I know its common understanding that President Bush has made our former good economy bad; or not-so-good.
How exactly did he do this, and what would he have to do starting now to make it better?
I think that the only reasonable argument anyone could make is that he affected the consumer confidence level in a negative way. By doing so he possibly worsened the economy.
We were going to go in a recession regardless of who was president. The president has very little control over the economy. They can alter fiscal policy by proposing changes to tax laws and government spending. However, most economists feel that these changes do not cause any changes in the economy for a few years. Also, it is viewed by most economists that lowering taxes and increasing government spending are both expansionary moves.
I guess you could say that Bush has some influence over monetary policy if you think he can somehow influence Greenspan and the Fed. However, again most economists feel that lowering interest rates is an expansionary move.
Really, both the fiscal and monetary changes have been at least in the right direction. You can say that they could have been better, by having more effective tax cuts aimed at a lower income earners.
To blame Bush for the tech bubble bursting, or corporate scandals, or terrorist strikes all of which have been contributory factors in the recession is completely ludicrous. I feel the only possible real negative effect the you could argue Bush has had is on the consumer confidence level.
It’s too hard for people to factor in all these things and reach a conclusion of who handled a crisis better than the other guy. It’s easier to just look at the economy (I for one usually take the worth of the dollar compared to other currencies, because that is something I can remember over years, without having to study endless statistics) and say “Hey, Bush is president and the economy is on a decline. Boo for Bush”.
Sure, this method isn’t fair, but then again nobody said that being president was going to be easy and if you’re expecting fairness in politics, you’re probably in the wrong line of work. shrugs
Perhaps when politicians stop taking credit for the good times, people will stop blaming them for the bad times. Not likely.
But, Summerime, your OP is exactly like saying: We all know that you beat your wife, I just want to know what implements you beat her with.
Can you offer any facts to get people started, and not just a wild assertion?
I don’t know that Bush made the economy bad, but IMHO he is about to make the same mistake that Reagan did. Reagan tried to fix an ailing economy with tax cuts for the wealthy, while at the same time increasing military spending and running a huge deficit. It simply didn’t work, and I don’t understand how Bush thinks it’s going to work now. And of course, these wars cost money, too; and that’s certainly not helping the budget.
It depends on how you look at it, the economy certainly wasn’t in great shape when Reagan came in to office. It clearly improved while he was in office. Also, many people, rightly or wrongly, attribute much of the boom economy of the 90’s to Reagan’s fiscal policies. Also, remember we had a new Fed chairman Paul Volker who certainly had influence on the economy when Reagan was in office.
Just because the country ran budget deficits does not mean the economy did poorly.
Good point. Bush better watch out, or we’ll have another disaster on par with the dreadful economic climate of the late 80’s and all of the 90’s. Unemployment then soared up to a woeful 4%.
Seriously, blowero, were you awake during the last 20 years? Are you honestly suggesting that 1985-2000 was not a period of almost unparalleled prosperity? Or is this something like, “I wasn’t making much money, so the economy musta sucked”?
Jeff
10 years after he was elected? I would say “wrongly”. Maybe we could attribute it to George Washington.
Actually, unemployment went UP during Reagan’s presidency:
http://www.1980sflashback.com
In 1980, it was at 5.8%; then in Reagan’s first term, 1981, it went up to 7.1%, and CONTINUED to rise:
1982 7.6%
83 9.7%!!!
84 9.6%
85 7.5%
86 7.2%
87 7.0%
88 6.2%
It went up all the way through his first term, and didn’t get back down to a reasonable level until the END of his second term. If his policies worked, they sure didn’t work very fast.
Bush started at 5.5% and brought unemployment UP again to 6.8% in '92. Whereas Clinton started with 7.5% and lowered it EVERY YEAR until it was at 4.5% in 1999. You seriously have to do some fuzzy math to try to make a case that Reagan was responsible for low unemployment in the 90s.
Yes, I was awake - were you? I would say 1993-2000 was a period of unparalleled prosperity. Hmmm…who was president then? Seriously, how much twisted logic are Reagan fans going to go through here?
