Today’s poor jobs report, and President Obama’s ungracious reference yesterday to the parlous state of the economy at the end of the Bush administration, will renew the debate about how much responsibility Obama bears for the current weak economy and how much of it is Bush’s fault. Personally, I’ve never believed that a president’s policies have much impact on the economy, in the short term. And I doubt that the presidency of either Bush or Obama provides a good explanation for our sorry jobs picture.
Let’s start with Obama. I have no trouble accepting the conservative argument that his regulatory policies, coupled with Obamacare and a general hostility towards business, have hurt the economy. And I doubt that the stimulus was money well spent, even for the narrow purpose of short-term job growth.
But I’ve seen no good projection of, say, what the employment numbers would look like in the absence of the stimulus and in a different regulatory environment, and I question whether such a study could reliably be performed. Republicans like to rely on old Obama administration estimate of what unemployment would be with and without the stimulus program. It’s fair to do so from a political standpoint. But these estimates, and the arguments based on them, should not be confused with serious economic analysis.
In the absence of a reliable analysis, I revert to my view that a president’s policies have little impact on short-term economic health. To me, then, the main cause of our current weak economic climate is to be found in deeper trends, including those underway when Bush left office.
But this doesn’t mean that Bush bears much responsibility for our economic woes. The 2008 recession was closely related to the collapse of the housing market. The best analyses I’ve seen of the recession, and of the housing market collapse, come from Stanford economist John Taylor. He has cited two main culprits: excessively low interest rates and the provision by banks, under political pressure, of home loans to people who couldn’t afford to pay them back.
Bush did not set interest rates; that was Fed’s work. And Bush bears little responsibility for the crusade, carried out for years, to make sure low income folks could buy homes. That crusade was led by liberal Democrats, as one would expect given that low income folks are a core part of the liberal base.
The Bush administration, in fact, warned about the mischief that was emanating from Freddie Mac and Fannie Mae. To be sure, Bush and congressional Republicans should have done more. But the Republicans never had the votes to roll back the liberal Democrats’ affordable housing agenda. Attempting to do so would have led to charges of racial insensitivity, and worse, with no policy payoff at the end of the day.
And foremost among those hurling this charge surely would have been Sen. Barack Obama.
In fact, Obama’s commitment to coercing banks into making loans to poor credit risk individuals goes way back. This was a core element of the community organizing movement in the early 1990s. ACORN used to stage sit-ins and other coercive action directed at Chicago banks that had the audacity to confine their loans to those who were very likely to repay them. As Stanley Kurtz has noted, Obama was recruited by Chicago’s ACORN to run training sessions in “direct action.”
So I have little sympathy for Obama when he frets that he’s being blamed for a mess that Republicans left him. The president did inherit a mess. But he was also present at its creation, and his Party brought it to fruition. Let’s call this poetic justice. Or the chickens coming home to roost.