Is it reasonable to compare Obama to King Bush II?

by philg

A typical line of reasoning on display in newspaper opinion sections is “It is unfair to criticize Barack Obama for doing X because King Bush II did X” (example from Paul Krugman today regarding borrowing more money to rebuild from Hurricane Irene: “After all, [Eric Cantor] and his Republican colleagues showed no comparable interest in paying for the Bush administration’s huge unfunded initiatives.” (link)).

I’m wondering why people accept this line of reasoning. First, considering the state of the U.S. economy, it is not obvious that King Bush II did a good job. Why would anyone want a politician to behave as he or she did during Bush II years? Second, King Bush II and Congress at the time were operating from a very different set of assumptions. People believed that the U.S. economy, and therefore the tax base, would grow 2-4% per year. People believed that returns on investment, including for public employee pension funds, were likely to be 8%/year. Currently the growth forecasts for the U.S. economy are maybe 0-1% per year and for investment yields perhaps 2-4%/year. It seems natural that thoughtful people would act differently given different assumptions.

Should it really be to a politician’s discredit to say “He advocated X in 2005 when the economy was forecast to continue booming for decades and now, with the outlook more or less dismal, advocates Y”?

10 thoughts on “Is it reasonable to compare Obama to King Bush II?”

  2. re: “..the economy was forecast to continue booming for decades”

    The ’08 housing bust was inevitable and even more obvious than the tech bust of 2000.
    1. When big money is loaned to millions of people with little income, default is certain.
    2. When loose money allows housing prices to rise faster than incomes, default is near certain. Even with qualified buyers.

    Both 1 and 2 were glaringly obvious going into 2008. And long before that. The “exuberance” was more than irrational. It was hypoxic. No one sober enough to walk a straight line believed this was sustainable. Not even me.

  3. But the long-term budget outlook was already dismal back in 2003.

    Alan Auerbach, William Gale and Peter Orszag, fiscal experts at the Brookings Institution, have estimated the size of the ”fiscal gap” — the increase in revenues or reduction in spending that would be needed to make the nation’s finances sustainable in the long run. If you define the long run as 75 years, this gap turns out to be 4.5 percent of G.D.P. Or to put it another way, the gap is equal to 30 percent of what the federal government spends on all domestic programs. Of that gap, about 60 percent is the result of the Bush tax cuts. We would have faced a serious fiscal problem even if those tax cuts had never happened. But we face a much nastier problem now that they are in place….

    Let’s assume that interest on the public debt will be paid, that spending on defense and homeland security will not be compromised and that the regular operations of government will continue to be financed. What we are left with, then, are the New Deal and Great Society programs: Social Security, Medicare, Medicaid and unemployment insurance. And to close the fiscal gap, spending on these programs would have to be cut by around 40 percent.

    It’s impossible to know how such spending cuts might unfold, but cuts of that magnitude would require drastic changes in the system. It goes almost without saying that the age at which Americans become eligible for retirement benefits would rise, that Social Security payments would fall sharply compared with average incomes, that Medicare patients would be forced to pay much more of their expenses out of pocket — or do without. And that would be only a start.

    All this sounds politically impossible. In fact, politicians of both parties have been scrambling to expand, not reduce, Medicare benefits by adding prescription drug coverage. It’s hard to imagine a situation under which the entitlement programs would be rolled back sufficiently to close the fiscal gap.

    Yet closing the fiscal gap by raising taxes would mean rolling back all of the Bush tax cuts, and then some. And that also sounds politically impossible.

    For the time being, there is a third alternative: borrow the difference between what we insist on spending and what we’re willing to collect in taxes. That works as long as lenders believe that someday, somehow, we’re going to get our fiscal act together. But this can’t go on indefinitely.

