How's the 'Bush Economy' doing now?

Great Debates
1

A few years ago, there were plenty of threads criticising the economic performance of the Bush administration. Lots of threads decrying the loss of jobs, the deficits, the tax cuts, benefiting the rich against the poor, etc.

My position at the time was that it was too early to tell. Two years into an administration isn’t enough time to see its effect on the economy. The tax cuts hadn’t been fully implemented. I said at the time that if Bush was elected to a second term, a true measure of his economic policy would be the performance of the economy in his ‘out years’.

Well, here we are in the 5th year of the Bush administration. I’ve been looking at the latest economic indicators, and they look pretty darned good. Specifically:

[ul]
[li]GDP growth close to 4% per annum[/li][li]Unemployment at 5%[/li][li]3.7 million jobs created in the last two years[/li][li]A rapidly shrinking deficit[/li][li]Tax receipts up 15% last year, mostly from the rich. This is the biggest annual rise in tax receipts since the early 1980s.[/li][li]Business investment up 11% this year[/li][li]Low inflation, low interest rates[/li][/ul]

This despite rapidly rising energy costs which generally act as a brake on the economy.

Especially encouraging is the rapid decline in the deficit, far ahead of original White House estimates. It has been revised downwards by 100 billion dollars just this year alone, and is now forecast to be about $330 billion, which in terms of GDP is almost down to half of its peak a couple of years ago, and far lower than the large deficits in the late 1980’s/early 1990’s.

This last seems to be somewhat of a vindication of the supply-side nature of the tax cuts. Revenues are soaring, and tax rates are low.

So, what do you think? Does the Bush administration deserve credit for maintaining a good economy in difficult times? Have the tax cuts turned out to be not quite the disaster that some predicted?

2

Hehe. One of the items you say people complained about was the rich being benefitted more then the poor, and one of your bullet points is that tax revenue is up, mostly as a result of the rich paying more. Which means they’re more prosperous then ever. :slight_smile: Supply side tax cuts are certainly working for them!

3

From what I’ve been reading all the economic indicators are up (well, all the ones that are generally accepted as indicating the economy is on an upswing). I was thinking of starting a thread about this last week in fact when I was reading over the unemployment figures. It is interesting that the economy is no longer the topic of conversation…but I suppose you could chalk that up more to a new focus on Iraq and the war on the board (as well as whats been happening on the Supreme Court lately).

I have to say that, while I’m not really surprised the economy is doing well (I figured we were in a recovery last year), I am surprised by the dropping deficit. I’m still pretty unhappy at the SIZE of the deficit that Bush ran up, though I conceed that not all of that was his fault…however, I also point out that much of it was. Still, if the economy continues to trend upwards I wouldn’t be surprised if we went from a ‘recovering’ or ‘positive’ economy to a boom economy in the next 2 years. The breaks though on the potential for the economy (well, except perhaps the high cost of energy…I don’t suppose I can lay that on him) still fall squarely on Bush…the chief being the Iraqi war.

-XT

4

John Mace, do you now think the president has a significant effect on the economy?
http://boards.straightdope.com/sdmb/showpost.php?p=5253783&postcount=4

What’s changed since then?

5

http://www.marketwatch.com/news/story.asp?guid={C02E5BF4-AAB1-4E11-AAEE-D143956D5F58}&siteid=google

6

Are you anticipating John joining the discussion? Afaik he hasn’t dipped a toe in this thread yet.

I’ll answer though from my perspective. Over all the president has only a marginal effect on the economy. However, being president they get the glory…and the shit…when its either good or bad. As with Clinton, if the economy booms under Bush he’ll get the credit, both the deserved and the undeserved. Or, as with his father he’ll get the blame if the economy tanks…both the deserved and the undeserved.

I think though that its not a stretch to say that THIS time things are a bit different. After all, Bush took over during the beginning of a recession…and then we got slammed with 9/11 which seriously tanked the economy. While I’m not prepared to say Bush is solely responsible, I think you’d have to give him SOME credit for how things have turned around in such a relatively short time…and during a war to boot (usually something that causes an economic downturn).

-XT

7

DAMMIT!!! Why do I always confuse John and Sam? Ignore me, I’m a dumbass.

8

No.

Nothing.

