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The Seven Deadly Deficits: What the Bush Years Really Cost Us

And how President Obama can get the economy back on track.

When President George W. Bush assumed office, most of those disgruntled about the stolen election contented themselves with this thought: Given our system of checks and balances, given the gridlock in Washington, how much damage could be done? Now we know: far more than the worst pessimists could have imagined. From the war in Iraq to the collapse of the credit markets, the financial losses are difficult to fathom. And behind those losses lie even greater missed opportunities.

Put it all together -- the money squandered on the war, the money wasted on a housing pyramid scheme that impoverished the nation and enriched a few, and the money lost because of the recession -- and the gap between what we could have produced and what we did produce will easily exceed $1.5 trillion. Think what that kind of money could have done to provide health care for the uninsured, to improve our education system, to build green technology ... The list is endless.

And the true cost of our missed opportunities is likely even greater. Consider the war: First there are the funds directly allocated to it by the government (an estimated $12 billion a month even according to the misleading accounting of the Bush administration). Much larger, as the Kennedy School's Linda Bilmes and I documented in The Three Trillion Dollar War , are the indirect costs: the salaries not earned by those wounded or killed, the economic activity displaced (from, say, spending on American hospitals to spending on Nepalese security contractors). Such social and macroeconomic factors may account for more than $2 trillion of the war's overall cost.

There is a silver lining in these clouds. If we can pull ourselves out of the malaise, if we can think more carefully and less ideologically about how to make our economy stronger and our society better, perhaps we can make progress in addressing some of our long-festering problems. As a road map for where to begin, consider the seven major shortfalls the Bush administration leaves behind.

The values deficit: One of the strengths of America is its diversity, and there has always been a diversity of views even on our fundamental principles -- innocent until proven guilty, the writ of habeas corpus, the rule of law. But (so we thought) those who disagreed with these principles were a fringe, easily ignored. We have now learned that the fringe is not so small and includes among its numbers the president and leaders of his party. And this division of values could not have come at a worse time. The realization that we may have less in common than we thought may make it difficult to solve the problems we must address together.

The climate deficit: With the help of corporate accomplices such as ExxonMobil, Bush tried to persuade Americans that global warming was fiction. It is not, and even the administration has finally admitted as much. But for eight years we did nothing, and America pollutes more than ever -- a delay that will cost us dearly.

The equality deficit: In the past, even if those at the bottom saw little or any of the gains from economic expansion, life was viewed as a fair lottery. Up-by-your-bootstraps stories are part of America's sense of identity. But today, the promise of the Horatio Alger legend rings false. Upward mobility is becoming increasingly difficult. Growing divisions in income and wealth are reinforced by a tax code that rewards those who have lucked out in the globalization sweepstakes. As that realization sinks in, it will be even harder to find common cause.