Bush and Trump were equally to blame
Bush was president when we plunged into the Great Recession, and Trump presided over the recent slump. Should they be blamed? I’m not sure, although I suspect that in both cases the president played only a very modest role in causing the recession.
On the other hand, I believe that voters were much more likely to blame Bush than Trump, and that’s one reason why the GOP lost so badly in 2008.
You might argue that polls show Trump losing just as badly as McCain, but those same polls show that Trump gets fairly high marks for the economy. Voters blame him for other things—mostly the lackadaisical response to Covid-19.
Let’s start with a few obvious points. Both recessions were global, and both were considerably worse in Europe. That doesn’t exactly point to a scenario where the US president is to blame. I suppose that Europe’s recessions could be the ripple effect of a US instigated shock, but ripples are almost always smaller than the original shock, not bigger.
The most likely explanation for the recent recession is that almost all countries were hit by the global Covid shock. You can say Trump didn’t do his part, didn’t encourage testing, masks, social distancing, etc., and I’d agree. But there’s not much evidence that a better president would have prevented a severe recession in 2020. I do blame Trump for not doing his part; I just don’t believe it would have been decisive.
The most likely explanation of the Great Recession is that a real estate slump lowered the natural rate of interest, and central banks such as the Fed and ECB did not lower the policy rate fast enough, effectively tightening policy. You could argue that Bush should have appointed someone better to lead the Fed, but his appointee did far better that Trichet at the ECB. (I favored Bush appointing Bernanke.) So it’s simply not realistic to presume that Bush played a major role in the recession.
Others point to “deregulation” such as the repeal of Glass-Steagall, but banking was never deregulated and the Glass-Steagall repeal had little impact.
Others (on the right) point to government efforts to put as many people into houses as possible, and Bush does share some of the blame here, but lots of others were involved in that effort. And that played only a minor role in the recession.
Given the fact that the public votes with limited information, it’s reasonable for them to blame leaders when things go bad, even if leaders only are responsible for 3% of outcomes. How else can voters encourage leaders to do their best?
I’d say it’s rational for voters to view Trump positively on economics (a view I don’t fully share–I’m more neutral) and negatively on Covid. And it was rational for voters to blame the GOP for the recession in 2008, despite the fact that it was mostly bad luck. And that’s despite the fact that I happen to view these two presidents as equally responsible for the two recessions. The point is that the public needs to hold presidents accountable for the modest role they play, or the democratic system cannot work. And the public works with limited information.
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26. October 2020 at 23:14
The current economic data is actually looking good, and the administration has no control over state issued mandates. Not all States are struggling economically, and the ones that are chose to mandate shutdowns. Mandates, from my perspective, that are unconstitutional. For those that follow WHO guidelines, you may also note that they do not support shutdowns. In fact, 10,000 scientists signed the Great Barrington Declaration: one the administration rightly supports.
I’ve decided to vote for DJT. And I wanted to give my reasons here:
1. Nobody can fix thirty years of outsourcing in four years. But Trumps visions is one that will bring prosperity back to this country. In 2016, you wrote about tariffs having a negative long term impact on the economy, but the current data shows the opposite is happening. Most of the jobs created over the last four years are blue collar jobs. Trumps new NAFTA is much better for the American worker (Even Bernie’s Supporters agree). And his trade war with China, while messy in the short-term, will pay dividends in the long-term.
2. As Glenn Loury and Thomas Sowell have pointed out many times: the policy proposals of the left are destroying this country. Let’s just take one example: a $15 wage might sound like a warm-hearted proposal from a caring politician, but the consequence of those policies will only lay off American workers, and cripple more industries.
Over the last 8 years we have a seen a movement on the left that does not resemble an American party, but a party that has deep hatred for American ideals: ideals rooted in individualism, the right to free speech without harassments, threats, violence and ridicule, and the right to have a weapon to defend oneself against tyranny. We have seen a party that is rooted in allegations of corruption, of policies promoting fear over fact (everyone in the world is a racist, covid will kill us all, hierarchies are bad, etc, etc), to the historical deep rooted optimism that put man on the moon, and paved the way for the American entrepreneur to dream big, and deliver the extraordinary.
3. I am deeply concerned of a Biden presidency. He may or may not still have moderate views, but his party doesn’t. His party does not want this country to Unite. They want to divide it. And if his party wins both the senate and congress, there will be unprecedented pressure for him to enact far left policies: policies that will destroy the last vestiges of our constitution, disenfranchise 50% of our population, and promote CCP interests over United States Interests.
