"The Straight Truth About the Bush Economy"
[Guest blogger and American Progress senior fellow Gene Sperling was President Clinton's National Economic Adviser.]
In evaluating President Bush’s recent speeches aimed at talking up the economy to the 63% of Americans who view it as either “bad,” “very bad,” or “terrible,” I would describe the different parts of his speech as “appropriate,” “unwise,” and “downright misleading.”
I think it is appropriate for the President to want to tell the 43% of the public that thinks that we are in an actual recession that we have had solid GDP and investment growth over the last couple of years. I also think it is appropriate for the President to honor our nation’s entrepreneurs, to remind people that globalization has upsides as well as downsides, and to take an optimistic tone in discussing the future.
I think it is unwise, however, to fail to acknowledge that much of the pessimism in the economy is not, as I wrote last August, a mystery we need Sherlock Holmes to solve. As Paul Krugman put it so well in his Monday column, “Americans don’t feel good about the economy because it hasn’t been good for them.”
But it’s downright misleading to ignore the economy’s weaknesses so the White House can falsely claim their fiscally reckless tax policy is an unequivocal success. When it comes to economic policy, President Bush is like the football coach with a 4-12 record who wants to tell you how his strategy has led to the four victories while pretending he has had an immaculate season. So if the President wants to claim his tax cuts have been the primary cause of our current economic performance since the end of the recession in November 2001, here are a few more economic facts he might want to consider.
American families have consistently seen their incomes decline during the Bush Presidency — even when calculating only from the end of the last recession.
– For 2005, average real weekly wages fell 0.4% from $552.75 in December 2004 to $550.60 in December 2005. Since the end of the recession, they are also down 0.4% from $552.58 in November 2001. [BLS]
– For 2005, average real hourly wages fell 0.4% from $16.40 in December 2004 to $16.34 in December 2005. Since the end of the recession, they have been effectively stagnant, dropping one cent from $16.35 in November 2001. [BLS]
– Since the 2003 tax cut, real hourly wages have fallen 2.2% and real weekly wages have fallen 1.6%. [BLS]
– Real median household income has fallen each year Bush has been in office and by nearly $1,000 since the recession 2001 [U.S. Census Bureau, Income Poverty, and Health Insurance Coverage in the United States: 2004, Aug. 2005, Table A-1.]
The President focused on job creation in both recent speeches, but employment growth in the current recovery has been the weakest on record.
– Monthly private employment growth has averaged a meager 59,700 per month even excluding the last recession and the months leading into it — the weakest monthly average for any recovery of this length. [BLS]
– The 4. 5 million job growth in the last two and a half years that the President brags about is weak by historical standards. In the last three recoveries, the economy created 7.9 million jobs during the corresponding 30 month period — 3.4 million jobs more than we’ve seen in the last two and a half years — even with a smaller workforce and smaller population. [BLS]
– The only reason the unemployment rate has fallen to 5% is that a smaller share of the population is working or actively seeking work today compared to before the recession. If labor force participation were as high today, as it was before the recession the unemployment rate would be 6.6%–1.6 points higher than today’s official number [BLS]
– Indeed, this is the first time on record that portion of the population holding a job is down 48 months after the end of a recession.
After seeing enormous gains in the fight against poverty under President Clinton, the poverty rate has risen each of Bush’s years in office, as an additional 5.4 million people have fallen into poverty since 2000. [Census, Aug. 2005, Table B-1]
– The poverty rate has risen each year since the end of the recession“”from 11.7% in 2001 to 12.7% last year as 4 million people fell into poverty. [Census, Aug. 2005, Table B-1]
– African American poverty has also jumped — from 22.7% in 2001 to 24.7% in 2004 as nearly 1 million (864,000) African Americans have fallen under the poverty line. [Census, Aug. 2005, Table B-1]
– Child poverty rate is on the rise — jumping from 16.3% in 2001 to 17.8% in 2004. As 1.3 million children under 18 have fallen into poverty [Census, Aug. 2005, Table B-2]
– This is the only recovery on record where poverty increased from the second to third year after the recession. [Census, Aug. 2005, Table B-1]
Though incomes have fallen, consumer spending growth has continued to propel the economy. Unfortunately, this combination has pushed the personal savings rate to historic lows, debt burdens to historic highs, and exacerbated our already unsustainable current account deficit.
– The personal savings rate has plummeted this year, hitting -2.18% in August — a level not seen since the Great Depression. [Bureau of Economic Analysis (BEA)]
– Americans now pay a record 13.6% of their disposable income to service their debt. Since we’ve had to borrow at record rates to spend beyond our means, debt burdens have risen considerably. [Federal Reserve]
– Thanks in part to our recent fiscal deterioration, net national savings have dropped from 4.9% when Bush took office to -1.0% last quarter– its lowest level since the Great Depression. [BEA]
The transition from budget surpluses to budget deficits was a major factor in this shift to dissavings. In January 2001, the Congressional Budget Office (CBO) projected a more than $5 trillion 10 year surplus. Today, Goldman Sachs predicts a $5 trillion cumulative deficit over the next 10 years. They cite the extension of the tax cut as the “single biggest factor underlying” that prediction.
– The current account has deficit exploded“”hitting a record $199 billion in the first quarter this year and on pace to top $800 billion this year. [BEA, Global Insight Inc. projection in Greg Hitt, "Trade Gap Eases, but Deficit Poised to Break a Record," The Wall Street Journal, 9/17/05]
– We now have to borrow about $3 billion from abroad every business day to support our habits.
While President Bush may be trying to claim that everything positive in the economy is due to his tax policies, I don’t want to commit the same error by trying to tie everything negative to the Administration’s choices. But on the other hand, four years of declining wages, rising poverty and weak job growth is hardly strong validation for a tax policy that has significantly contributed to the largest fiscal deterioration in our nation’s history.