Think Progress just came out with this article listing 5 reasons why Americans should blame Bush for the economic woes we are enduring. While there are plenty of perfectly sound reasons why one should blame the former president and his aides, these are not 5 (or 4, to be fair) of them.
1. Deregulation caused the crisis? The article goes, and I quote, "Sweeping financial deregulation helped build the housing bubble". This statement would have you believe there was massive abolishing of regulation across the board going on in the previous decade under Bush's presidency to build up the housing bubble which ran roughly from 2002 to its peak in late 2006 and early 2007. But wait a minute, then the article links to a proposed (whether it ever got enacted or not, I do not know and the article or the sites it links to do not make this clear) plan by Bush's treasury secretary Henry Paulson in 2008! Now even if it was true that this plan really did deregulate the financial industry, how a proposed plan in 2008 could cause a housing bubble in the previous 5 years and a recession starting in December 2007 is beyond me. This logic has yet to penetrate my mind. But as we open the sites that the article links to, we learn that the proposed plan did not really deregulate anything. Honestly, read it and decide for yourself. It shifted more power in one direction, chiefly to the Treasury and to the Fed, and supposedly took away from others. The best the article manages is to link to three single changes to or abolishments of rules of certain regulatory agencies. Even if you take the author at his word that these changes to the rules really did destabilize the industry, and he does not provide a causal relationship at all, this is hardly the "sweeping financial deregulation" we were told was going on. If you subscribe to this website you might also be surprised to know that the Securities and Exchange Commission (SEC), one of the chief regulatory financial bodies in the US, saw its funding increase by 140% during the Bush years. That's right, from $377 million in 2000 to $906 million in 2008. To boot, Boston University professor Laurence Kotlikoff points to 115 agencies regulating the financial industry in 2010. Sweeping deregulation, right? Yeah.
The Financial system went off its rails simply because the Fed was providing cheap money for everyone to go crazy and gamble with. And they did go crazy, they invested in all the wrong places that looked profitable because interest rates were artificially set insanely low by the Fed and when the interest rates crept back up the system went broke. There was also a major moral hazard built in the system where everyone more or less suspected that the government would bail out the big players if things went sour. They suspected correctly.
2. Cutting taxes for the rich did it? No. Cutting taxes simply means you have more money left in the hands of private citizens to spend it productively. This on its own cannot cause a downturn. Besides, the US government cut taxes massively after 1918 and then again after 1945 and these policies were followed by vigorous economic growth and prosperity both times. To be sure, there is one significant point that the authors make correctly - cutting taxes without cutting government spending means increasing the national debt and this truly is toxic and dangerous. But not tax cuts on its own.
3. Wars. This is the one thing the authors get right fully and wholly. Wars are destructive, both morally and economically, and the empire the US has built for itself is going to cost Americans dearly.
4. Didn't help homeowners? Yes and no. The help the authors are presumably envisioning is precisely the kind of "help" that led to the whole housing fiasco in the first place. Government can help one homeowner by taxing another, or, more likely, by taxing the same homeowner. So now your mortgage is lower but your taxes are much higher. Great! It can also "help" you by making borrowing more attractive through subsidies and loan guarantees. But that is exactly what it did in the last decade and that is what helped pump the housing bubble. The authors are correct, however, to point to the endless bank bailouts in the wake of the financial crisis. This has been a disastrous policy and will only lead to more reckless behavior by these banks in the future.
5. Weakened workers? Apparently less government labor regulation and less labor unionism equals financial meltdown. First of all, work safety does not happen because government passes laws and regulations. It "happens" because businesses compete for labor on the market and one way of attracting workers is to offer them a safer workplace. It also "happens" because, believe it or not, entrepreneurs don't actually want their workers to get killed. If nothing else, injuries cost money. You can read here for more detail. As for collective bargaining - I am not against it. I am, however, against the notion that an oligarchy of labor union bosses can prevent someone else fom signing a contract on their own terms and thereby trow millions of people out of work. But again, we are supposed to believe that a smaller amount of labor laws and regulations in the US caused or at least helped cause the greatest systemic global economic collapse in our generation, if not in modern history. I'm done inferring, you draw your own conclusions.
To learn more about the causes of depressions and the role of government in them see this video, this, this or this book.
Matej Avsenak Ogorevc
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