May God have mercy on us all Nov 3rd.
27. October 2020 at 01:16
” . . . or the democratic system cannot work.”
Oh dear, ‘still’ ‘banging on’ about ‘the democratic system’?
“Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism. “
https://www.cambridge.org/core/services/aop-cambridge-core/content/view/S1537592714001595
27. October 2020 at 01:21
“Let’s just take one example: a $15 wage might sound like a warm-hearted proposal from a caring politician, but the consequence of those policies will only lay off American workers, and cripple more industries.”
Only if the wrong assumptions are made re the US labor market?
27. October 2020 at 03:36
The elephant in the room is the catastrophic voluntary Iraq War. That’s why Bush was the worst President in my lifetime.
It wasn’t The Great Recession I blame Bush for so much as the fact that the economic recovery during his Administration was appallingly weak. Manufacturing jobs got hammered to make room for China.
We forget, but 2019 was probably the best economy we’ve seen this century; record low unemployment and record high median wages. All gone now. I know white people think Trump is a racist, but this is why he has higher Black and Latino support than your typical Republican.
Sorry, Trump’s presidency has been much, much better for America and the world than Bush’s.
27. October 2020 at 07:48
SS: “[Trump’s] mostly the lackadaisical response to Covid-19” – lol! You do realize the USA was #1 in imposing a quarantine on C-19? A mere six days after the official Wuhan outbreak?
See for yourself at this excellent article here: https://www.brookings.edu/2020/04/02/the-early-days-of-a-global-pandemic-a-timeline-of-covid-19-spread-and-government-interventions/
Note further countries around the world did more than just quarantine but their outcomes differed wildly, proving it’s not just lockdown that works, but rather a host of other factors, including demographics, maybe different strains of C-19, social distancing norms, etc etc etc that one man, the president, has little control over. MAGA?!
27. October 2020 at 08:27
@Brian Donohue
Agreed. The Iraq War was the most consequentially bad decision by any president in my lifetime. The moral, geopolitical and financial consequences have been staggering.
27. October 2020 at 10:19
Harry, You said:
“The current economic data is actually looking good, and the administration has no control over state issued mandates. Not all States are struggling economically, and the ones that are chose to mandate shutdowns.”
This is not accurate. Almost all states are depressed, and mandates have very little to do with our economic problems.
Brian, I don’t see how your comment relates to this post.
Ray, You said:
“You do realize the USA was #1 in imposing a quarantine on C-19?”
Are you off your meds again?
27. October 2020 at 10:50
Scott, you were talking about Bush and Trump. I supplied the embarrassing omission on foreign policy and made the point that Bush’s economic policies were less effective than Trump’s as well. Cheers.
27. October 2020 at 11:28
“… Great Recession is that a real estate slump lowered the natural rate of interest, and central banks such as the Fed and ECB did not lower the policy rate fast enough, effectively tightening policy.”
Why phrase this in terms of interest rates? I’d say the slump reduced the expected price level, or even NGDP trajectory (this is observable) and the Fed failed to restore it to pre recession levels and still has not.
27. October 2020 at 12:57
Brian Donohue,
You said:
“Sorry, Trump’s presidency has been much, much better for America and the world than Bush’s.”
https://www.youtube.com/watch?v=1Z70ReLhMgU
Some Trump supporters are stupid enough to think Hillary and Obama are criminals. What crime did the Michigan governor supposedly commit. They’re not even accusing her of crimes. They just want to lock up political opponents. Trump responds with, “Lock ’em all up.”
If this isn’t worse than a catastrophic, but very limited disaster in the middle east…
27. October 2020 at 13:00
I view trump as the most successful president since Clinton.
Here’s what he didn’t do –
1) Start a major war
2) Enact ObamaCare
He also yelled at Powell when Powell was causing a small slowdown by hiking rates in 2018. Blind squirrel finds a nut but he was right.
Zero evidence exists that Hillary would have handled the virus better than Trump. Optically she would have sounded smarter, but doubtful she would have done better. Or at best a guess.
Trade War with China was pointless. But a trade war is only about .1% as damaging as an actual war.
27. October 2020 at 13:59
Scott,
Good post, really balanced and thoughtful. I agree with Brian also. And “lackadaisical” is my new favorite English word for today. Lack-a-dai-si-cal. Oh my god.
