Our Economic Problems Are Bush's Fault???

There is an old story about a new chief executive that enters an organization filled with enthusiasm.   On his first day he sits at his desk, opens a drawer and there are three envelopes.   There is a letter of instruction by the side.   He reads the letter and it tells him that the first time he gets into trouble he should open the first envelope.  The second time he gets in trouble he should open the second envelope.  Then finally, the third time he is in hot water he should open the third envelope.   This puzzles him but he leaves the envelopes alone and goes about his business to define strategies and secure resources to achieve the goals set out for him at his hire.   Then one day he got into a bit of trouble.   Things seemed to be crashing down around him.   He remembered those envelopes and he opened the first envelope.   It said, "Blame your predecessor."  He saw this as good advice and at the Friday Board Meeting he blamed his predecessor.  This seemed to quiet the Board and he felt he had weathered the storm.  Several months later another crisis arose in the organization.   Again he remembered those envelopes and he reached for the second envelope.  It instructed him to "Blame the Union."   He did this and again things quieted down for a period.  But eventually the bad news caught up with him again and he reached for that envelope and it said, "Prepare three envelopes."    

Now we in the Tea Party have our differences with the former president:

  • He would not secure the border
  • He did not veto any spending bills in the first term
  • He signed McCain - Feingold into law
  • He expanded the reach of Medicare with an expensive prescription drug program
  • No Child Left Behind was a further incursion by the Federal Government into local schools
  • He would not stand up and fight the Senate for his appointments

Despite all these faults and I believe if I gave more time to this process that I'd think of more; despite all these faults we cannot blame this economy on George W. Bush.  

When George Bush assumed control of the reins of government he had a Republican Senate and a Republican House.   Despite this the country was in a mild recession.   After taking office he proposed and pushed through the Congress a major tax cut.   This tax cut spurred the economy.  The only interruption of economic progress came when this country was attacked on 9/11/2001.  The attack only interrupted the momentum for a short period.  Eventually the country resumed its growth.   Here is what happened to the unemployment rate during President Bush's term of office and extended through 2009. 

4

4.7

5.8

6

5.5

5.1

4.6

4.6

5.8

9.3

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

 

 

Note that despite all of my own criticisms of George W Bush for overspending during his two terms and despite my criticism that he should have vetoed spending bills that he instead signed into law, the unemployment rate remained remarkably low during his term of office.    It didn't actually begin to show any period of weakness until 2008.

In 2007 a new Congress came to town led by Harry Reid and Nancy Pelosi.   The first budget they had to deal with was the 2008 Budget.   Everyone must remember that the federal year does not coincide with the calendar year.   The fiscal budget for 2007 began in October 2006 and ended in September 2007.   Thus the first budget that the Democrats would have full control over would be 2008. 

Historically economists have regarded 5% unemployment as full employment.   This 5% was always intended to recognize the normal churn in the labor market.   People leave their jobs to move elsewhere, high school and college graduates enter the workforce.   Some businesses sadly fail.   In 2006 and 2007 unemployment was an extraordinarily low 4.6%.   Then Democrats assumed control.  Might the Congress, specifically the House of Representatives who has the sole power in our government to initiate appropriations bills share some of this blame?

The 2009 Budget,  a budget that would typically not be in control of the president who was inaugurated in January 2009, was heavily impacted by an $800B "stimulus" bill signed into law in February, 2009 by the new president.   This act would reasonably be seen as the Obama Administration taking immediate responsibility for the 2009 Budget.   The Stimulus Package was promoted as saving jobs.   With the stimulus, it was argued, unemployment would not exceed 8 or 8.5%.  Note that in 2009 unemployment increased to 9.3%.   If everyone will recall, that rate climbed as high as 10% earlier in the year.

One other factor that needs to be discussed and that is the way markets work.  

1999

10473.46

2000

10731.15

2001

10208.86

2002

9214.85

2003

9006.64

2004

10315.51

2005

10546.66

2006

11408.75

2007

13178.26

2008

8,776.39

2009

10,428.05

2010

10097.9

Note that the Dow Jones Industrial Index fell in the fall of 2008, prior to the election.   Markets work in anticipation of events.  By the time history happens those of us not tuned to the expectations of the market find that we are too late to sell the ones no one wants or buy the ones that everyone wants.   This was true in 2008.   It became evident in the early fall that Barack Obama was going to win the election and the markets tumbled.  

In light of this data, how can anyone blame GW Bush for the current state of the economy?   The very most one might say is that he contributed.  He agreed to the bailout of the banking system in October 2008.  This cost the treasury $700 Billion and was in response to the subprime mortgage debacle but just who was responsible for that?  The Congress.   The Bush Administration had on multiple occasions attempted to put a halt to the subprime lending, warning the Congress of danger but Congress turned a deaf ear.   Barney Frank, ranking member of the Democrat minority for the first six years and Chairman of the House Financial Services Committee under Nancy Pelosi had a conflict of interest, a "spouse" who was an executive at Fannie Mae.   http://www.businessandmedia.org/articles/2008/20080924145932.aspx It was learned that Senator Christopher Dodd from Connecticut had received a sweetheart deal on his mortgage from the organization and the organization contributed heavily to the Democrat coffers.    It was also learned that Barack Hussein Obama was among the top beneficiaries of political contributions from Fannie Mae and Freddie Mac.   

Despite all this, when Barack Obama assesses blame to the current economy he continues to point to the Bush Administration.   This is childish, it is immature and it is definitely inaccurate.    If the current president wishes to assign blame for our current economic crisis he need look no further than his own party and recall when he does that he sat in the Senate and cast his own vote on some of these actions.  

President Obama, open the third envelope.  

 

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Comments

  • 12/6/2010 5:28 AM Traslochi wrote:
    This is a very helpful post, i hope this really helps me to complete my project.
    Reply to this
  • 12/6/2010 3:41 PM C jones wrote:
    Interesting read however the writer tries to place blame on one individual or the other because they got a sweetheart loan or for some other reason. The author mentions that the Bush Administration tried to stop sub prime loans on a number of occasions. Please provide dates of such efforts. There is difference between a warning and really doing something about it. As far as I know there was no concerted to do so. In fact Bush just turned his back on the situation in the same way he decided to go war but decided not to pay for it. It would be constructive to hear in detail what the solution is and with specifics project GDP growth, unemployment rates, speck government budget deficits or surpluses. Why is it so difficult to do so?
    Reply to this
    1. 12/10/2010 9:31 AM The Patriot wrote:
      Per your request:

      http://www.youtube.com/watch?v=cMnSp4qEXNM


      The Patriot
      Reply to this
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