Bush's Economic Mistakes

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Bush's Economic Mistakes - By JUSTIN FOX - Excerpt from TIME.COM
Introduction -
George Bush is leaving the White House with a dismal economic record. By almost every measure — GDP growth, jobs, median incomes, financial-market performance — he stacks up as probably the least-successful President on the economic front since Herbert Hoover.
It's not all Bush's fault. He inherited an inevitable recession in 2001, and even last year's financial collapse was to some extent the result of unsustainable trends in place long before he moved to Washington. Also, we generally give Presidents both more credit and more blame for economic outcomes than they probably deserve. As Bush mock-moaned in his final White House press conference, "Why did the financial collapse have to happen on my watch?"
His next words, though, were, "It's just pathetic, isn't it, self-pity?" So let's spare him the pity. As the decider in the White House for the past eight years, George Bush made some economic calls that don't look smart today. Here are eight of them.
1. The Return to Deficits
When President Bush took office in 2001, Republicans and Democrats in Washington had built a strong consensus on the need for fiscal responsibility. Bush blew that apart within a few months. With the country in a recession, a temporary return to deficits was inevitable. But Bush's tax cuts and spending increases — and clear disdain for the pay-as-you-go approach that had brought deficits down in the 1990s — brought a return to permanent deficits. These actions almost certainly didn't cause the current crisis, but they have left the Federal Government in a much weaker position to combat it.

2. Iraq
Doing a cost-benefit analysis on a war is awfully hard. There are just too many what-ifs. But the cost of invading and occupying Iraq has been staggeringly high — whether you believe the $3 trillion figure of economists Linda Bilmes and Joseph Stiglitz or side with the Congressional Budget Office estimate of a mere trillion or two. It's the biggest part of the explanation for the yawning Bush-era budget deficits. So even if you think the war did bring benefits to the U.S., they would have to be pretty gigantic to justify the cost.
3. Tax Cuts for the Rich
When Ronald Reagan slashed taxes on capital gains and high earners in the early 1980s, inflation was pushing the middle class into top tax brackets, financial markets had been stuck in a funk for 15 years and income inequality had been declining for almost five decades. Like him or not, the man's actions fit the times — and the U.S. economy boomed for most of his two terms in office. Bush came to Washington facing almost diametrically opposing economic conditions, yet he offered up the same solutions as Reagan. Guess what: they weren't what the economy needed.

4. Financial Regulation
The only major piece of regulatory legislation enacted during the Bush years was the Sarbanes-Oxley Act, which dramatically increased regulation of corporate financial disclosures. The really big regulatory changes being pointed to now as possible culprits for the crisis date back to Bush's predecessors: Bill Clinton, Ronald Reagan, even Jimmy Carter and Gerald Ford. So the popular Democratic refrain that "Bush-era deregulation" is to blame for our troubles is a little hard to square with the evidence. What is true is that most Bush-era financial regulators were less than enthusiastic about the very act of regulating, and that Bush's "ownership society" push glossed over a lot of potential dangers. Bush didn't cause the financial regulatory breakdown, but he didn't jump in to fix it either.

5. Telling Us to Go Shopping
After the 9/11 terrorist attacks, President Bush didn't call for sacrifice. He called for shopping. "Get down to Disney World in Florida," he said. "Take your families and enjoy life, the way we want it to be enjoyed." Taken on its own, this wasn't such a horrible sentiment. But Boston University historian Andrew Bacevich has made a convincing case that it was part of a broader pattern of encouraging financial irresponsibility. "Bush seems to have calculated — cynically but correctly — that prolonging the credit-fueled consumer binge could help keep complaints about his performance as Commander in Chief from becoming more than a nuisance," Bacevich wrote in the Washington Post in October. Now we're paying the bill.

6. Energy Policy
Not much to say here, except that there wasn't an energy policy. Again, this wasn't new to the Bush era. But with a years-long oil-price slide finally coming to an end not long before he took office, the President's (and Vice President's) unwillingness to take serious steps to reduce the country's dependence on fossil fuels left the country vulnerable and way behind the rest of the developed world in preparing for a post-oil future.

7. A State of Denial
Every Administration spins and sugarcoats the economic truth. But the Bush White House took this disingenuousness to new levels. The surest way to get yourself fired as a Bush economic adviser was to say something that was true. Paul O'Neill was ousted from Treasury for warning about deficits. Larry Lindsey was kicked out of the top White House economic job for predicting in 2002 that the Iraq war would cost $100 billion to $200 billion — far below the actual cost but much more than what the White House was officially projecting. This disdain for reality, and for expertise, pervaded the Bush economic approach, and made it impossible for the Administration to react intelligently to real-world economic problems like the housing bubble.

