It’s Bush’s Fault
Why do President Obama and the Democrats continue to blame “Bush’s failed economic policies” for the financial crisis even though it is not true? Because they can. You see, they know it is a complex subject and they know that the media have so far been unwilling to explain what really happened during Bush’s time in office. They also know that as long as most of the media remain in their camp, they will continue to protect the president. Yet, considering its reach and importance to the 2012 campaign, this may very well be Obama’s biggest lie.
A quick review
- Did the Bush tax cuts cause the Recession? No, and if Obama really thought so, why does he want to keep most of them?
- Did financial deregulation under Bush cause the Recession? No. Countless studies failed to find any evidence to support the charge that rule changes by the Bush SEC contributed to the financial crisis.
- Did the Bush deficits cause the Recession? Obama can’t possibly support that idea. After all, Obama has already added almost $6 trillion to the national debt in just 3½ years. Plus, according to the CBO, under his most recent budget, he would add $6.4 trillion more to the federal budget deficit over the next decade. Obama’s deficit and debt figures are far greater than Bush’s.
- Did Bush housing policies cause the Recession? No again. As you will learn later, the financial meltdown was a direct result of government housing policy—most of which was implemented by the out-of-control, quasi-governmental agencies, Fannie Mae and Freddie Mac.
A note about the recovery before we get into the weeds
- Obama and his economists predicted that the stimulus would create a recovery rate of 4%+ annual growth. It has averaged a pathetically weak half that, and 2013 promises to be no better.
- They also predicted unemployment would be under 6%. It has been 8% or higher for 42 straight months. It now stands at 8.3% and shows no signs of moving down.
First, let’s understand the back story
Bush inherited a recession from Clinton
Let’s begin at the beginning of Bush’s first term. As I said, it is relatively complex, so bear with me while I explain it to you. Within a couple of months of Bush taking office, the country went into a recession. The causes of the recession occurred during Clinton’s tenure, and since there is a cause-and-effect lag, Bush inherited it from Clinton whose booming “Dotcom” economy had, predictably, collapsed. The collapse was predictable because the success of the dotcoms was to a great extent an illusion. These companies had no “brick-and-mortar” foundations. They were built in and they ran in cyberspace and it was clear to experienced business professionals that the market could not continue to support most of them. Of course they were correct and most of them failed. So Bush began his first term with a recession not of his making.
The Terrorist Attacks of 9/11
The terrorist attacks of September 11, 2001, were carried out by psychopathic, religious fanatics—cold-blooded murderers. For thousands of our fellow Americans, the personal loss of family members and friends created a void that will never be filled. We cannot begin to measure that kind of loss. What we can measure is the economic cost, which translates into a continuing burden, directly or indirectly, on all of us.
- Our economy was still in recession when the 9/11 attacks hit us. The attacks made a bad situation worse.
- The immediate impact of the attacks caused a dramatic drop in consumer confidence, and a significant fall in the stock market.
- Insurance cost – an estimated $40 billion
- Cost of rebuilding the World Trade Center – about $700 million
- Quarterly airline industry profits fell $25 billion—about $100 billion annually—in the years following the attacks. Several airlines went bankrupt, despite generous loans from the U.S. Government.
- The financial loss of gross New York City product was estimated at $23.7 billion through the end of 2002. Tax losses added another $2 billion.
- About 100,000 jobs were lost in Manhattan alone. 18,000 businesses were either destroyed, disrupted or forced to relocate.
- The economic consequences of the attacks reached every aspect of the U.S. economy.
- Because of the attacks, estimates of U.S. Job losses were as high as 1.8 million, which also reduced our gross domestic product by as much as 5 percent, or $500 billion. While some other studies produced lower figures, the consensus was that the losses were huge. Also, security concerns raised the price of oil, which may have affected the flow of investment dollars into the U.S.
- The numbers reach staggering proportions when we add in indirect economic effects. As a consequence of the attacks, $1 trillion was spent on national security, and even though Obama and the Democrats continue to blame Bush for the “unpaid for wars in Afghanistan and Iraq,“ the above $1 trillion does not include the cost of those wars.
- The wars in Afghanistan and Iraq added at least another $1 trillion in costs. Even though Obama said the Afghanistan War was justified, he and other Democrats continue to attack Bush for the Iraq War. There are two main problems with this: 1) Virtually all congressional Democrats voted for the Iraq War. 2) Many Democrats continue to dishonestly accuse Bush of lying about Saddam Hussein having WMD even though they read the same intelligence reports that Bush read. (See “Is Obama More Dishonest Than Nixon, Reagan, and G.W. Bush?”)
This brief review of 9/11 economic costs does not consider countless other costs, such as government settlements to first responders, security and legal costs for terror trials, increased energy costs, time lost due to airport security, and much more. For example, it is hard to imagine the extent of “opportunity loss” — costs of things we were not able to spend money on because it was spent on 9/11-related items instead.
Finally, it is practically impossible to calculate a final, total cost of the economic impact of 9/11, but it is certainly in the trillions of dollars.
