Without Excusing Obamanomics, Bushonomics Was a Dismal Failure

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Having studiously avoided the limelight since departing Washington a little over four years ago, former President George W. Bush's profile has recently grown with the opening of his presidential library at Southern Methodist University. Bush's re-emergence has predictably, and understandably, brought with it defenses of a presidency widely seen as a failure upon his leaving office in 2009.

Positively for Bush, his approval ratings have reversed course for the better. According to a Wall Street Journal story last Friday, the 43rd president now has the same approval rating (47%) as our 44th president.

Time to some degree heals all wounds, and then another plus for Bush's reputation has been the presidency of Barack Obama itself. Though his ascendance to the White House was billed as the second coming during which all of our ills would be cured, President Obama's violation of the four basics of economic growth whereby he's reversed them - raised taxes, boosted regulations, made trade less free, and devalued the dollar - have caused some to yearn for the "good old days" of Bush. Time apparently causes us to forget too, because make no mistake about it, Bush's economic presidency was a dismal failure.

There are so many areas to touch on to explain the above, but in the interest of time it's probably best to focus on the basics. Bush to his credit presided over impressive reductions in taxes on income and capital gains, but presumably bereft of any position on the role of government in our lives, he studiously avoided vetoing spending bills on the way to levels of spending growth that even eclipsed Obama's profligacy. Put plainly, Bush's tax cuts were largely erased by the economy-sapping tax that is government spending.

Obama is today seen as a president possessing an anti-capital bent, but Bush was hardly better. Indeed, while businesses are reliant on investment in order to grow, Bush gleefully signed a Sarbanes-Oxley Act that repelled investment in businesses, and that helped freeze up the IPO markets more broadly. The massive regulation that was Sarbanes-Oxley forced visionary CEOs to become accountants, and for raising substantially the cost of going public to begin with, deprived investors of the chance to save for tomorrow's retirement through investment in tomorrow's innovators.

Of course during the Bush years there was little reason to invest. That's the case because the Bush administration made plain early on that it wasn't for free trade, and as such was for a weak dollar. This revealed itself in tariffs slapped on steel, softwood lumber and shrimp, through frequent jawboning of China about its correct decision to peg its yuan to the dollar, not to mention bailouts of GM and Chrysler at the expense of their more able foreign carmakers.

The Bush administration's stance on trade played a huge role in the willingness of investors to commit capital precisely because it impacted the value of the dollar. Investors are buying future dollar income streams when they choose to back certain companies and concepts, but Bush's anti-trade lurches signaled to the markets a comfort with a much weaker dollar, and the markets complied.

Indeed, while a dollar bought roughly 1/290th of an ounce of gold upon Bush's arrival in office, by the time he left a much debased greenback only purchased 1/819th. Cheapen the dollar and you drive away investors in dollar-denominated assets. The Bush years proved how very true this was. The S&P 500 declined 34% during Bush's presidency. Even during Jimmy Carter's misbegotten presidency the same index rose 24%.

What about oil? Oil is priced in dollars, so amid the dollar's decline, and in a replay of the malaise-riddled 1970s, the price of oil skyrocketed. Bush, seemingly channeling a President Carter who lamented a consumerist society during his own failed presidency, blamed our "addiction" to oil as though progress were something to denigrate. Naturally Bush didn't acknowledge that his own administration's monetary failings were the cause of oil having risen from an average per barrel price of $23 in 2001 to $91/barrel in 2008.

So while Bush's trade policies were the initial spark that lit the dollar fire, his appointment of Ben Bernanke as Federal Reserve Chairman in 2005 fed the fire copious amounts of gasoline. After 20 years of mostly uninterrupted Reagan/Clinton strong-dollar prosperity, Bernanke represented a return to monetary mysticism whereby growth could be achieved through the printing press, as opposed to emanating from real ideas. Notable here is that a dollar bought roughly 1/480th of an ounce of gold ahead of Bush's foisting of the cruel blessing that is Bernanke on the electorate.

The falling dollar predictably made a fool of the very savers whose savings push the economy forward. Instead, those with soggy dollars began to consume with abandon, including consumption of housing. A recessionary rush to home ownership began, and Bush naively assumed that the housing boom signaled economic strength. As a result he called for more of it, paid for by the taxpayers. "We want everybody in America to own their own home," said the 43rd president, and given Bush's view that "it is in our national interest that more people own their home," he signed the American Dream Downpayment Act in 2003, which, according to historian Niall Ferguson was "a measure designed to subsidize first-time house purchases among lower income groups."

As is well known now, the housing mania ended badly, and when it did, some financial institutions that were overexposed to mortgages were rendered insolvent. In possibly the most unfortunate act of an unsuccessful presidency, Bush allowed for the bailing out of the institutions that the free markets had left for dead. He explained that to save the free markets, he had to abandon them, but in truth, he discredited them along with the Republican Party.

Capitalism and commerce only advance if failure is regularly allowed to cleanse commerce of bad ideas, and in the process, re-arrange who has access to always limited capital. In Bush's case he fell for the absurd idea that the failure of banks like Citi (bailed out 5 times in the last 22 years) would wreck the capitalist system, when in fact it was the capitalist system that desperately wanted to put Citi out of business so that commerce and banking could evolve.

The markets had similarly spoken in favor of a massive restructuring of both GM and Chrysler by market actors, but instead of allowing this to happen, Bush made sure that these two automotive laggards were propped up with the unwilling funds of others. Though the U.S. and global economies had largely performed well in the 25 years leading up to 2008 precisely because government control had been in retreat, Bush's actions signaled a return of economic meddling from the Commanding Heights. The latter in mind, not to mention the economic and human horrors of the 20th century well in mind, the markets convulsed as Bush proceeded to "save capitalism" with a distinct lack of it.

Put plainly, Bushonomics was a total failure, and for Bush partisans to defend the economic portion of his presidency is for them to exhibit willful blindness, all the while subsuming their own deeply held beliefs in what causes an economy to grow. The Bush years were marked by tax cuts wiped out by massive spending increases, innovation-suffocating legislation and regulation in the form of Sarbanes-Oxley, new barriers to trade, and a falling dollar that drove investors out of new ideas, and in to devaluation hedges.

To the above, and to a failed presidency too conveniently forgotten, some reply that "Bush is better than Obama." Maybe so, maybe not, but it's also not the point. Absent Bush's egregious economic errors that wrongly discredited free enterprise and rightly discredited the Republican Party, there's no Obama presidency. In short, if you loathe Obama, turn your scorn to the man who, while perhaps decent, made Obama possible.


John Tamny is editor of RealClearMarkets, Political Economy editor at Forbes, a Senior Fellow in Economics at Reason Foundation, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). He's the author of Who Needs the Fed?: What Taylor Swift, Uber and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank (Encounter Books, 2016), along with Popular Economics: What the Rolling Stones, Downton Abbey, and LeBron James Can Teach You About Economics (Regnery, 2015). 

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