8. The Muddled Bailout
It could have been much, much worse. For the first time, Bush gave someone with more expertise than political bona fides — Treasury Secretary Henry Paulson — control over economic policy and didn't let the hacks in the White House undercut him. Paulson's financial rescue has been awfully messy and expensive, but one shudders to think what might have happened if his much weaker predecessor, John Snow, had still been in charge at Treasury when trouble struck. The main problem has been the ambivalence with which both Paulson and the White House have approached the financial rescue. They backed into it, never articulating clear principles for how it should work. That's yet another thing the new Administration is going have to rectify.

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Clinton Says Don't Blame Him for the Economic Crisis – TIME Excerpt

Mon Feb 16, 4:50 pm ET

Given the sweep and severity of today's global economic crisis, it would seem there's plenty of blame to go around. But Bill Clinton doesn't think any of it should fall on his shoulders.

On Monday morning's Today Show, Ann Curry's interview with the former president - recorded over the weekend outside a Clinton Global Initiative event in Texas - addressed Clinton's inclusion on TIME's list of the "25 People to Blame" for the global economic collapse. "Oh no," he responded, "My question to them is: Do any of them seriously believe if I had been president, and my economic team had been in place the last eight years, that this would be happening today? I think they know the answer to that: No." (See TIME's list of the 25 people to blame for the collapse)

The magazine's story, which apportioned blame widely between such figures as Countrywide co-founder Angelo Mozilo, former Federal Reserve Chairman Alan Greenspan, Lehman Brothers CEO Dick Fuld and President George W. Bush, zeroed in on two specific economic policy decisions made during the Clinton administration. Clinton ushered out the Glass-Steagall Act, which for decades had separated commercial and investment banking, and signed the Commodity Futures Modernization Act - which exempted all derivatives, including the now-notorious credit-default swaps, from federal regulation. His administration also loosened housing rules, which added pressure on banks to lend in low-income neighborhoods.

"None of it was an endorsement of permissive lending and risk-taking," the magazine concluded. "But if you believe deregulation is to blame for our troubles, then Clinton earned a share too."

In a separate interview this past weekend with CNN, Clinton did allow that his administration could have done more to "set in motion some more formal regulation of the derivatives market," but he also vehemently denied that the repeal of Glass-Steagall or his administration's housing policies helped cause the financial crisis. Both interviews took place only hours after the Senate passed the $787 billion economic stimulus bill, which President Barack Obama is expected to pass into law Tuesday.

Earlier in the interview, Clinton told Curry that he agreed with the assessment of Dennis Blair, President Obama's director of national intelligence, that the world financial crisis has surpassed terrorism as the country's most significant "near-term" security concern. He also gave the new president high marks for the way he's used his first month on the job: "I think he's off to a good start ... Given the fact that they had to do it in a hurry, and he had to deal with Congress and the inevitable compromises, I think he got quite a good bill out of this. This package that he's going to sign is our bridge over troubled waters."

As for who troubled those waters, it's still up for debate.

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Time Magazine's 25 people to blame for the financial crisis

Corky Siemaszko
DAILY NEWS STAFF WRITER

Friday, February 13th 2009, 5:48 AM

Meet the Dirty Two-Dozen who have driven the nation's economy into the ditch - then look in the mirror and see who else is to blame.

Topping Time magazine's list of the 25 people to blame for the economic mess is Angelo Mozilo, the high-living former Countrywide CEO who helped cause the nation's massive mortgage meltdown by handing out loans to poor saps who could never afford to pay them back.

Next on the list is another genius, former GOP Sen. Phil Gramm, who pushed through our clueless Congress legislation in 1999 that dismantled Depression-era protections that were put in place to prevent ... another Depression.

When millions of Americans started losing their jobs and life savings last years, Gramm called us a "nation of whiners."

Third was former Fed Chairman Alan Greenspan, who had the nerve to go before Congress last year and acknowledge he was "shocked" that his hands-off Wall Street approach helped tank the economy.

That said, we regular folks get a spanking from Time magazine, too.

For borrowing to the hilt and blowing all that dough instead of saving it for the future, the American Consumer ranked No. 5 on Time's list - right behind Christopher Cox, the former SEC chairman who was blind to the $50 billion Ponzi scheme that Bernard Madoff (No. 19) engineered.

The list includes some characters who arguably could rank first, second, or third, like No. 6, former Treasury Secretary Hank Paulson, or No. 7, former AIG honcho Joe Cassano.

Then there's No. 11, Dick Fuld, a poster boy for greed who made half-a-billion dollars as he drove Lehman Brothers into the dust.

No suprise, former President George Bush made the list at No. 14 because, as Time put it, "the meltdown happened on Bush's watch."

What may surprise many is that Bill Clinton was ranked 13th on Time's list, although he presided over an economic boom during the 1990s.