[FoRK] The GOP's Misplaced Rage

Stephen D. Williams sdw at lig.net
Fri Aug 14 20:31:20 PDT 2009

> The GOP's Misplaced Rage
> Leading conservative economist Bruce Bartlett writes that the 
> Obama-hating town-hall mobs have it wrong—the person they should be 
> angry with left the White House seven months ago.
> Where is the evidence that everything would be better if Republicans 
> were in charge? Does anyone believe the economy would be growing 
> faster or that unemployment would be lower today if John McCain had 
> won the election? I know of no economist who holds that view. The 
> economy is like an ocean liner that turns only very slowly. The gross 
> domestic product and the level of employment would be pretty much the 
> same today under any conceivable set of policies enacted since Barack 
> Obama’s inauguration.
> Until conservatives once again hold Republicans to the same standard 
> they hold Democrats, they will have no credibility and deserve no respect.
> In January, the Congressional Budget Office projected a deficit this 
> year of $1.2 trillion before Obama took office, with no estimate for 
> actions he might take. To a large extent, the CBO’s estimate simply 
> represented the $482 billion deficit projected by the Bush 
> administration in last summer’s budget review, plus the $700 billion 
> Troubled Asset Relief Program, which George W. Bush rammed through 
> Congress in September over strenuous conservative objections. Thus the 
> vast bulk of this year’s currently estimated $1.8 trillion deficit was 
> determined by Bush’s policies, not Obama’s.
> I think conservative anger is misplaced. To a large extent, Obama is 
> only cleaning up messes created by Bush. This is not to say Obama 
> hasn’t made mistakes himself, but even they can be blamed on Bush 
> insofar as Bush’s incompetence led to the election of a Democrat. If 
> he had done half as good a job as most Republicans have talked 
> themselves into believing he did, McCain would have won easily.
> Conservative protesters should remember that the recession, which led 
> to so many of the policies they oppose, is almost entirely the result 
> of Bush’s policies. According to the National Bureau of Economic 
> Research, the recession began in December 2007—long before Obama was 
> even nominated. And the previous recession ended in November 2001, so 
> the current recession cannot be blamed on cyclical forces that Bush 
> inherited.
> Indeed, Bush’s responsibility for the recession is implicit in every 
> conservative analysis of its origins. The most thorough has been done 
> by John Taylor, a respected economist from Stanford University who 
> served during most of the Bush administration as the No. 3 official at 
> the Treasury Department. In his book, Getting Off Track, he puts most 
> of the blame on the Federal Reserve for holding interest rates down 
> too low for too long.
> While the Fed does bear much responsibility for sowing the seeds of 
> recession, it’s commonly treated as an institution independent of 
> politics and even the government itself. But the Federal Reserve Board 
> consists of governors appointed by the president and confirmed by the 
> Senate.
> Because the president appoints the board, he has primary influence 
> over its policies. This is especially the case for chairmen of the Fed 
> appointed by Republicans because they often have ties to Republican 
> administrations. Chairman Ben Bernanke was originally appointed as a 
> member of the Fed in 2002, serving until 2005, when he became chairman 
> of the Council of Economic Advisers in the White House, a position 
> that made him Bush’s chief economic adviser.
> As early as 2002, a majority of the seven-member Federal Reserve Board 
> was Bush appointees, and by 2006 every member was a Bush appointee. 
> While many critical decisions about monetary policy are made by the 
> Federal Open Market Committee, the board’s position always prevails.
> The Treasury secretary also has had breakfast with the Fed chairman on 
> a weekly basis for decades. Consequently, most economists generally 
> believe that every administration ultimately gets the Fed policy it 
> wants. Therefore, one must conclude that if there were errors in Fed 
> policy that caused the current downturn, it must be because the Fed 
> was doing what the Bush administration wanted it to do.
> To the extent that there were mistakes in housing policy that 
> contributed to the recession, those were necessarily committed by Bush 
> political appointees at the Department of Housing and Urban 
> Development, Fannie Mae, Freddie Mac, and other agencies. To the 
> extent that banks and other financial institutions made mistakes or 
> engaged in fraudulent activity, it was either overlooked or sanctioned 
> by Bush appointees at the Securities & Exchange Commission, the 
> Comptroller of the Currency, the Commodity Futures Trading Commission, 
> and elsewhere.
> But in a larger sense, the extremely poor economic performance of the 
> Bush years really set the stage for the current recession. This is 
> apparent when we compare Bush’s two terms to Bill Clinton’s eight 
> years. Since both took office close to a business cycle trough and 
> left office close to a cyclical peak, this is a reasonable comparison.
> Throughout the Bush years, many conservative economists, including 
> CNBC’s Larry Kudlow, extravagantly extolled Bush’s economic policies. 
> As late as December 21, 2007, after the recession already began, he 
> wrote in National Review: “the Goldilocks economy is outperforming all 
> expectations.” In a column on May 2, 2008, almost six months into the 
> recession, Kudlow praised Bush for having prevented a recession.
> But the truth was always that the economy performed very, very badly 
> under Bush, and the best efforts of his cheerleaders cannot change 
> that fact because the data don’t lie. Consider these comparisons 
> between Bush and Clinton:
> • Between the fourth quarter of 1992 and the fourth quarter of 2000, 
> real GDP grew 34.7 percent. Between the fourth quarter of 2000 and the 
> fourth quarter of 2008, it grew 15.9 percent, less than half as much.
> • Between the fourth quarter of 1992 and the fourth quarter of 2000, 
> real gross private domestic investment almost doubled. By the fourth 
> quarter of 2008, real investment was 6.5 percent lower than it was 
> when Bush was elected.