**
Unemployment went up as the inflation rate went down. This is actually a well understood short-run relationship in economics called the Phillips Curve. The tight monetary policy that Volker adopted during this time is credited with putting a stop to the runaway inflation in the 70’s due to the oil shocks and incompetent monetary policy which had the effect of accomodating these shocks (feeding the rising price levels). By triggering a recession in the early 80’s and putting a stop to this inflation we were able to put the economy back on stable enough ground to set the stage for the prosperity of the late 80’s and the 90’s.
It isn’t very helpful to point out rising unemployment unless you have a clearer understanding of what it signifies.
I agree with John Mace. The orginal question is a loaded one. There is even a name for it but I forget.
Presidents have many jobs and 1 of them is national cheerleader. At the end of President Cinton’s 2nd term the stock market was highly over valued.I agree with John Mace. The orginal question is a loaded one. There is even a name for it but I forget.
At the end of President Clinton’s 2nd term the stock market was highly over valued. This wasn’t a secret. Everyone in Wall Street knew it. I believe Paul Voker even cashed in shortly before the last major slide. Enron (and others) didn’t help with their deceptive accounting practices. 9/11 affected every business associated with travel.
Although one of the jobs of President is to be the national cheerleader, it would have been tough for President Bush to take office and announce all is well. There was no question that the stock market would decline to normal levels. It’s not rocket science to look at a company that is worth $1 billion dollars and compare it to the total value of its stock. If it is $2 billion dollars then the company is worth twice as much on paper. If the entire market is over-valued then it WILL decline.
What can a President do to affect the economy? Almost nothing. Congress proposes bills, Presidents sign them into law. President Clinton once refused to sign a congressional budget, which forced the shut down of the Government (literally). He forced Congress to increase spending in areas that he requested. Not really sure how Congress got blamed for the shut down but they did. THAT’S good PR on the part of a President and that is the extent of the direct power to make changes.
When you hear a President speak about his legislation it is always prefaced with the word “proposed” unless and until it makes its way through Congress intact. A president can also influence Congress by appealing to voters who in turn contact their representatives. A current Example would be Bush’s stop in Lima Ohio. That was directed at Senator Voinovich ® who is against the 550 billion tax reduction in favor of the 300 billion tax reduction.
This answers the original question. The only way a President can affect the economy is to influence Congress to reduce taxes in the short run and reduce spending in the long run. It is the reduction of taxes that is the primary method of economic stimulation.
Isnt that part of his job??
Its not a common understanding with me. Bush had very little to do with the sudden drop in the economy. The economic pundits have been saying the dot coms were overpriced during clintons secon term. The stockmarket started to believe them during the Bush/Gore recount. Bush wasnt in office yet. Then the economy followed the stockmarket which was understandable because it was a re-adjustment. The economy was saved by Greenspan and was just starting to swing up when 9-11 happened. Airlines lost tons of money per day. The WTC being destroyed affected the economy directly and indirectly and no one was in any mood to buy anything. In spite of all of that, the economy was never in the dumps long. It has been steadily been increasing, just not in the flashy big bofo way that the media is used to now.
Buy more stuff.
Also, produce more stuff!
Am I the only one who read the OP as more of a challenge to the “Bush caused or didn’t properly prevent this quasi-recession” crowd? Put up or shut up?
Anyway, so far, the best I’ve been able to gather is that he’s negatively affected consumer confidence. I actually buy this argument to a certain extent, I’m personally convinced that “confidence” has a profound effect on economies, and it’s possible that the president hasn’t properly cheerleaded us into producing and consuming more. Empirically demonstrating this, of course, is impossible… “so, in measurable units, how much less confident are you in our economy today as opposed to four years ago, and how much of this attributable to our current adminstration?”
I’m usually of the “presidents have little measurable effect on economies” mindset, and I’d love to see any theories or evidence to the contray concerning the Bush administration. I’m not holding my breath…
A bit of a hijack: Azael, the Phillips Curve is frequently taught in undergrad econ courses, and probably a majority of academic economists consider it applicable in the short run, but it is by no means a universally accepted theory to generally understand the relationship between employment and inflation. Personally, I consider it a weak relationship, but here’s a fairly accurate description of its history. Most of my professors in college took the Milton Friedman view of the curve…
If you buy more stuff, more stuff have to be produced.
