The Dark Days of 2005?

The Democratic narrative is coalescing around the idea that Republicans want to undo all of the progress made during the past two and a half years and go back to the dark days of the Bush White House.
Both Robert Gibbs, Former White House Press Secretary, and Debbie Wasserman Schultz, current DNC Chairperson, have made such claims this month. Two planetary sized assumptions are embedded in this narrative. The first assumption is that the laws passed by the Obama White House are effective remedies to the problems of 2007 and 2008. The second assumption is that the Bush Presidency was a dark time for our nation.


The first assumption has more holes than a wiffle ball. Many of the administration's new laws have nothing to do with economic recovery and are widely perceived as being damaging to the economy. Obama's signature achievement is an unpopular health care bill that increases the cost of hiring for every firm. The stimulus bill blew taxpayer money everywhere except for destinations that would lead to sustained hiring: permanent tax cuts and long term capital investment projects. Cash for clunkers gave a shot in the arm to the auto industry for three months and then left it deflated and impotent for three more. The bailout of the auto industry set a dangerous precedent for government intervention, put ownership of GM into the hands of the UAW for political gain, and eviscerated existing bankruptcy law that should have helped GM restructure their debts under protection from the courts. Dodd-Frank, which stifles the banking system with additional regulation and bureaucracy, has convinced no one that the financial system is safe from future disaster. TARP, the one program that many economists agree helped avert financial Armageddon, was signed into law by President Bush.



Although Democrats have been successful at assigning blame for the financial crisis to greedy bankers, this is fairly transparent class warfare. The real engineers of this crisis were politicians and Federal Reserve officials. Congress, President Clinton and President Bush all share blame for encouraging an irresponsible expansion of home ownership. By extending government guarantees to increasingly low quality mortgage debt the government encouraged a frenzy of real estate acquisition where bankers could collect fees from originating low quality loans and could then sell the loans into government guaranteed pools. The financial crisis was not a failure of business or a failure of capitalism but rather the result of inappropriate government engineering. Highly accommodative monetary policy and vast global liquidity also deserve honorable mentions as important contributing factors.


Although it is rarely questioned, the second assumption is equally flawed. The Bush years were not a dark time but rather a time of considerable prosperity and full employment. Unemployment averaged 5.27% during the Bush Administration. The often maligned Bush tax cuts were fully implemented in 2003 and were followed by a 40% growth in federal tax receipts by 2007.


White House talking points asserting that Republicans want to bring us back to the dark ages of George W. Bush are wholly inconsistent with the reality of President Obama’s performance and President Bush's performance. Over the next 16 months the Democrats will need to craft a more believable narrative to hold the interest of voters.