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January 10, 2008 2009 * [LINK / comment]

Bush's fiscal profligacy: a recap

As the unemployment rate climbs to 7.2% (see Washington Post), consumer spending plummets, and the U.S. dollar sinks ever lower on world markets, one is entitled to wonder, What the hell happened to us? Many Americans are mystified by the current economic recession, a new experience for just about anyone under 40. They have grown so accustomed to economic growth over the past three decades that "irrational euphoria" became normal behavior. Well, all good things must come to an end. Sorry, folks: That was just a dream! A drug debt-induced dream, you might say.

There are many reasons for the awful mess we are in, including the failure of regulators to ensure sound mortgage lending practices, but chief among them is the soaring budget deficit. Whenever the Federal government has to borrow money to pay its bills, it absorbs a portion of national savings (or foreign savings, in the global economy) that would otherwise be invested for productive purposes. The current record-setting deficit takes the lion's share of savings and thereby "crowds out" investment, crippling potential growth. Go back and look at your Macroeconomics 201 textbook.

So whose fault is this? Well, if you follow Harry Truman's approach, "the buck" stops at the White House desk, and the outgoing president clearly bears most of the responsibility for our nation's fiscal predicament. I do not mean to excuse the Democrats or the Republicans in Congress who succumbed to the temptation of "easy living," passing budgets with bigger and bigger deficits every year, but it's the guy at the other end of Pennsylvania Avenue who had the power to veto those spending bills if he really wanted to. Unfortunately, President George W. Bush was notoriously meek about confronting Congress on budgetary matters.

Of course, it all started with the tax cuts that Bush pushed through Congress in 2001 and 2002, using any rationale that seemed handy at the moment. At the time some people wondered if tax cuts were a prudent move for a country that suddenly found itself embroiled in a global-scale war against Islamic extremists. Tightening the government purse-strings seemed to contradict the ambitious foreign policy of the Bush administration, which was characterized as "imperialistic" by many critics. As I noted in Dec. 2002 a writer for the Boston Globe observed, "No serious empire-builder would ever cut taxes as recklessly as President Bush has." Well, perhaps Bush was an "un-serious empire-builder."

In the aftermath of the (temporarily) successful conquest of Iraqi armed forces in April 2003, the atmosphere in Washington verged on giddiness, and hardly anyone dared to question Bush's judgment. In May 2003, I cautiously questioned whether it was the right time for another round of tax cuts, but I tried to give the president the benefit of the doubt. (Belonging to a political party can sometimes cloud one's judgment, and I'm only human.)

Soon, however, my fears about the Bush agenda grew. During mid-year, Bush rolled out his Medicare prescription drug benefit proposal, which eked through Congress later in the year. As I wrote at the time, "This new entitlement will create a fiscal hemorrhage, exactly the kind of thing the Concord Coalition has always warned against. ..." At the time I was angry with Bush, but even I couldn't imagine the horrors that would follow this first dangerous and terribly misguided step. Pat Buchanan's 2004 book Where the Right Went Wrong recounted Bush's "fiscal record of startling recklessness," adding $1.3 trillion to the national debt in just his first three years in office, without using his power to veto spending bills even once. Even after the 9/11 attacks, Bush promoted the idea of "Let the good times roll," as if he were imitating Bill Clinton. I will always look back on the fall of 2004 and wonder why I put in so much effort on behalf of the Bush campaign, setting aside my gnawing doubts. For now, all I can figure is that the alternative of John Kerry must have seemed frightening to me.

In retrospect, Americans have to be very glad that President Bush's audacious proposal to, in effect, privatize Social Security never saw the light of day; most of them would have lost their life savings last year. At the time (April 2005), the Bush proposal seemed like the wrong emphasis to me, but I was willing to hear him out, in hopes of reaching a compromise. (Fat chance.) It got even worse in July 2005, when Congress passed (with Bush's approval) a costly, pork-laden energy bill that did absolutely nothing to encourage Americans to adapt to a world of scarce energy supplies. It was full of silly gimmicks that seemed inspired by the social engineering approach of the Democrats. And, of course, it caused the budget deficit to ballon further.

The pivotal moment of truth came in September 2005, when Bush tried to overcompensate for his poor handling of the Hurricane Katrina disaster by asking Congress for a virtual blank check to rebuild the devastated region. At the time, budget hawks like me were fretting that the deficit was approaching half a trillion dollars. (Three and a half years later, the deficit is nearly twice that level!) Conservatives soon began openly rebelling against the wayward president, with the "porkbusters" campaign, for example.