Considering the depth and pervasiveness the detrimental effects of the 9/11 attacks had on our economy, not only are Obama’s criticisms of the Bush economy grossly dishonest on their face, they are even more misleading when we consider that the post 9/11 economy rebounded amazingly quickly due to the Bush fiscal and monetary policies, which were put in place in response to the attacks. So instead of being responsible for destroying our economy, I predict that honest historians will praise President Bush for his insightful and decisive leadership during and after the attacks.
President Clinton weakened our intelligence and military capabilities
Why did the CIA fail to anticipate the 9/11 attacks?
Bill Clinton is scheduled to make a key address at the Democratic National Convention. If you watch his speech, please keep in mind what I am about to tell you.
When George W. Bush took office in January 2001, he not only inherited a recession from Bill Clinton, he also inherited a dangerously weakened CIA. It seems that Clinton’s CIA Director, James Woolsey, didn’t have much time to keep track of Osama bin Laden because he was too busy fighting Clinton and other Democrats over cuts in CIA funding and resources. For example, the agency was in great need of translators who spoke Arabic, Farsi, Pashto, and other languages spoken in the broiling “terrorist belt.”
But Clinton and congressional Democrats made it impossible for Director Woolsey to hire and train the people he needed. As a result, the CIA was functionally blind, deaf, and dumb in the world’s most terror-prone region. To quote The Washington Times, “So, a bureaucratic feud and President Clinton’s indifference kept America blind and deaf as bin Laden plotted.” You can read the full story here: The Washington Times–Bill Clinton’s Indifference. Overall, our intelligence capabilities were significantly weakened during Bill Clinton’s presidency.
But it got worse: Our military readiness was also dramatically reduced. Both President Clinton and Vice President Al Gore often bragged that they had reduced the size of the federal government. “The era of big government is over”, they said. But what they failed to mention was that 286,000 (90%) of the 305,000 federal employees removed from the payroll, were military jobs. The statistics for America’s defense sector during the Clinton years confirms the deep-seated animosity held by the Clinton administration toward the military. Clinton eliminated 6 entire divisions from the Army—from 18 to 12. He removed 166 ships from our Naval fleet—from 546 to 380. And he stripped 26 squadrons from our Air Force—from 76 to 50. So the idea that Clinton and Gore were big reformers because they had ended the era of big government, was nothing more than a con job. What they really did was to dramatically weaken our intelligence and military capabilities while the federal bureaucracy, essentially, remained intact.
What else could happen?
President Bush must have wondered what else could possibly go wrong when he considered the hand he had been dealt. He had inherited a recession and a weakened intelligence and military capability and we had been hit by the most devastating attack on our homeland, ever. It was rather amazing that he had been able to steer us through it all and had still managed to get our economy back on track.
And then Katrina—the most destructive natural disaster in our history!
On August 29, 2005, the worst natural disaster in U.S. History hit our Gulf Coast. It was Hurricane Katrina and it was a massive Category 5 monster before it even made landfall. The cost of damage was between $96-$125 billion, including $40-$66 billion in insured losses. Approximately 300,000 homes were either completely destroyed or made uninhabitable. About 118 million cubic yards of debris and devastation was left behind. The job of clean up was mind-boggling.
Reasonable estimates of the total economic loss from Katrina were as high as $250 billion. The storm disrupted gas production and had a general negative effect on national economic growth. In 2005, economic growth as measured by Gross Domestic Product (GDP) was at 3.8% in the third quarter, but it dropped to 1.3% in the fourth quarter due to the loss of gas production caused by Katrina.
So once again, President Bush was faced with another crisis not of his own doing. However, his political opponents on the left were not about to miss an opportunity to dishonestly place blame where it did not belong.
Bush, himself, said later that he made mistakes. But what he did not say was that a lot of people made a lot of mistakes. For example, New Orleans Mayor Ray Nagin failed to implement his evacuation plan and ordered residents to a shelter without any provisions for food, water, security, or sanitary conditions. He also delayed his emergency evacuation order until less than a day before landfall, which led to hundreds of deaths because people could no longer find any way out of the city. And we all remember the pictures of school bus parking lots full of yellow school buses, which Mayor Nagin refused to use in the evacuation. Why? He said they weren’t covered with insurance liability and there was a shortage of bus drivers. Governor Blanco also was to blame for her mistakes. But in fairness to all, we must keep in mind that this was the worst natural disaster in U.S. History. It was also the first time in such a huge disaster that FEMA was operating under the newly created Department of Homeland Security.
And there was this: When Katrina hit, New Orleans was one of the poorest metropolitan areas in the United States. 27% of New Orleans households, about 120,000 people, were without private mobility. Yet despite the fact that so many people were not able to evacuate on their own, the mandatory evacuation called on August 28 by local authorities, made no provisions to evacuate homeless, low-income, car-less individuals, the sick, or the city’s elderly or infirm. As a result, most of the stranded were the poor, the elderly, and the sick. As I said, a lot of people made a lot of mistakes.
But this article is about the claim by President Obama and the Democrats that Bush caused the financial crisis. Hence, Hurricane Katrina must be included because of its huge negative impact on our economy and the unassailable fact that, as with the other items discussed here, Bush did not cause Hurricane Katrina.
