Dispelling myths about Bush’s economy
Bill Rinner | Friday, February 13, 2004
Despite what you hear from Democratic presidential hopefuls and Republican pundits, the Bush administration can take little responsibility for the state of the American economy since January 2001.
Complex macroeconomic trends, business cycles and even the meaning of the words “gross domestic product” often elude the understanding of average Americans, and those with a party stance to push can pick and choose their statistics to shove down our throats to either disparage Bush or glorify him. Consequently, a number of myths have evolved regarding Bush’s connection to economic developments that must be addressed.
Myth number one: “Bush has lost millions of jobs since he took office.” This claim not only ignores economic developments at work even before Bush took office, but also assumes that Bush is directly responsible for every business’s personnel decision made immediately after his inauguration. The stock market bubble and ensuing tech crash, followed by the shock of Sept. 11, took a devastating toll on American business that had already experienced a recession inherited before Bush even took office.
The recession and bubble-burst took a double toll on employers; cutting or freezing hiring during periods of negative growth is a common practice, but an entire sector faced downsizing as over-investment in tech stocks reduced to rubble, causing the substantial rise of unemployment that is currently declining.
Myth number two: “Bush has allowed the outsourcing of countless jobs to foreign countries.” Corollary to myth number one, this myth is not so much a falsehood as it is a misunderstanding of the nature and motivation for outsourcing jobs. Until recently, hardly any politicians seemed to pay much attention to outsourcing factory and tech jobs, but as the practice increased over the last few years, elected officials now perceive it as a potential hot issue, and pending legislation is piling up. The Senate passed a bill in late January banning the outsourcing of government technical jobs to India that Bush will likely sign into law, but the president also has intimated that he approves of outsourcing as a necessary practice.
Is Bush in the pockets of his corporate cronies, or does he simply possess a better understanding of the global economy than those who decry outsourcing entirely? Bush, who possesses a Harvard MBA, undoubtedly understands that for any business to grow, it must find ways to cut costs in the short run, including jobs. One consideration that opponents of outsourcing overlook is that businesses require ways to trim costs to grow and ultimately provide more jobs both at home and abroad. Taking a hard-line stance against outsourcing could discourage certain businesses from creating any jobs at all.
Also overlooked is the existing business atmosphere that causes outsourcing itself. Compared to Third World countries, we pay higher wages, maintain tighter environmental regulations and provide a friendly environment for unionization, so businesses jump on the opportunity to move factories to a friendlier locale. Wedging businesses between strict restrictions and broad based laws that prevent outsourcing could lead to yet another recession, so legislators must find a way to balance the two conflicting forces at work.
Myth number three: “Bush has created the highest deficit in United States history.” Bush’s record of high spending since he took office is indisputable, but this claim is not true when analyzing the deficit as a percentage of GDP, a measure that takes the current level of growth and the current size of the economy into account. During the early to mid ’80s and the early ’90s, the deficit as a percentage of GDP was higher than the most recent fiscal year. Both periods of high deficits preceded periods of sustained growth, and critics of yesteryear echoed those of today who claim that the deficit will run the economy into the ground. History proved the critics wrong, and if the country’s growth continues, the deficit will likely decrease to more manageable levels.
Republicans once claimed to be the party of deficit hawks, but as their commander-in-chief spends like an old-school liberal, the opposition party must naturally fill the void and champion a platform of balancing the budget or at least curbing federal spending. As the election draws near, the Democratic candidate must present a sound fiscal policy that addresses purportedly excessive spending by the incumbent.
Will the candidate propose to limit military spending while the country is at war? Will he overturn Bush’s massive Medicare expansion? Will he take the unpopular stance of raising taxes? More to the point, after Bush has spent the last two years spending like a Democrat, will the Democrats respond by reversing their usual platform of funding a wide variety of social programs?
Even if Bush does not serve a second term, he has stuck a hefty thorn in Democrats’ side, where they must either embrace conservative spending principles or risk increasing the deficit to even higher levels. Perhaps there is method in the madness of Bush’s spending after all.
Bill Rinner is a junior economics major studying at the London School of Economics. For Valentine’s Day, he decided to write a column that had as little to do with love as possible. His column appears every other Friday, and he can be contacted at [email protected]
The views expressed in this column are those of the author and not necessarily those of The Observer.