> • Between December 1992 and December 2000, payroll employment 
> increased by more than 23 million jobs, an increase of 21.1 percent. 
> Between December 2000 and December 2008, it rose by a little more than 
> 2.5 million, an increase of 1.9 percent. In short, about 10 percent as 
> many jobs were created on Bush’s watch as were created on Clinton’s.
> • During the Bush years, conservative economists often dismissed the 
> dismal performance of the economy by pointing to a rising stock 
> market. But the stock market was lackluster during the Bush years, 
> especially compared to the previous eight. Between December 1992 and 
> December 2000, the S&P 500 Index more than doubled. Between December 
> 2000 and December 2008, it fell 34 percent. People would have been 
> better off putting all their investments into cash under a mattress 
> the day Bush took office.
> • Finally, conservatives have an absurdly unjustified view that 
> Republicans have a better record on federal finances. It is well-known 
> that Clinton left office with a budget surplus and Bush left with the 
> largest deficit in history. Less well-known is Clinton’s cutting of 
> spending on his watch, reducing federal outlays from 22.1 percent of 
> GDP to 18.4 percent of GDP. Bush, by contrast, increased spending to 
> 20.9 percent of GDP. Clinton abolished a federal entitlement program, 
> Welfare, for the first time in American history, while Bush 
> established a new one for prescription drugs.
> Conservatives delude themselves that the Bush tax cuts worked and that 
> the best medicine for America’s economic woes is more tax cuts; at a 
> minimum, any tax increase would be economic poison. They forget that 
> Ronald Reagan worked hard to pass one of the largest tax increases in 
> American history in September 1982, the Tax Equity and Fiscal 
> Responsibility Act, even though the nation was still in a recession 
> that didn’t end until November of that year. Indeed, one could easily 
> argue that the enactment of that legislation was a critical 
> prerequisite to recovery because it led to a decline in interest 
> rates. The same could be said of Clinton’s 1993 tax increase, which 
> many conservatives predicted would cause a recession but led to one of 
> the biggest economic booms in history.
> According to the CBO, federal taxes will amount to just 15.5 percent 
> of GDP this year. That’s 2.2 percent of GDP less than last year, 3.3 
> percent less than in 2007, and 1.8 percent less than the lowest 
> percentage recorded during the Reagan years. If conservatives really 
> believe their own rhetoric, they should be congratulating Obama for 
> being one of the greatest tax cutters in history.
> Conservatives will respond that some tax cuts are good while others 
> are not. Determining which is which is based on something called 
> supply-side economics. Because I was among those who developed it, I 
> think I can speak authoritatively on the subject. According to the 
> supply-side view, temporary tax cuts and tax credits are economically 
> valueless. Only permanent cuts in marginal tax rates will 
> significantly raise growth.
> On this basis, we see that Bush’s tax cuts were pretty much the 
> opposite of what supply-side economics would recommend. The vast bulk 
> of his tax cuts involved tax rebates—which failed in 2001 and again in 
> 2008, because the vast bulk of the money was saved—or tax credits that 
> had no incentive effects. While marginal rates were cut slightly—the 
> top rate fell from 39.6 percent to 35 percent—it was phased in slowly 
> and never made permanent. Neither were Bush’s cuts in capital gains 
> and dividend taxes.
> I could go on to discuss other Bush mistakes that had negative 
> economic consequences, such as the Sarbanes-Oxley Act, which imposed a 
> massive regulatory burden on corporations without doing anything to 
> prevent corporate misconduct, and starting unnecessary wars in Iraq 
> and Afghanistan, which will burden the economy for decades to come in 
> the form of veterans’ benefits.
> But there is yet another dimension to Bush’s failures—the things he 
> didn’t do. In this category I would put a health-care overhaul. Budget 
> experts have known for years that Medicare was on an unsustainable 
> financial path. It is impossible to pay all the benefits that have 
> been promised because spending has been rising faster than GDP.
> In 2003, the Bush administration repeatedly lied about the cost of the 
> drug benefit to get it passed, and Bush himself heavily pressured 
> reluctant conservatives to vote for the program.
> Because reforming Medicare is an important part of getting health 
> costs under control generally, Bush could have used the opportunity to 
> develop a comprehensive health-reform plan. By not doing so, he left 
> his party with nothing to offer as an alternative to the Obama plan. 
> Instead, Republicans have opposed Obama's initiative while proposing 
> nothing themselves.
> In my opinion, conservative activists, who seem to believe that the 
> louder they shout the more correct their beliefs must be, are less 
> angry about Obama’s policies than they are about having lost the White 
> House in 2008. They are primarily Republican Party hacks trying to 
> overturn the election results, not representatives of a true 
> grassroots revolt against liberal policies. If that were the case they 
> would have been out demonstrating against the Medicare drug benefit, 
> the Sarbanes-Oxley bill, and all the pork-barrel spending that Bush 
> refused to veto.
> Until conservatives once again hold Republicans to the same standard 
> they hold Democrats, they will have no credibility and deserve no 
> respect. They can start building some by admitting to themselves that 
> Bush caused many of the problems they are protesting.
> Bruce Bartlett was one of the original supply-siders, helping draft 
> the Kemp-Roth tax bill in the 1970s. In the 1980s and 1990s, he was a 
> leading Republican economist. He now considers himself to be a 
> political independent. He is the author of Reaganomics: Supply-Side 
> Economics in Action and Impostor: How George W. Bush Bankrupted 
> America and Betrayed the Reagan Legacy . His latest book, The New 
> American Economy: The Failure of Reaganomics and a New Way Forward, 
> will be published by Palgrave Macmillan in October.

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