We’re in a good business cycle right now. Good business cycles usually follow bad ones.

But politically, presidents do get blame or credit. All those screeming about how bad the “Bush economy” was should now come back and acknowlege that Bush’s economy is pretty darn good. Otherwise, we should have a pretty good idea what they were basing their negative comments on before.

Note to Sam: Your fourth bullet (deficit) is a bit of a stretch. You don’t get credit for bringing down a deficit that you created in the first place.

9

Those big job cuts are worrisome. Reminds me of 2002.
Also, the floating yuan isn’t going to do consumers any favors over the next few years.

10

Why not? If you buy into ‘supply side’ economics, you sure can. The supply siders would claim that if you cut taxes, it will result in a short-term loss in revenue, but as the effect of the tax cuts stimulate growth, the out year revenue increases will result in the money coming back. Now, I’m not saying they are correct, but that IS what their model would suggest.

Note also that this is exactly the same pattern that happened during the Reagan era. His tax cuts caused a sharp reduction in revenue and larger deficits. Then in the out years, tax receipts skyrocketed and the deficit began to fall.

BTW, the trade deficit has also been reduced by 10% in the last quarter.

I would be hesitant to credit Bush for all this - as you say, a good chunk of this is due to the natural business cycle. Still, it’s important to note that most of Bush’s critics were claiming that by now we’d be seeing higher interest rates due to pressure from the deficit, a deficit growing much faster, higher unemployment, and other calamities. None of this has happened.

I could write pages about where I think the Republicans in general and Bush in particular have screwed up - their trade policy has been all over the map, and spending is insanely out of control. The current highway bill, supported by Republicans, is insanely out of control. It’s also billions higher than the limit Bush set to prevent a veto. Let’s see if he has the balls to veto this monstrosity - my guess is that he won’t.

11

Forgot to add: This reduction in the deficit is not nearly enough, and that’s completely Bush’s fault - government spending is the one thing that you can blame government entirely for, and the Republicans have been a disaster in this regard. The problem is that even if the ‘supply side’ cuts are working, it’s not nearly enough because there are the looming structural problems with Social Security and Medicare that are going to bust the budget big time. Right now, the government should be running surpluses AND low taxes, by cutting spending. This would give them room to move to correct the upcoming imbalances.

12

things are looking better for Bush at the moment. But to play the devils advocate…
3.7 million jobs created in the last two years

not as good as it seems. To keep pace with population gain, we need to create about 200,000 jobs per month (Clinton averaged more than that over 8 years).

A rapidly shrinking deficit

Its well below what they forecast for the year. As I recall, the Bushies forecast a real high number so that they could easily attain the 50% reduction goal as promised over the next four years.

Low inflation, low interest rates

When was the last time we had high inflation or high interest rates? 1991?

GDP growth close to 4% per annum

I take it that “close” means less than 4%. Isn’t 4% about average for all of the Clinton years?

Tax receipts up 15% last year, mostly from the rich.

Thats because the middle and lower class salary gains are way less percentage wise than the big bonuses and comps given to the $100,000 and above club.

This is the biggest annual rise in tax receipts since the early 1980s.

Good, because Bush’s war is costing over 100 Billion per year. We have to pay for this financial black hole somehow. What a waste.

13

In order to lend credit to this thread, I suggest you try to take into account the effects of war on the economy. I’m no economist, but I’ll echo what I’ve heard:

We’ve been on war footing, economically, since 2002 or so. Jobs may very well be up, as may be profits and other business indicators, but a huge reason for that will be the government pumping billions into the defense sector. Anytime you spend billions more than normal on defense, you end up with a short-term thriving economy-and the term lasts as long as the funding does.

But when you start to scale down those huge contracts, the economy not only follows-but it can potentially dive. Government deficit (we’re running on deficit, I’m not going to argue how much of one because that’s all partisan) during wartime has a positive effect on unemployment and positively effects GDP. However, once the war ends both numbers tend to decrease substantially.

Furthermore, interest rates and inflation, IIRC, are directly tied to the insane housing market right now which is completely out of Bush’s control and just part of the ups and downs of that sector of that market. I know for instance that Phoenix and Dallas/Ft. Worth(less) are experiencing rapid economic growth as a region due to the housing boom.

