Paul Krugman: If Bush's policies aren't responsible for bad economy, what is?
11:32 AM CDT on Sunday, July 13, 2008
By huge margins, Americans think the economy is in lousy shape – and they blame President Bush. This fact, more than anything else, makes it hard to see how the Democrats can lose this election.
But is the public right to be so disgusted with Mr. Bush's economic leadership? Not exactly. Even liberal economists have a hard time arguing that Mr. Bush's cluelessness actually caused the poor economic performance on his watch. His tax cuts didn't work, but they didn't create the Bush bust. So what did?
At the top of my list are three factors: the housing bubble and its aftermath, rising health care costs and soaring raw materials prices. Much has been written about housing, so let's focus on the others.
Most public discussion of health care focuses on the problems of the uninsured and underinsured. But insurance premiums are also a major business expense: Automakers famously spend more on health care than they do on steel.
One of the underemphasized keys to the Bill Clinton boom, I'd argue, was the way the cost disease of health care went into remission from 1993 to 2000. For a while, the spread of managed care put a lid on premiums, encouraging companies to expand their work forces.
But premiums surged again after 2000, imposing huge new burdens on business. It's a good bet that this played an important role in weak job creation.
What about raw materials prices? During the Clinton years, basic commodities stayed cheap by historical standards. Since then, however, food and energy prices have exploded, directly lopping about 5 percent off the typical American family's real income and raising business costs throughout the economy.
Much of this pain could have been avoided.
If Mr. Clinton's attempt to reform health care had succeeded, the U.S. economy would be in much better shape today. But the attempt failed – and let's remember why. Yes, the administration botched the politics. But it was Republicans in Congress who blocked reform.
As for high food and fuel prices, they're mainly the result of growing demand from China and other emerging economies. But oil prices wouldn't be as high as they are, and the United States would have been much less vulnerable to the current price spike, if we had taken steps in the past to limit our oil consumption.
Mr. Bush certainly deserves some blame here. Still, in energy as in health care, the biggest missed opportunities came 15 or more years ago, when Mr. Gingrich and other conservative Republicans in Congress, aided by Democrats with ties to energy-intensive industries, blocked conservation measures.
So here's the bottom line: Mr. Bush deserves some blame for the poor performance of the economy on his watch, but much of the blame lies with earlier political figures who squandered chances for reform. As it happens, however, most – though not all – of the politicians responsible for our current economic difficulties were Republicans.
And bear in mind that John McCain has gone to great lengths to affirm his support for Republican economic orthodoxy. So he'll have no reason to complain if, as seems likely, the economy costs him the election. |