To make stuff easier to produce, you lower taxes on business. But who owns businesses? yep, thats right the rich. but What do the poor do when they have more money from less taxes? they buy more stuff. Some rich people take their lowered business tax and make more stuff. Some take the money but where do they put it? in Stocks, which givess the company that sells the stocks more money to work with to make more stuff.
This is not an instant fix. This wont happen instantaneously. This might not even take effect until Bush is out of office. The next president might even take credit for what Bush does now. It doesnt matter. The economy would be alright and thats all that counts.
Buy stuff.
Are you trying to suggest that demand creates its own supply? I wonder what Jean-Baptiste Say would have to say about that…
Clearly, a lot.
You, blowero, are going about this entirely the wrong way. See, first you come up with the hypothesis “Reagan did great things for the economy” and then you adjust the window you look at to make it so!
You just gotta believe!
By the way, another doozy which I just saw repeated in a letter-to-the-editor of the Wall Street Journal is the claim that the government revenues went up by a factor of 2 from 1980 to 1990 and this demonstrates that the tax cuts created more revenue than they lost.
Well, the facts turn out to be that the factor of 2 drops to about 1.9 if you limit yourself to looking at revenue from individual income taxes (recalling that Social security taxes were raised while Reagan was in office). Correcting for inflation drops this factor down to 1.24, and that is only because the 1980 to 1990 window is a particularly generous one…If you look at 1981 to 1991, the factor is 1.11, i.e., revenues from individual income taxes went up by only 11% in real terms in that decade. By contrast, they went up by about 70% in the following decade (either taking 1990 to 2000 or 1991 to 2001 as the window). The 60s and 70s also saw higher real revenue growth from individual income taxes than the 1980s.
In fact, in real terms, the Reagan tax cuts caused an actual drop in individual income tax revenues so that the revenue in 1981 was not surpassed again until 1987. Such a sustained dip in these revenues has not occurred since; however, even Bush’s own forecasts in his budget don’t project us equaling the year 2000 high-water mark for such revenues again until 2008 and then just barely. This is clear evidence that those who don’t learn from the mistakes of the past are condemned to repeat them!
[FYI, these numbers can be gleaned from downloading the Historical Tables section of the FY2004 federal budget and looking at Table 2.1 combined with the “composite deflator” column from Table 1.3.]
By the way, in this article, Krugman makes this brief counterargument to the claim that these supply-side tax cuts to the wealthy raise all boats:
I agree with blowero that while Bush probably can’t be blamed much for creating the current recession, he can certainly be blamed for using it as an excuse to employ failed economic policies which amount to giving the wealthy a huge tax breaks at the expense of the poor and working class (now and in the future).
Is there a particular part of the FY 2004 this comes from? I’m downloading the 23 MB acrobat file of the entire thing (located here from the Office of Management and Budget) but it might be helpful for others if there is only a particular section of the budget document this comes from.
In general, I agree entirely that it’s a political ploy. On the other hand, “at the expense of the poor and working class”, to me, implies making these groups worse off than they are now, through economic means or otherwise. Is there a particular facet of Bush’s economic policy that you’re referring to? Cuts in social programs such as Medicaid? Reluctance to properly adjust the minimum wage so as to match cost of living increases of the relevant population? Reduced funding for federal low-income housing programs such as the Low Income Housing Tax Credit program or Section 8 assistance?
What makes you think that? We already have the supply. We are not in a recession. We have all sorts of stuffs in inventories waiting to be sold. there are no product shortages. Inflation is not high, prices have not gone up. So we have the supply, prices are steady, all we need now is demand.
Uh, ElJeffe brought up unemployment rates; I just called him on his bullshit. You aren’t seriously suggesting that the 4.5% unemployment rate in 1999 was due to Reagan “setting the stage” 18 years earlier?