08.15.12
Right back to 1929
Bruce Bartlett does an excellent job re-shredding an already debunked, (Culture Of Fraud), paper by the Romney/Ryan (R&R) “economists”. Here’s the article and key excerpts, Blaming Obama for George W. Bush’s Policies.
So whatever caused the 2007-9 recession had to have resulted from policies that the Bush administration was responsible for – either by initiating them or failing to act against them.
Space prohibits a full discussion of these issues, but certainly one factor had to be the squandering of budget surpluses that resulted from the policies of the Bill Clinton administration and their replacement by huge deficits under President Bush.
Mr. Bush inherited a budget surplus of $236 billion from Mr. Clinton in 2000, which fell to $128 billion in 2001. By 2002, the federal government ran a budget deficit of $158 billion, which rose to $377 billion in 2003, and $413 billion in 2004. The deficit fell to $318 billion in 2005, $248 billion in 2006, and $161 billion in 2007, then shot up to $459 billion in 2008.
It should be noted as well that the fiscal 2009 budget was submitted to Congress by Mr. Bush in January 2008 and took effect on Oct. 1 of that year – almost four months before President Obama took office.
Thus the government was running historically large budget deficits long after the end of the 2001 recession. As I have previously documented, these deficits resulted to a large extent from legislated tax cuts during the Bush years.
It is also important to note, though one will not find it in the economists’ report, that much of the legislated increase in the deficit under President Obama resulted from tax cuts. According to the Congressional Budget Office, tax cuts in the American Recovery and Reinvestment Act of 2009 reduced revenues by $253 billion between 2009 and 2011 – about a third of the budgetary cost of the stimulus package.
Further tax cuts agreed to by President Obama in 2010 added another $354 billion to the deficit in 2011 and a similar amount this year. Thus about $1 trillion of the deficit since 2009 came from tax cuts.
Most economists believe that running large deficits during cyclical upturns is a bad idea because they overstimulate the economy when it’s not needed and thus sow the seeds of economic imbalances that lead to subsequent recessions. One can argue that George W. Bush’s budgetary profligacy was a major cause of the 2007-9 recession – the longest and deepest of the postwar era.
Even if one isn’t willing to go that far, it is apparent that had Mr. Bush reduced budget deficits rather than enlarging them through tax cuts and spending increases for wars, pork-barrel projects and a new entitlement program (Medicare Part D), the federal government would have had more fiscal ammunition available to fight the recession that President Obama inherited from President Bush.
Because of the large deficits Mr. Bush bequeathed Mr. Obama – on Jan. 8, 2009, the C.B.O. projected a deficit for the year of $1.3 trillion that didn’t include any Obama policies – Congress was deeply reluctant to enact a stimulus larger than $787 billion, even though President Obama’s economic advisers thought that one at least twice as large was necessary to turn the economy around. The opposition of every Republican to the 2009 stimulus was a major factor in its inadequate size.
By way of analogy, suppose you go to your doctor with an illness. He correctly diagnoses it and prescribes the right medicine, but for some reason you are given a dosage only half as large as required. The medicine was enough to improve your condition, but not enough to cure you. You remain sick although you feel better and will remain so until you finally get a full dosage of the proper medicine or your body is able to cure itself, which might take years.
Note that in this analogy the medicine was properly prescribed; only the dosage was wrong. It would be incorrect to blame the medicine because you are still sick.
The Republican economists nevertheless blame the medicine itself for the failure of the economy to respond to President Obama’s prescription.
But it was Republican policies during the Bush administration that brought on the sickness and Republicans in Congress who have denied the economy an adequate dosage of the cure. Now they want to implicitly blame President Obama for causing the recession and the failure of stimulus to fix the problem, asserting that fiscal stimulus is per se ineffective.
There is a word for this: chutzpah.
That along with the post below should remind everyone of what we will go back to if President Obama is not reelected. Along those lines there’s a new book out from Michael Grunwald called The New New Deal. While I think calling the stimulus a new New Deal is too much, this article from the author makes some very good points, Obama’s New Deal. Here’s an excerpt that sums up the article pretty good.
