Bruce Bartlett is a Republican who's most recent book is titled
"Imposter: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy." Bartlett's previous employer - a conservative think tank - fired him because Bartlett's anti-Bush views were making it difficult for the think tank to raise money. Below are some of Bartlett's observations about the current Bush expansion. Something you will immediately notice is Bartlett likes facts, making him anathema to current Republican leadership.
Unfortunately, this excepts are available only through Times select. The following appeared in a column on Marc 6 titled
What Bush Boom?
One of the main criticisms I have received from friends on the right about my new book, "Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy," is that it ignores an important point -- that Mr. Bush's tax cuts have been so good that they in effect compensate for or excuse his huge increases in spending and other anti-free market policies.
When I ask what was so great about the tax cuts, they point to the "booming" economy. I have yet to hear any other evidence offered.
Let's look at the record in the standard way economists do, starting from the trough of the last recession in November 2001. Since that time we see these results, through the latest data:
Real gross domestic product: Up 13.5 percent
Real gross private domestic investment: Up 32.3 percent
Payroll employment: Up 2.8 percent
Standard & Poor's Index: Up 13.9 percent
Viewed in isolation, these numbers seem impressive enough. But without context, they really tell us nothing. To provide such context, I looked at these same statistics over the same time period from the end of the previous recession, which ended in March 1991, according to the National Bureau of Economic Research. This is what we see:
Real gross domestic product: Up 13.25 percent
Real gross private domestic investment: Up 43 percent
Payroll employment: Up 7.7 percent
Standard & Poor's Index: Up 45 percent
Thus we see that real G.D.P. is very slightly higher, but all the other numbers are substantially worse in this expansion compared to the last one. And it is worth remembering that taxes were not cut at all during that business cycle but were, in fact, raised twice. George H.W. Bush raised taxes as part of the 1990 budget deal and Bill Clinton raised taxes substantially in 1993, shortly after taking office. The hallmark of both tax increases was an increase in the top tax rate -- considered anathema by supply-side economists -- which went from 28 percent at the end of the Reagan administration to 39.6 percent during the Clinton years.
Oh my dear lord - a Republican is stating the blatantly obvious - Clinton's economy was better in terms of job growth, domestic investment and stock market performance. And Clinton raised taxes -- and the economy still grew at a healthy pace. My God - the end is near! Dogs and cats will start living together! I should also note a recent Federal Reserve study titled Recent Changes in Household Finances also indicates the Clinton economy was better regarding the growth of median and mean national income and overall person net worth.
I hear this argument all the time from the Right Wing Noise Machine (RWNM) Econ Division: Bush tax cuts are responsible for this current economic expansion. However, there is another argument that offers a far better explanation of the current expansion: Easy credit - not the tax cuts -- is responsible for this expansion.
Let's start with person income. As the Federal Reserve Study cited above indicates, personal mean and median income has grown very slowly from 2001-2004. The median family before tax income rose 1.6% and the median family income before taxes fell 2.3%. The report notes "These results stand in contrast to the strong and broad gains seen for the period between the 1998-2001 survey and to the smaller but similarly broad gains between 1995 and 1998 survey." So, before the Bush policies went into effect, economic gains applied to a broader number of people and were higher.
Here's the second point. The low savings rate indicates people were already living paycheck to paycheck in 2000. The personal savings rate was 2% in 2000 and has dropped to -.7% in the January 2006 personal income statistic.
Finally, personal consumption expenditures have increased about 18% during this expansion on an inflation-adjusted basis. These expenditures are responsible for about 70% of US economic growth.
Let's tie these elements together. The average American was already living paycheck to paycheck in 2000. His income hasn't increased meaningfully since then. But his spending has increased an inflation adjusted 18%. So, where is this new money coming from?
Debt. Total household debt outstanding has increased from 6.529 trillion in the first quarter of 2001 to 11 trillion in the third quarter of 2005. As this analysis from Stephen Church indicates, households required debt for new spending cash totaling 13.1 % of GDP in 2004 and 11.8% of GDP in 2005.
The RWNM also fails to consider the cost of the tax cuts: increased debt to pay for the deficit created by the tax cuts. Bush has yet to balance a budget - and at the present rate of spending he most certainly won't. In addition, total outstanding federal debt has increased from 5.6 trillion to 8.2 trillion - a 46% increase. As Kash at Angry Bear has noted, the actual cost of a tax cut equals the total amount of the debt issued to pay for the revenue shortfall plus the interest on the new debt.
I swear to God, one day I am going to walk into a Republican doctor's office with a cold and he will say the cure is a tax cut. What the current RWNM argument fails to realize is that cheap credit is far more responsible for the last most recent spurt of US economic growth. And considering the total amount of consumer debt is now about 87% of US GDP, we are far closer to the end of this debt-financed expansion than the beginning.