27. October 2020 at 16:22
I agree with some of the sentiments above regarding the Iraq War. But the Afghanistan war/occupation was and is similarly wasteful.
Since and including Vietnam, there is a standard that major US wars must feature copious amounts of carnage, be fantastically expensive, and be counterproductive.
The better postwar Presidents have avoided major foreign entanglements, and include Carter, Reagan, Clinton and, yes, Trump. Obama gets a half-star.
BTW, you may read about the horrific expense of the $2 trillion US green program planned by Biden. Mostly likely a lot of grifting and waste ahead. But there may be some offsets, such as lower fuel consumption and a cleaner environment (not gauged by GDP counts, btw).
In the next 10 years, the US will spend at least $13 trillion on “global security,” including DoD, VA, DHS, black budget, and pro-rated interest on the national debt. Maybe a lot more.
In other words, Biden’s entire green program could be funded by some minor reductions in “global security” spending.
Somehow, the major media outlets cannot even fathom the US budget, let alone ask any sensible questions of presidential candidates.
28. October 2020 at 01:06
“The most likely explanation of the Great Recession is that a real estate slump lowered the natural rate of interest, and central banks such as the Fed and ECB did not lower the policy rate fast enough, effectively tightening policy.”
So all that was required was a cut in interest rates?
28. October 2020 at 10:02
Sean, You said:
“Zero evidence exists that Hillary would have handled the virus better than Trump. Optically she would have sounded smarter, but doubtful she would have done better. Or at best a guess.”
There’s also zero evidence that Trump would not have kept the US out of a war with Iraq. He did support the war.
You can’t have it both ways. Judge people on their record . . . or don’t.
Postkey, You asked:
“So all that was required was a cut in interest rates?”
No!!!! They needed to cut rates relative to the natural interest rate. That might have involved a big rate increase.
28. October 2020 at 11:00
Bush did play a relatively major role in the Great Recession because he exacerbated some fairly obvious economic issues from 2001-2008. So my theory is the suboptimal economy of 2001-2008 was the product of an underlying energy crisis in America that resulted in malinvestment in America and hemorrhaging manufacturing jobs to China. So obviously Bush played up the Housing Bubble in 2004 because it was the lone economic bright spot in his first term AND it helped Jeb look like a successful governor of Florida. But the invasion of Iraq created uncertainty in the oil industry because a stable Iraq would reach its potential as an oil producer and flood the market so in 2002 the oil industry calibrated their investments on the potential of a stable Iraq without sanctions in the near future. Furthermore Bush’s top energy adviser was Rex Tillerson and Lee Raymond and we have multiple quotes from those two during the relevant period in which they assert that America was about to become an LNG IMPORTER in order to meet our energy needs. So the conventional wisdom in the Bush administration was that fracking would never be economical and so natural gas would get more expensive because we would have to import it in the form of LNG and so the Fortune 500 made decisions/investments based on that conventional wisdom.
So one good thing about Trump is that he has put to rest the policy proposals of the Michael Moore/Patrick Buchanan crowd that we have shipped good jobs overseas and we can easily bring them back with tariffs. Trump’s tariffs and trade policies have been unmitigated disasters with the overall strong economy of his first 3 years drowning out what a disaster his signature policies actually have been. But I have long been sympathetic to Moore/Buchanan/Trump trade policies (while being skeptical they could actually work) and the counter factual that could have made America stronger is “what if Pat Buchanan won the 2000 election?” Buchanan is essentially a more thoughtful Trump and I do think America might have been stronger if a more thoughtful version of Trump had come on the scene in 2000.
29. October 2020 at 00:33
‘Postkey, You asked:
“So all that was required was a cut in interest rates?”
No!!!! They needed to cut rates relative to the natural interest rate. That might have involved a big rate increase.’
“The most likely explanation of the Great Recession is that a real estate slump lowered the natural rate of interest, and central banks such as the Fed and ECB did not lower the policy rate fast enough, effectively tightening policy.”
The real estate slump LOWERED the natural rate of interest, but “They needed to cut rates relative to the natural interest rate. That might have involved a big rate INCREASE.’?
29. October 2020 at 10:12
Postkey, The Fed also influences the natural interest rate, via forward guidance.
30. October 2020 at 00:01
No answer was the strange reply.