In my first post in the series, I
examined the prosperity that was unleashed by President George W. Bush’s tax
cuts, despite the economic and security challenges he faced. The point was to refute the argument by
liberals and Democrats that Bush was responsible for the current economic
recession, the origins of which I explained in the second post in this series
as having been caused by natural economic and global factors that were
exacerbated by Democratic policies. The
purpose of this final post is to summarize and refute the specific liberal and
Democratic arguments that the policies of Bush and the Republicans are to blame
for the recession, especially by noting these Democratic policies and observing
how the Democratic Obama Administration has followed most of Bush’s policies they
blame for the recession.
I doubt that many people can even
identify what specific policies of the Bush Administration allegedly caused the
recession. Presidents often wrongly
receive too much credit or blame for the economy, as people assume not only
that government, but particularly the federal government and especially the
president is responsible. I have
identified four allegations that Bush’s policies caused the recession that are
either wrong or exaggerated while the economically beneficial effects of the
policies are ignored, as well as the degree to which external matters harmed
the economy:
1) Tax cuts. Bush’s across-the-board income tax cuts
sparked the aforementioned economic recovery, despite September 11 and led to
prosperity from 2002-2008. The liberals’
and Democrats’ argument that tax cuts caused the recession is a novel one not
supported by economists except Marxists.
Regardless, Obama extended the tax cuts in order to avoid a tax increase
during a weak economic recovery, which even he recognized would have harmed the
economy.
2) Deficit spending. The argument that spending more than
revenues, thereby causing a budget deficit, drives up interest rates, which,
because of the over $5 trillion dollars of debt that had accumulated since the
1830s until Bush was inaugurated, cost the government even more because of
interest it must pay to service that debt.
However, interest rates reached historic lows during this time. The deficits were being reduced as
percentages of the gross domestic product, despite the need to increase the
defense and intelligence budget after the Clinton Administration – until the
start of the recession, although the total is exaggerated, as some were in the
form of loans with interest that have mostly been repaid during the Obama
Administration or the purchases of stock that have been sold for profit. Regardless, Obama increased the level of
federal spending, which he argued was economically “stimulative” when he did
it, which contradicts the argument that deficits caused the recession.
3) Trade. Bush was one president out of the last five
from Ronald Reagan to Obama who have negotiated free trade agreements. In fact, Obama signed two major free trade
agreements that were negotiated by the Bush Administration. The
increase in exports has contributed to economic growth, while the decrease in
the cost of imports has helped mitigate inflation.
4) Deregulation or lack of adequate
regulation. The main causes of the
financial crisis that led to the Panic of 2008 was the collapse of the real
estate market, which was the result of regulations from the Democratic Carter
and Clinton Administrations to encourage home ownership, but which encouraged
lenders to make bad loans to those who were not creditworthy. Although the Bush Administration added to
this encouragement, it warned repeatedly about the dangers of adequate
standards for credit for loans made by the federally-backed Fannie Mae and
Freddie Mac mortgage entities, but the Democratic Congress, including then-Senator
Obama, declined to act to protect the American taxpayer.
Many bad mortgages had been bundled
together with good mortages as investments by banks that were unable to
distinguish which were good and which were not, which critics blame on a lack
of adequate bank regulations. Some
liberals and Democrats blame the Bush Administration for the banking
deregulation, but the most significant banking deregulation occurred during the
Clinton Administration. Regardless, the
collapse of the real estate market did not cause the economic downturn that led
to the recession, but it did exacerbate it.
Whether or not the economy would have recovered before going into
recession is difficult to determine, but deregulation or lack of adequate
regulation was not to blame.
In short, of the four Bush
Administration policies the liberals and Democrats claim caused the recession,
Obama has continued two of them and increased another while he and his party
were heavily responsible for the other one.
No comments:
Post a Comment