“The Stimulus Shows What Obama Is All About.”
Yes. This kind of statement is usually intended as an insult; critics on the right and the left describe the Recovery Act as the essence of Obama-ism. It is, but not in the way they mean.
To Republicans, the “failed” stimulus is a classic Obama exercise in big-government liberalism, fiscal irresponsibility, and incompetence. But those are all bum raps. The Recovery Act included $300 billion in tax cuts, just as Republicans had requested; ARPA-E was its only new government agency, and most of its spending went to priorities (from highways to electric vehicles to unemployment insurance) that had always been bipartisan until they were associated with Obama. The stimulus did increase the deficit — that’s the whole point of Keynesian stimulus — but its impact on the long-term debt was negligible compared with the Bush tax cuts, the wars in Iraq and Afghanistan, and collapsing revenues during the Great Recession. And the Recovery Act really was an exercise in good government. Not only was it scandal-free and earmark-free, on time and under budget, but it also engineered a quiet bureaucratic revolution, harnessing the power of competition to award tax dollars to the worthiest applicants instead of just spreading cash around the country. The stimulus created dozens of competitive, results-oriented races to the top for everything from lead-paint removal to the smart grid to innovative transportation projects.
Yet somehow, to many liberals, the stimulus exposed the president as a spineless sellout, more interested in cutting deals than chasing dreams, happy to throw his base under the bus, and desperate to compromise with uncompromising Republicans. But progressive purity wouldn’t have gotten 60 votes in the Senate. And Obama isn’t a progressive purist. In reality, the Recovery Act provided early evidence that Obama is pretty much what he said he was: a left-of-center technocrat who is above all a pragmatist, comfortable with compromise, solicitous of experts, disinclined to sacrifice the good in pursuit of the ideal but determined to achieve big things. It reflected his belief in government as a driver of change, but also his desire for better rather than bigger government. And it was the first evidence that despite all his flowery talk during the campaign, he understood that bills that don’t pass Congress don’t produce change.
Ultimately, the stimulus was the purest distillation of what Obama meant by Change We Can Believe In. It was about saving the economy from a calamity, but also changing the economy to prepare America to compete in the 21st century. On the trail, Obama often talked about cleaner energy, better schools, health reform, and fairer taxation not only as moral imperatives, but as economic prerequisites for American renewal and leadership. He warned that the United States couldn’t afford to let the green industries of the future drift abroad; or fail to prepare children for the information age; or lose control of skyrocketing health-care costs that were bankrupting families, companies, and the country. And the Recovery Act took steps — in some cases, giant steps — in all those directions. Nearly four years later, the stimulus has become a punch line, a talking point in a political battle over big government, but it’s moving America toward that hopey-changey policy vision he laid out during his last campaign.
In the end, the stimulus didn’t live up to the hype, but it made things better. That’s the whole point of change.
While the article is pretty easy on Obama, it’s hard to argue that the stimulus didn’t make things better then they were when Obama took office. But it also must be pointed out that more was needed, and still needs to be done. Obama may have gotten all the could get, at the time, but there still needs to be pressure put on him from the left to do more. (See Five Reasons Why Crisis Persists).
One of the main problems with Ryan joining the ticket is that we are back to playing defense of protecting the status quo of the social safety net and not talking about putting people back to work and expanding the social safety net by taxing the wealthy. The R&R ticket and economic plan is radical at best, but more to the point it’s dishonest and destructive to our country’s future.
While Obama should be credited with stopping the crisis, he certainly could have used the bully pulpit to show the American people who has been keeping him from doing more. I still believe that one of the main problems that Obama had was timing. In comparison to FDR and the Great Depression, Obama got in office in 1929, shortly after the crash. He stopped it from turning into another Great Depression. But the economic crisis hadn’t persisted long enough to bring about sweeping change. Where when FDR got in office, there had already been three years of inaction, and the country was in dire shape.
Obama was not swept into office with near the wave and mandate of FDR. There’s much more to be done and in the upcoming election he’s the only choice we have. Because the other side will just take us right back to where we were in November of 2008. It would be like the ensuing 4 years never happened. We would be right back to 1929.