2012 Election Special

Several months ago the Obama narrative coalesced around some version of how Governor Romney wants to take us back to “the ruinous policies that got us in to this mess in the first place”. One can only assume that what the Obama camp is referring to here is the policies of President George W Bush. Assuming that’s the case, it’s worth taking a look at the key tenets of the Bush Presidency so that we may better understand the risk that we might somehow return to those policies. There were four defining pillars of the George W Bush Presidency. (1) an adventurous foreign policy (2) an unprecedented amount of government spending (3) crony capitalism, or favors and favorites in government (4) controversial tax cuts.





Before we take a look at these four items however, it’s worth pointing out that these four pillars do not include what many experts consider to be the main causes of the financial crisis, which include (1) many years of overly accommodative monetary policy (2) a malfunctioning credit rating system (3) government sponsored entities that took private risks with public money (4) reward systems in the banking industry that often led to irresponsible and high risk behavior. (5) opaque financial derivatives that defied the talents of the most expert credit analysts.



So as we take a look at the Bush record, the financial crisis is already off the table. Each of these five items was firmly in place long before President Bush took office in 2000. Furthermore, banks are as big today as ever before and almost no financial expert believes that a future financial crisis is less likely. In fact, far more experts are predicting financial Armageddon now than in 2007. Now, as for the Bush policies:



President Bush’s adventurous foreign policy was certainly ruinous. It cost our country dearly in terms of blood and treasure and it fractured many allegiances around the world. Whether it made the US safer is debatable, although I don’t believe it did. President Bush isn’t running though. Governor Romney is, and in no way has Governor Romney ever advocated for a militaristic foreign policy. Governor Romney comes across as far less of a Cowboy than “ol W” and exudes both maturity and competence. This brings us to government spending.



On President Bush’s spending record, President Obama is in a glass house. For President Obama to decry President Bush’s spending record would simply not be credible, although that has not stopped him. We regularly hear about how President Bush put things on credit cards and sought benefits that nobody was asking for, which is maddeningly hypocritical. But more importantly, I have met no one who doubts that Governor Romney would be a more restrained and more responsible spender than President Obama. It doesn’t come up as an issue because this is simply understood at a profound level.



Next is “crony capitalism”, which was nothing for the GOP to be proud of. This was much more of a problem for the Republican Congress than the Republican President however, and they were duly punished for it in 2006. The President is also in a glass house on this though. After nearly a trillion dollar “stimulus” boondoggle for unions and green energy companies the Obama Administration has lost all credibility with respect to fiscal fairness. After four years of holding inducements in one hand and a stick in the other for banks and insurance companies, there is a long list of business friends and enemies at the White House.



This brings us to the controversial Bush tax cuts. President Obama is always quick to point out that these were cuts that we could not afford and that nobody was asking for. I have never understood how the president always gets away with saying this because the truth is that after the second round of tax cuts was phased in, federal tax receipts increased by 40% between 2003 and 2007. This shattered CBO projections. What part of having 40% more tax revenue is not affordable? Are we to believe that the increase would have been greater, say 50%, without the tax cuts? Maybe nobody brings this up because they fear being associated with President Bush. People should be given more credit than this however. Americans remember that unemployment averaged 5.27% during the Bush Administration. Maybe they don’t remember specifically, but they remember it generally, emotionally.



Republicans have not convincingly or systematically laid out these points and as a result they will have a very close race.