  4. Paul: It was obvious to everyone that collapse was imminent? If so, how did the guys who bet against housing make so much money? There were other people on the other side of every trade made by http://en.wikipedia.org/wiki/John_Paulson

    Russil: The long-term fiscal outlook was also “dismal” in 1994 when http://www.ssa.gov/policy/docs/ssb/v58n2/v58n2p74.pdf came out. So I guess there are degrees of dismal. Certainly not until 2008 did anything like the current retrenchment in the number of Americans employed. Check the graphic in http://economix.blogs.nytimes.com/2011/09/02/comparing-recessions-and-recoveries-job-changes-3/ for why the present does not in fact look very much like the past.

  5. Sure both have lied and are anything but peceful and both are against civil rights. Obama has not ended Guantanamo, he has not asked the FED to stop printing money.
    He still promises new things he can’t keep Bush does the same. America is not a bit more save as they both imply with their actions against terrorism. Next time they will not take planes, but anything else they can find to harm the US…..

    If I would write what I think of them honestly you probably would never allow me again to post here. Well my usual wish is a wishing well. I have nothing like that for the current leaders of any of the “supposed to be developed “countries.

    You can name them all Obama, Sarkozy, Merkel, the new president of Japan (sorry I can’t remember his name) any other leader of an european country (but maybe the Swiss)…. Really I don’t wish them anything good…

  6. Phil,

    George Bush actually existed, really was president, and did in fact spend a lot of money. So while Krugman’s views in this case are indeed lunatic gibberish, they are more firmly tethered to reality than most of what he has to say, and you should give him credit for trying harder than usual.

  7. That’s a classical political execute which is over used, as well as blaming the other party or the other guy when our politicians cannot get their way. What’s more, President Obama keeps saying, “I inherited this economical crises” and the war, et. al. Sure he did, but is he saying he didn’t know about those issues when he run for the office, really?! I don’t know of any other president using the “inherited” execute more often than President Obama to explain his reasoning.

  8. I saw this nifty 2 minute explanation of the economic crisis.
    When he got to the part about public employees fighting with
    private employees over whatever scraps are left over, I
    immediately thought of this blog.

  9. Isaac: Thanks for the video link to Robert Reich’s advertisement for class warfare. I think it is worrisome that it is titled “the truth”. He talks about stagnant wages for Americans without mentioning the fact that the rapid development of infrastructure and education in countries such as India and China have greatly expanded the global supply of high quality labor. What is surprising about the U.S. is not that wages have been constant but that they haven’t fallen.

    Reich says that “tax revenues are down to only 15% of the total economy”. He neglects to mention that he is talking only about federal revenue, but then goes on to complain about kids in crowded schools (funded by states and towns). http://www.usgovernmentrevenue.com/ shows that government revenue is in fact closer to 30% of the economy. The U.S., unlike some other countries, just happens to fragment tax collection among a variety of government levels.

    Considering federal, state, and local, never in the history of the world has a government collected as much revenue as in the U.S. The fact that this quantity of money is not sufficient to the promises and ambitions of our politicians is a separate issue that no current politician is willing to address in a serious-minded manner.

  10. philg re: ..how did the guys who bet against housing make so much money?

    Smart money shorted and/or bought CDSs (credit default swaps) from AIG. Then when it popped, “we” gave AIG a ton of dough so they could payoff CDSs held by Goldman and others. AIG went bankrupt and exploded. Somebody should have gone to jail. The poor folks who bought paper mache CDOs made from shredded bad mortgages (“securitized”) got burned the most. Sad and very messy.

    Anyway, I’m an engineer. Not an economist. But it was pretty clear to me the thin ice was cracking.

    fwiw: My company is selling/building $40B worth of plant and equipment to China. With options for more. And don’t forget Brazil. Brazil is an amazing country with a bright future. There will be growing pains. Not to worry, the place is huge, beautiful, and still very much unspoiled. I expect it to stay that way for a very long time. If I were a young man I’d learn Portuguese and jump on a plane.

    My long term outlook for the United States is at best iffy or worse. The country is coming uncoupled, have/have not. I think class war and revolution in the next thirty years is likely. But what do I know?

    Paul Kramarchyk, age 63
    Barkhamsted, Connecticut

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