That’s what I recall from what I’ve read, but as I’m said-I’m not an economist. I understand politics far better than economics and I’m quite sure there are many holes in that. As for my final words?

Under Reagan. So we should name something else after the SOB :wally

14

Am I wrong to feel that it’s misleading to talk about how Bush has reduced the deficit?

In fact, the deficit is increasing. It’s only the amount of increase compared to a previous year’s increase that has gone down, isn’t it?

15

That I was ever able to tell, Clinton didn’t do much in his tenure in terms of the economy except leave it as was from Bush I. Of course, that may not have been a bad decision–at least until the technology bubble imploded.

16

This is a lie.

Until 9/30/05, i won’t know what the exact numbers are, but by the current numbers i can see that the deficit will have stayed about the same.

As of 9/30/2003, the total public debt of the U.S. was $6,783,231,062,743.62. As of 9/30/2004, it was $7,379,052,696,330.32. Which makes the deficit for that fiscal year just under $600 billion.

As of 7/28/2005, total debt was $7,879,032,522,692.31, making a 10 month deficit of $500 billion. Will it reach $600 billion by the end of the fiscal year? We’ll know in two months.

Source: Bureau of the Public Debt http://www.publicdebt.treas.gov/opd/opdpdodt.htm

17

Do you have a cite for any economists crediting the gains in the economy to defense spending? The type of spending the U.S. has been doing wouldn’t have much effect on the economy, as far as I can see.

You have a point that Bush’s big-spending ways will have resulted in somewhat of a Keynesian stimulus, but the effect should not be over-stated. His increases in spending amount to about 7% of the federal budget, which in turn is only about 20% of the economy, if I recall correctly. And that doesn’t translate directly into GDP growth, because it’s merely a transfer of money from one sector of the economy to the other. Another way to look at it is that $330 billion will be borrowed and spent this year, out of about 10 trillion dollars in the economy. A lot of that money will be spent overseas, some will be spent in areas that don’t really do anything for GDP, and some will be a stimulus that artificially pumps up GDP.

The housing market booming increases inflation. As does the rise in energy prices. What it does do, however, is boost consumer spending, which boosts GDP. So you have a point there. However, it’s not clear whether or not the housing market is in an artificial bubble, or whether the rise in real-estate is just a reflection of current economic conditions. My opinion is that it’s a bubble in some locations, and not in others. There are a lot of places in America where real estate is still very reasonably priced.

Reagan inherited high inflation and high interest rates. The U.S. had been struggling under them for years. Carter started the process of correcting inflation by appointing Paul Volcker to the Fed, and he began to implement a tight money policy that kicked off a necessary recession at the start of Reagan’s term. In fact, the parallels between Reagan’s term and Bush’s are striking - both inherited a recession, cut taxes and raised spending, and created massive deficits in their first term. Then the economy turned around, and under Reagan the largest peacetime expansion of the economy in history began. So far under Bush, we’re seeing a similar thing, but it remains to be seen if it will last.

18

No, the deficit last year was $412 billion. This year’s is now forecast to be $333 billion, or about 2.7% of GDP. Last year, the deficit was at 3.6% of GDP. The deficit is now forecast to be half of its last-year high within 3 years.

19

There’s no question that the years of the Clinton presidency saw lots of job gains. However, Clinton presided over a tech bubble that burst just before Bush became president. Manufacturing jobs actually peaked and began declining before Bush was elected.

That charge was against the Bush administration’s earlier forecast of a $521 billion dollar deficit for last year, which critics claimed was boosted in order to allow him to claim that he’d cut it in half by 2009. The actual deficit last year was $412 billion, and the current deficit has dropped substantially from the actual number, not just the inflated one.

3.8% for the last three quarters. Again, that may be close to the average for the Clinton years, but Clinton’s economy was described as a ‘miracle’. So why shouldn’t Bush’s? Besides, Clinton had a tech bubble and a ‘peace dividend’, and Bush is having to work with soaring energy prices and a war.

Most of the gains are coming from increased business profits and stock market profit. This is what supply-siders predicted.

Nonetheless, personal income is also up.

20

You’re not playing fair. The deficit I’m talking about is the on-budget fiscal deficit which has been measured this way for decades. The total increase in debt is something different, and if you want to use that figure, then Clinton ran constant deficits as well.