Is Bush to Blame for the Economy?

By Dean Baker, The American Prospect. Posted March 4, 2008.

Last summer, President Bush told the American people that "the American economy is the envy of the world." He continued, "The fundamentals of our economy are strong .... Job creation is strong. Real after-tax wages are on the rise. Inflation is low." None of this was exactly true then, but it is certainly not true now. When President Bush signed the stimulus package he finally acknowledged what the rest of us already knew: The economy is in real trouble. The collapse of the housing bubble is throwing the economy into a recession, and quite possibly a very severe recession. For most workers this means that the economic situation is about to go from bad to worse.

There has been a myth spread by folks like The New York Times that the economy had been performing very well under President Bush, but that he wasn't getting proper credit because of public anger over Iraq. While pleasing to the ears of Bush supporters, this is a myth without foundation.

At the most basic level, contrary to the myth, growth has actually been very weak under President Bush. Here is the ranking of growth by presidential administrations since 1960:

Kennedy-Johnson: 5.2%

Clinton: 3.6%

Reagan: 3.4%

Carter: 3.4%

Nixon-Ford: 2.7%

Bush II: 2.6%

Bush I: 1.9%

President Bush only manages to beat out his father, and even this distinction may not hold when the final numbers are in. These data only run through the third quarter of 2007. If we fall into a recession and Bush ends his term with five quarters of near-zero growth, then Bush II could even fall behind Bush I in the growth category.

But growth is only a small part of the story. As has been widely publicized, the Bush-era deficits reversed the effects of the deficit reduction from the Clinton years. We will almost certainly end the Bush years with a higher debt-to-gross domestic product ratio than we had at the start of the Clinton presidency. That is not a disaster, but the next administration will not have the luxury of allowing the debt to increase in the same way.

Perhaps more important, the ratio of foreign debt to GDP has soared in the Bush years. By the end of the Bush presidency, we will likely have added more than $1.5 trillion (more than 10 percent of GDP) to our foreign indebtedness. This is the result of the massive trade deficits of the Bush years.

Growth and debt are, of course, abstractions for most people. What matters to the vast majority of families is what they take home in their paychecks, their job security, their health care, and their pensions. On these fronts, the Bush legacy is also one of miserable failure. Going into this year, the average hourly wage was about 3 percent higher than it was when Bush took office in 2001. This modest growth is entirely attributable to the wage momentum coming out of the late 1990s boom. Adjusted for inflation, wages have been flat since 2003. In recent months they have headed downward as energy- and food-price increases outstripped wage growth. Wage growth may still end up positive for the Bush years as a whole, but the gain will be so small that most workers will not notice it.

Job growth has been abysmal in the Bush years, averaging less than 900,000 jobs a year, compared to more than 2.5 million jobs a year during the Clinton administration. As a result, millions of young and middle-aged people have simply stopped looking for work and dropped out of the labor market.

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Dean Baker is co-director of the Center for Economic and Policy Research.

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