists, including
some former advisers to Bush, say it increasingly looks as if the
nation's economic expansion was driven to a large degree by the
interrelated booms in the housing market, consumer spending and
financial markets. Those booms, which the Bush administration encouraged
with the idea of an "ownership society," have proved unsustainable.

"The expansion was a continuation of the way the U.S. has grown for too
long, which was a consumer-led expansion that was heavily concentrated
in housing," said Douglas Holtz-Eakin
<http://www.washingtonpost.com/ac2/related/topic/Douglas+Holtz-Eakin?tid
=informline> , a onetime Bush White House
<http://www.washingtonpost.com/ac2/related/topic/The+White+House?tid=inf
ormline>  staffer and one of Sen. John McCain
<http://www.washingtonpost.com/ac2/related/topic/John+McCain?tid=informl
ine> 's top economic advisers for his presidential campaign. "There was
very little of the kind of saving and export-led growth that would be
more sustainable."

"For a group that claims it wants to be judged by history, there is no
evidence on the economic policy front that that was the view,"
Holtz-Eakin said. "It was all Band-Aids."

From 2002 to 2006, the housing boom generated about 600,000 to 800,000
jobs that otherwise would not have been created -- about 10 percent of
total job growth in that span, according to the consulting firm IHS
Global Insight
<http://www.washingtonpost.com/ac2/related/topic/Global+Insight+Inc.?tid
=informline> . Such data, expert say, suggest the economy was not as
fundamentally strong as it seemed.

"Some of the recovery, some of the expansion, was based on very shaky
foundations," said Nariman Behravesh
<http://www.washingtonpost.com/ac2/related/topic/Nariman+Behravesh?tid=i
nformline> , chief economist at Global Insight.

"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," said 
Mark Zandi
<http://www.washingtonpost.com/ac2/related/topic/Mark+Zandi?tid=informli
ne> , chief economist of Moody's Economy.com
<http://www.washingtonpost.com/ac2/related/topic/Moody's+Corporation?tid
=informline> , and an informal adviser to McCain's campaign. "It's
almost a lost economic decade."

The president's current aides say they are proud of their economic
record. They note, for instance, that they attempted to rein in the
growth of Fannie Mae
<http://projects.washingtonpost.com/post200/2007/FNM/>  and Freddie Mac
<http://projects.washingtonpost.com/post200/2007/FRE/> , the housing
finance companies whose vast expansion they see as a central cause of
the financial crisis. Independent analysts generally view them only as
contributors to the crisis.

"It does look like a great eight years, aside from the last quarter,
unfortunately," Edward P. Lazear
<http://www.washingtonpost.com/ac2/related/topic/Edward+Lazear?tid=infor
mline> , chairman of Bush's Council of Economic Advisers, said in a
recent interview. "In the long term, things look good. The reason things
look good is this economy will rebound, and it will rebound strongly. .
. . We expect things to turn around, and I would say early in President
Obama
<http://www.washingtonpost.com/ac2/related/topic/Barack+Obama?tid=inform
line> 's administration."

Even excluding the 2008 recession, however, Bush presided over a weak
period for the U.S. economy. For example, for the first seven years of
the Bush administration, gross domestic product grew at a paltry 2.1
percent annual rate.

The administration also failed to gain traction on some of the
fundamental economic and fiscal issues facing the nation -- including
solidifying the finances of Medicare
<http://www.washingtonpost.com/ac2/related/topic/Medicare?tid=informline
>  and Social Security, simplifying the tax code, or making health care
more affordable. Resolution of those issues might have left the
government more flexibility to respond to the current crisis by lowering
the nation's future budget deficits.

The federal government had a modest budget surplus when Bush took office
in 2001, but ran a deficit -- funding itself to a significant degree
with borrowed money -- of 4.9 percent of gross domestic product in 2004
and 4 percent in 2005, even as the economy was growing at a healthy
pace.

