Bush's Real Record On The Economy
By INVESTOR'S BUSINESS DAILY | Posted Friday, May 04, 2007 4:20 PM PT
The Presidency: Years from now, pundits and academics will surely wonder why President Bush's greatest achievement — his stewardship of the economy — got so little notice during his time in office. Yet that's how it is.
Bizarrely, polls show that many people think the economy has fallen into a recession. Or that we never left the slump that began in March 2001, a bare month and a half after Bush entered office, and that ended in November of the same year.
Last summer, a national poll taken by American Research Group showed 38% of Americans thought the economy was in a recession. By last month that had fallen to 28%, but it's still a big share. Of course, we weren't in a recession. Nor is it the case, as also has been asserted, that "things got worse" under Bush.
What factually is true is Bush faced the greatest economic challenge of any incoming president since President Reagan. Like Reagan, Bush met the challenge — something for which the media and his foes refuse to give him credit.
It's hard to overemphasize how nasty things were. But the media were too busy penning loving tributes to President Clinton to note that the economy was falling apart as he left office. Here are the facts about what Bush faced:
• The economy was already in recession. It actually began shrinking the summer before Bush entered office — by 0.5% in the third quarter of 2000.
• The stock market, as measured by the popular Nasdaq, had already plunged 46% from its peak in 2000 — the biggest drop since 1929, slicing nearly $8 trillion from Americans' wealth.
• Not until Jan. 3, 2001, a mere three weeks before Bush took office, did the Federal Reserve cut interest rates — a first step in reversing six rate hikes over the prior two years. Since there's about a one-year lag between Fed rate moves and the economy, the bank's tardy response to the slowdown pretty much doomed Bush's first year.
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Bush was also hamstrung early on by Democrat claims that his victory in the disputed 2000 election was somehow "illegitimate."
As 2001 wore on, things got worse. Democrats screeched about Bush's proposed tax cuts. Later they blamed him for "soaring" deficits — even though, with the economy's slowdown, deficits were entirely predictable and, indeed, inevitable. But the much-feared deficits have now shrunk to 1.6% of GDP, below the long-term average of 2.6%. Soon we may have surpluses.
For real pain, however, look at the stock market's plunge. As the chart above shows, the late-1990s Nasdaq collapse was worse even than that suffered by the Dow industrials in the 1929 crash.
The similarity is more than just coincidental — it's spooky.
On the heels of that devastating decline, of course, came 9/11 — a national psychological trauma that created mass fear and even panic. We tend to forget how people just stayed home, stopped shopping and traveling.
An IMF study reckoned that 9/11 cost the U.S. economy about $75 billion in lost GDP — not counting property losses of well over $100 billion. The U.S. also incurred future yearly costs of roughly 0.75% of GDP to pay for greater security, another big hit.
No question: The year 2001 marked a major break for the economy, with one of the largest hits ever to the wealth of Americans.
It could have been an epic disaster. But it wasn't. Bush did exactly the right thing — though he's still criticized for it today. To get the economy moving again, he pushed through tax cuts in 2001, 2002 and 2003.
Some 113 million people got an average tax cut of $2,216. Families with children got even more — $2,864 on average.
Since the last round of cuts in 2003, we've had the quietest, and most significant, boom in wealth, income and profits in our history. This explains why the economy, to the surpise of economists and the chagrin of liberal pundits, keeps humming. We've gone over the numbers before, but they bear repeating. Since 2002:
• Real gross domestic product has soared $1.64 trillion, or 16.5%, during a five-year stretch that has yet to see a downturn and that has witnessed average annual growth of 3%.
• Disposable personal income — what's left after taxes — has jumped $2.16 trillion, or 29%, to $9.68 trillion.
• Productivity, the fuel for future standards of living, has improved 14.3%.
• Overall employee compensation has expanded 4% a year.
• Net wealth, the amount people would have after paying off their debts, has swelled $15.2 trillion, or 38%, to $55.6 trillion. That gain in just five years is more than the total wealth amassed in the first 210 years of America's existence — an unprecedented surge.
• About 69% of Americans now own their homes, an all-time high.
• The jobless rate, now at 4.4%, remains below its 40-year average. Since August 2003, 7.8 million new jobs have been created.
• Tax receipts have surged 43%, or $757.6 billion, again thanks to economic growth.
Today, some signs point to slowing. All the more reason to keep Bush's tax cuts, the engine of our prosperity. But the new Democrat-led Congress has threatened not just to roll back Bush's cuts, but to impose new taxes that would sink the economy.
A recent study by economists Tracy Foertsch and Ralph Rector for the Heritage Foundation found that letting Bush's tax cuts lapse in 2010, as they are scheduled to do, would cost the U.S. $75 billion in GDP each year, kill 709,000 jobs and slice $200 billion from real personal income. It'd be a crime to let that happen.
George W. Bush's economic miracle is both real and sustainable. Too bad he won't get credit for it until the current generation of biased journalists and academics has retired. |