But Bush did not have time to linger on what was because he saw ominous, dark clouds forming on the national horizon. In fact, he had seen those clouds for awhile.
The Housing Market Collapse
Our financial crisis was triggered by one monster of a problem with many tentacles—the housing collapse. So how did it happen? For that answer, we need to know something about home ownership and mortgages. Most people can’t afford to buy a house outright for cash. They need to borrow most of the purchase price. When they do this, they sign a legal document that spells out their responsibility to repay the loan as well as other information. This document is called a “mortgage.” For years, the primary source of home-purchase loans was a local savings and loan bank. These local banks knew the neighborhoods and the local house values. They also had certain credit requirements that a prospective home purchaser had to meet in order to get a loan. These requirements helped to protect the bank from loss and also helped purchasers from making a loan they might not be able to repay. It was a good system that served us well for over a hundred years.
But then some politicians decided that the system was unfair. They said that everyone should be able to own their own home—that it was their right. Of course they also knew that if they could put millions of people into their own homes, whether they could afford it or not, those people would surely vote for them. Yes, the politicians absolutely knew that. So these politicians, who were almost all Liberal Democrats, effectively, tempted and coerced banks to make loans to virtually anyone—whether they could afford it or not. Thus, the seeds of a financial crisis were planted.
The following is an excerpt from an AIE.org article
- Today, the United States has the most troubled housing market in the developed world. It’s also the only developed country with a major government role in housing policy.
- In less than twenty-five years, “affordable housing” and other housing policies have turned a healthy market into a financial ruin. In 1989, for example, only 1 in 230 homebuyers made a down payment of 3 percent or less; by 2007, it was 1 in 3. Meanwhile, average home equity plunged from 45 percent to 7 percent.
- The policies that caused the financial crisis are still in force. Until they and the government’s role in housing are eliminated, the U.S. housing market will not return to health.
Bush warned of financial collapse
President George W. Bush and members of his administration are on record warning, repeatedly, that if significant, meaningful reforms were not implemented at Fannie Mae and Freddie Mac, we were headed for a serious financial crisis. But congressional Democrats did not want to hear it. They blocked all attempts by the Bush administration and congressional Republicans to reform Fannie Mae and Freddie Mac, two of the key players in the housing market collapse. To be sure, many large banks and Wall Street firms were also guilty, but it is unlikely that they would have been as active as they were without political pressure from the left to “put everyone in home” and the millions of mortgage loan guarantees provided by Fannie and Freddie.
Was the housing market collapse Bush’s fault? Hardly. He tried to prevent it but the Democrats blocked him every time. (See Bush Warned of A Potential Financial Crisis)
So those were the cards Bush was dealt. Now, let’s consider …
Bush’s economic policies
Obama Claim: The Bush Tax Cuts didn’t work.
The Truth: Oh yes they did. They did exactly what they were meant to do. They stimulated the economy and led to millions of new jobs—over 8 million to be exact. Furthermore, unlike the failed Obama stimulus, which cost the taxpayers billions of dollars, instead of taking money from hard-working Americans, the Bush tax cuts put more money in their pockets.
This is not even a Republican or Democrat issue. Democrat, President Kennedy enacted the same supply-side tax cuts that were later implemented by Ronald Reagan and then by George W. Bush—and they worked every time. Under Reagan, over 20 million new jobs were created and it started the longest peace-time continuous period of economic growth in U.S. History.
Obama’s Class Warfare
So what’s the deal? It’s simple: Obama’s presidency is collapsing and he is trying to save it by pitting one group of Americans against another. It is called “Class Warfare” and it’s right out of tired, old Marxist strategy manuals. Obama and the Democrats demonize the “rich” by saying they should pay their fair share. But what he, purposely, does not tell you is that the top 10% of earners pay over 71% of all federal income taxes while nearly half of all Americans do not pay any federal income taxes at all!
Obama brags that his economy has added jobs for 29 consecutive months.
It’s true. But once again, he is misleading us. He doesn’t tell the whole story, and to be sure, a lie is not necessarily in the words, it’s in the intent. In this case, he failed to include the job losses during his time in office. The number of jobs created under Obama have not even kept up with population growth. (See Obama Economic Record)
Bush’s policies ended the recession, not Obama’s.
You heard it right. You see, the recession officially ended in June, 2009—before the Obama stimulus had time to fully kick in. But by then, policies put in place by Bush began to have an effect. Furthermore, large portions of the Obama stimulus bill were squandered on non-stimulative items. For example, millions were used to prop up liberal Democrat local and state governments that had been mismanaged for decades. Failed liberal policies similar to the ones Obama continues to use on a national level, had wreaked havoc on those local and state governments and Obama bailed them out, temporarily, with stimulus money. Then, of course, millions more were wasted on Obama’s pet projects like Solyndra, which not only failed to create jobs, but went bankrupt a year after Obama touted it as the wave of the future. That foolish project alone wasted half a billion dollars of taxpayer’s money.
Yet Obama still continues to take credit for “turning our economy around.” It is truly astonishing. (See The Bush Failed Economic Policies)