Bush did not steer the country toward a more sound long-term fiscal
position. After winning reelection, he made a failed push both to tweak
Social Security to stabilize its long-term finances and create private
accounts for Americans to invest in the stock market. Democrats
aggressively fought the plan, but indicated they were willing to work on
a compromise to ensure the program's long-term financial stability if
Bush would take private accounts off the table, which he declined to do.

Keith B. Hennessey, Bush's chief economic adviser, said the
administration "tried everything" it could to broker a deal on Social
Security, including sending subtle signals to Democrats that it would
negotiate on private accounts.

Changes to Medicare were also elusive for the administration. When Bush
entered the White House, the program faced a long-term funding deficit.
It still does, and its cost is expected to balloon in the years ahead.
In fact, the administration's addition of a prescription drug benefit
enlarges Medicare's long-term funding imbalance.

The administration had planned to try to deal with the problem after a
successful overhaul of Social Security. That day never came, though, and
officials figured that if they couldn't reach a deal on the relatively
simple problem of fixing Social Security, they would have no shot at
fixing the vastly larger and more complex problems facing Medicare.

Bush made a more concerted effort in 2007 to overhaul the health-care
system, with a plan that many independent experts thought could make
care more affordable for poor and middle-income families. But by the
time the president made the push, he was already highly unpopular. The
proposal went nowhere.

"The retirement of the baby boom is not a distant thing, and the rapid
rise in medical care costs goes on year after year," said Alice Rivlin,
a scholar at the Brookings Institution
<http://www.washingtonpost.com/ac2/related/topic/The+Brookings+Instituti
on?tid=informline>  and senior economic official in the Clinton
administration. "It's easiest to fix those things when the economy is
doing well, and we didn't fix them when we had the chance."

A Bush-created commission proposed a detailed overhaul of the tax code
in 2005 that aimed to make taxes more fair and less complex, also
winning plaudits from tax experts. But passing such a plan wasn't a high
priority for the White House, and the effort stalled.

"On tax reform, I think they themselves were not very interested in it,"
said Kevin A. Hassett, a senior fellow at the American Enterprise
Institute
<http://www.washingtonpost.com/ac2/related/topic/American+Enterprise+Ins
titute+for+Public+Policy+Research?tid=informline>  and an adviser on
Bush's reelection campaign.

As achievements, Bush and his advisers point to the tax cuts of 2001 and
2003, which many analysts credit for keeping the last recession mild,
even as the cuts contributed to the large deficits that followed. Bush
and other administration officials play down the role of the tax cuts in
feeding the deficits, arguing instead that increased spending on
counterterrorism, national security and the military after the Sept. 11
attacks was the primary, and unavoidable, cause.

Bush also boasts about his record on trade, including the signing of 11
free-trade agreements with countries in Asia, Africa and Central and
South America. But he also failed in bids to land several other
prominent trade pacts and saw the collapse of negotiations to curb
global agricultural subsidies, known as the Doha Round.

One constant for Bush has been an optimistic, even rosy, economic
outlook. Throughout much of past year, even as the Treasury Department
<http://www.washingtonpost.com/ac2/related/topic/U.S.+Department+of+the+
Treasury?tid=informline>  and Federal Reserve
<http://www.washingtonpost.com/ac2/related/topic/U.S.+Federal+Reserve?ti
d=informline>  began preparing for the worst behind closed doors, Bush
and his aides trumpeted the fundamental strength of the U.S. economy and
dismissed Democratic proposals for a second stimulus package. A White
House fact sheet released on Sept. 5 was titled: "American Economy Is
Resilient in the Face of Challenges."

Two days later, the administration announced the federal takeover of
Fannie and Freddie, setting in motion the most sweeping government
intervention in the economy since the Great Depression.

That takeover, experts widely agree, was necessary. But even those
sympathetic to the president's ideas are skeptical of his overall
legacy.

The highest praise Hassett offers for Bush's economic legacy is that
"the economy was caught up in a storm while he was president, but it
wasn't his fault."

"In the end, to the extent there ends up being a defense of the Bush
presidency" on economic issues, "that's about the best you can get."

 

Brad Woodhouse, President

Americans United for Change

202-470-5858 

202-251-5669 (cell)

[email-masked]

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