Categorized | economy

Some smart analysis of Bush’s economic mistakes

Out with the old and in with the old, I say.

Two very smart post-mortems on the economic missteps of the Bush era: Justin Fox at and Douglas Holtz-Eakin at Both are worth a bit of dissection. After the break, of course.

Justin Fox lists eight significant missteps:

Taking budget surpluses and converting them into gihugomungous budget deficits
I would add that throughout this eat-your-pie-and-throw-it-too era of fiscal irresponsibility, that whatever economic benefits might be ascribed to the Bush era tax cuts and profligate spending, they are more than offset by leaving the government with massive amounts of debt in the face of an economic downturn. The government would have been in much better shape to handle the recession and financial meltdown if we had saved in good times rather than flushed it all down the toilet.
Enough with how invading Iraq was a big mistake. Yes, it was a boner like none other. But Bush’s biggest mistake was screwing up the occupation for so many years. Done right, the Iraq occupation could’ve been ended years ago with a stable government in place. Anyone who gives Bush any credit whatsoever for the surge should keep in mind that the surge was necessary because Bush, Cheney, and Rumsfeld criminally mismanaged the occupation from the beginning. Iraq was an economic, political, and practical mistake. But the biggest mistake was when our leadership effectively went AWOL — for years — after the invasion and allowed the country to descend into chaos.
Tax cuts for the rich
Yep, all the blame for this can be put squarely on W’s shoulders. Nothing trickled down to the middle and lower classes except debt.
Financial regulation
Here the picture is more complex. When you consider all the early dominoes that fell in the junk-mortgage meltdown, it’s unclear how Bush’s deregulation spree contributed. It’s not so much that Bush deregulated financial markets, it’s that there was no regulatory structure in place for the folks who drank most of the Kool-Aid. I’m not certain any President would have had the vision or leadership to create an entirely new regulatory infrastructure to deal with exotic financial instruments or non-banking mortgage lenders or investor-backed mortgage pools. Keep in mind also, that the institutions that got burned the worst in the subprime mortgage meltdown here in the States were foreign institutions (RBS, anyone? HSBC, anyone?) buying this junk on the London or some other forex. Which is why Volcker is now proposing such a new regulatory infrastructure.
Telling us to go shopping
I’m not sure how this was an economic misstep. I don’t see it in the numbers, Justin. I got a nice suit coat and a crappy Subaru out of it, myself.
Energy policy
The Bush administration could have put America in the lead in terms of innovation and new energy economic models. But the race ain’t over.
Living in constant denial
This isn’t a mistake, this is the source of most of their mistakes. I think the distinction is absolutely crucial and one that The Curious Capitalist misses. The Bush administration has much to teach all of us, from big businesses to solopreneurs, how not to make decisions and how not to lead. And the first rule of making good decisions is this: to make your vision into reality, you have to face reality first. Facts aren’t stubborn, people are.
The muddled bailout
Anyone who actually paid attention to how Bush handled the occupation in Iraq knew exactly how Bush would handle the economic crisis that closed out his days as President.

The Holtz-Eakin piece is much stronger. He goes right to the core issue when he faults Bush for having no economic “vision”:

The Bush administration never managed articulate a vision of how a government can harness the incredible power of free people engaged in efficient, fair markets to generate broad-based prosperity and a social justice. Instead, they left the public with the impression of an ideological adherence to markets.

Instead, the Bush team simply believed in “markets for markets sake.” This not only gave the impression that they didn’t care about all the rest of us, it actually made life worse for all the rest of us.

Holtz-Eakin lists four other economic blunders:

Spending, spending, spending
Holtz-Eakin gets this one absolutely right: it’s not just spending like crazy, it’s that there was no policy behind the spending, no sense of trade-offs, no real decisions. Just spend. I once heard Senator Bernie Sanders say that “the most important thing we do in a democracy is determine how we’re going to spend our taxpayer dollars. It’s the most significant decision we make and every citizen should be involved.” The perspective that “budget is policy” is what is most left out in criticisms of Bush’s profligacy.

Tax cuts, not tax policy
Again, a perspective frequently left out in both criticisms and defenses of Bush’s tax cuts for the rich. The tax-cutting wing of supply-side economics (but not supply-side economics itself), the wing that started and ended with the impressionistic, Daffy Duck, you-can’t-bounce-a-meatball economic thought of Arthur Laffer, has been thoroughly and resoundingly debunked. But still there are folks out there who think that tax cuts will do it all. Holtz-Eakin rightly focuses our attention on tax policy, the tax cuts (and tax raises) that are designed to produce economic growth and social justice. I literally cannot say it better than this:

the overriding approach was that any tax cut would do, and tax cuts were driven by political and economic imperatives – not a vision for a better tax code.

Health care reform
Curiously missing from the Curious Capitalist’s list. Health care is a massive drag on the economy (though, when weighed against its benefits, the drag is probably probably overstated). When you look at the problems U.S. companies have in global competition, the inflated price of health care relative to other countries is a serious albatross around our necks. No matter what your ideological stripes, the solution is going to involve both free markets and government control of health care. Why can’t anybody wrap their heads around this contradiction? Again, Holtz-Eakin:

Higher quality health care, at lower cost, for every American should be a central plank of Republicans. It is within the grasp of reformed markets to deliver.

But what does he mean by “reformed markets”? There’s the twenty-ton genie in a bottle.

Lost bi-partisanship
Again, this was not a mistake, but a source of many of the mistakes Bush made. A lot has to do with Bush and Cheney’s constitutional inability to listen to people they disagree with. Those of us who have studied how great leaders and commanders make decisions, one sterling quality stands out: they are able to listen to their critics and opponents. Really listen. And incorporate other ways of thinking into their own way of thinking. If we’re to learn any practical lessons from Bush’s failed presidency, it has to be from the processes through which the wrong decisions were made, not the wrong decisions themselves.

People with immovable opinions belong on TV, talk radio, or the blogosphere. That’s why God created Fox News, Clear Channel, The Drudge Report, and Huffington Post (when did God do this, you ask? before the “let there be light” part). People with immovable opinions don’t belong in positions of leadership. Ever.

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