The reasons for Bush's astonishing disregard for fiscal prudence became clearer as his term progressed. For example, in March 2006 I wrote about Bruce Bartlett's book Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. I also highlighted the dangerous belief prevalent in the Bush White House (Cheney, Rove, et al.) that "deficits don't matter." Guided by his political guru Karl Rove, for whom winning elections was all that matters, Bush decided not to worry about deficits. As I wrote, "Such a grotesquely irresponsible attitude ... would be paving the way for the collapse of the conservative coalition." Indeed it did! (For more on the episode when Treasury Secretary Paul O'Neill resigned in dismay over the lack of regard for serious policy in the Bush White House, see the New Yorker magazine, January 2004.)

For me, patience with Bush finally wore out in April 2006, when I made it clear that I was "disgusted with fiscal imprudence." I also pointed out that "many Republicans wrongly equate loyalty to President Bush with being a true conservative," which of course was exactly backward. This pathological, malignant tendency exhibited by many Republicans was spreading quickly as frustrations mounted, as the Grand Old Party began floundering about. Some party members sought to articulate a coherent philosophy of governance, but for the ascendant populist faction known as "The Base," caring about government operations was seen as irrelevant, and perhaps a little subversive.

Not surprisingly, Bush led his party to a huge defeat in the November elections, setting off an orgy of recriminations in the GOP. He didn't learn his lesson, however: In December 2006, Bush endorsed the Democrats' call to raise the minimum wage by $2.10, to $7.25 an hour, over a period of two years, in exchange for concessions on tax cuts and regulatory policies. This abomination was the purest essence of Bush's bogus "compassionate conservatism."

As the Democrats took control of Congress in January 2007, Bush made a declaration that at the time seemed far-fetched, but in retrospect seems astonishingly cynical: He was going to "submit a plan to balance the budget within five years!" (Yeah, right.) Bush devoted most of his attention to "the surge" in Iraq for the rest of the year, and did little if anything about the budgetary situation as the warning signs of financial doom multiplied.

As the economic teetered nervously in January 2008, Bush spent what little remained of his "political capital" to push for an economic "stimulus" package that was mainly of benefit to Red China. (Our government in effect borrowed money from China to give to consumers to buy products that were mostly made in China; real smart.) Ironically, he achieved "bipartisan consensus" on the need for a stimulus, as president-elect Barack Obama intends to push for an even bigger "stimulus," as the deficit gets bigger and bigger and bigger... President-elect Obama says he expects to run annual deficits of a trillion dollars or more for the foreseeable future; see the Washington Post. He seems as nonplused by the fiscal catastrophe as Bush himself, which is a scary thought, as is his warning of imminent catastrophe if Congress doesn't do what he wants. Whatever Obama decides to do with all that money, it is all but inevitable that massive tax cuts on the wealthy (which probably means you) will follow. You can be sure that billions of dollars in financial assets are flowing to "save haven" offshore banking centers such as the Bahamas, in anticipation of redistributionist economic policies under Obama.

The main point of this blog post is not to "bash Bush," but rather to make it clear that people like me have been warning about the coming economic disaster for years, to no avail. You might say this is a litany of earnest pleas for reform that fell on deaf ears. The Republican leadership just tuned out the "naysayers" and pretended that all was well, whistling past the figurative graveyard and all but guaranteeing themselves minority status for the next few years at least. Many Republican rank and file members can't wait for January 20 to come, so that they can finally speak openly and honestly -- without fear of retribution -- about what an awful mess our current president has created, for the party and for the country. Mark my words, if you think there is a lot of infighting among Republicans now, it will get much worse ten days from now. It will be a contest to see who can disown "W" the quickest and most emphatically.

Ironically, the machinery of the Republican Party today is controlled by Bush loyalists who have been trained in the "Mayberry Machiavelli" tactics (a term coined by John DiIulio) of Karl Rove to purge anyone who deviates from their agenda. These are the people who frantically blame others in the party for "betraying conservative principles" while ignoring the obvious fact that their own president spent his eight years in office doing exactly that. Somehow, many people have got it in their heads that tax cuts are what defines conservatism as a political philosophy, a grossly simplistic notion that is quickly unraveling as the horrendous economic consequences of Bush tax cuts become apparent. The facts are as plain and clear as the nose in front of your face, but for true believers, facts don't matter. The conservative "movement" of today is utterly blind to the dismal reality of the Bush years, a classic case of massive "cognitive dissonance." God help us.


* NOTE: Originally posted on Jan. 10, 2009 but with the wrong year (2008) displayed. Here is a screen shot just before the correction was made, showing the date/time stamp:



Posted (or last updated or commented upon): 09 Jan 2010, 10: 03 AM

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