In prior posts, I posited that the Bush Tax Cuts and the bank bailouts (especially through the Fannie/Freddie bailouts) accounted for large portions of the current debt nightmare facing the US. The graph at left depicts the relative contributors to the US deficit and hence our debt problem. Obviously, the Bush Tax Cuts loom large over time. But, the next largest contributor is the Bush economic downturn.
To be fair, not all of the downturn can be attributed to the policies of the Bush Administration. The Clinton Administration pursued financial deregulation too, particularly through the repeal of Glass-Steagall. And, as I have argued since December of 2008, the Obama Administration failed to pursue adequate fiscal stimulus and failed to design its inadequate stimulus in an economically rational way, in particular relying upon tax cuts that would be saved by consumers and hoarded by the financial system rather than stimulating growth. Nevertheless, the Bush Administration's economic policy boiled down to just cutting taxes again and again and the evidence is conclusive that those tax cuts failed to stimulate sustainable growth.
Thus, according to former Reagan and Bush I Administration official Bruce Bartlett :
"It would have been one thing if the Bush tax cuts had at least bought the country a higher rate of economic growth, even temporarily. They did not. Real G.D.P. growth peaked at just 3.6 percent in 2004 before fading rapidly. Even before the crisis hit, real G.D.P. was growing less than 2 percent a year. . . .Real G.D.P. growth was 4.1 percent in 1994 despite widespread predictions by opponents of the 1993 tax increase that it would bring on another recession. Real growth averaged 4 percent for the balance of the 1990s. By contrast, real G.D.P. growth in the nonrecession years of the 2000s averaged just 2.7 percent a year — barely above the postwar average."
And, in terms of jobs, the Bush Administration holds a deplorable record, as demonstrated here:
Over eight years, from 2000 to 2008, employment in the US plunged, wiping out all of the robust job growth of the Clinton years of 1992-2000. The Bush Administration ushered in a lost decade of employment stagnation even before the recession hit. Those job losses translate into more debt for strapped households, more loan defaults, lost tax revenues and, ultimately, failed economic policies for the Bush Administration.
These failed economic policies form the foundation of the financial crisis which was triggered by too much consumer debt and not enough consumer income--i.e., a very weak job market notwithstanding (or perhaps because of) the very wasteful Bush Tax Cuts. This is the third part of our debt nightmare rooted in failed GOP policies.