Back in January, I had a post entitled Why is the Economy in Trouble? Seriously, Why is the Economy in Trouble?. If I may quote myself extensively (and I may!!):
[W]hy is the economy in a state where even rational people are talking about the need for stimulus only a few years after we’ve had large individual income tax cuts, big cuts on taxes on repatriated corporate income, and continued year after year tax cuts on the estate tax. And let’s not forget that the Fed has bent over backward to help GW. Take a look at real interest rates since GW took office – has any president gotten anything even remotely resembling this sort of help since stagflation was vanquished?
So in plain English, we’ve had a heck of a lot of what we’re told is fiscal stimulus and a heck of a lot of monetary stimulus since GW took office.
And yet there’s still trouble. This administration (and its cheerleaders) have been wrong about everything they’ve told us about the economy. They promised rapid growth and to pay down the debt. In 2007, the surplus was going to be so big that there wouldn’t be enough retiring bonds to pay off. By 2010, debt was to be 6.5% of GDP. That was their first economic plan.
A recession came – they blamed it on Clinton and 9/11 and pushed through tax cuts, and more tax cuts. It was a light recession… short and shallow. But apparently enough so that debt would grow rather than shrink, despite all the help from the Fed. And for some reason, growth was anemic. So they pushed more tax cuts. And growth was still anemic. Eventually, in mid – 2003, the economy started to pick up again. There was much trumpeting of horns and pontificating and gloating. We’ve had average real growth for a few years plus a big run-up in the debt, and now we’re back to worrying about a downturn again? Now? So soon after their wonderful remedy produced what Kudlow called the Goldilocks economy?
Which raises a question… what are they going to blame it on now? Clinton has been out of office too long, its been more than six years since 9/11, Congress has given them just about everything they wanted, and the Fed could not be more cooperative. (In fact, anyone could see the Fed helped so much for so long, it created its own problem… which is where we are at this point.) So what is left? Why the very short, very sub-par expansion? If its not Clinton, and not 9/11, and not the Fed, and not some big problem from abroad, then what? Random chance? For no particular reason, this happened now? Or is it their economy, their policies?
My guess is that they’ll find some other reason, something other than their own actions and remedies and prescriptions. Because as far as GW and his cheerleaders are concerned, this situation gives them an excuse to peddle some more of their failed remedies and inane prescriptions. After what we’ve seen since January of 2001, a decent man would not go before the American public with a smirk on his face and tell us we need more tax cuts. But GW will. And decent people would not see the smirk and hear the call for more of the same and support it. But the cheerleaders will.
I guess now, a few months later, we see that GW isn’t the only one who goes before the American public and tells us we need more tax cuts. But the question stands – if tax cuts are beneficial, why has the economy performed so poorly for seven and a half years?
This is not a business cycle thing – its not like the economy did well for part of his term and we’re now in a trough. GW is on currently on track to finish his term with an annualized growth rate of around 1.3% of real GDP per capita. Since Ike took office, Ike, Ford and Bush Sr. produced growth rates that were that dismal. But Ike was diligent about paying down the debt, Ford had to contend with an Oil Crisis and disco, and Bush Sr. got hosed by Alan Greenspan.
GW has had everything his way for a very long time, he got to implement the policies he wanted, he got help from the Fed, and he didn’t seem to worry about deficits. So, after all of this, I ask again, why has the economy performed so poorly since GW took office? What gets the blame? Something other than policy must, or McCain wouldn’t be peddling more of the same.