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The Pernicious ‘No Real Economic Progress’ Myth
The Bush years have been better for Americans' wallets than most critics admit.
The conventional wisdom (CW) is that under President Bush:
- The country’s economy has grown very little and incomes have never gotten back to where they were before the recession.
- The rich have been getting richer, especially because of the Bush tax cuts, while the poor and the middle class have been getting ever fewer crumbs.
While its performance hasn’t been as good as it could have been, the Bush economy has acquitted itself well enough that the CW should be discarded.
Let’s start with the overall economy.
Based on quarterly economic growth data from the government’s Bureau of Economic Analysis (BEA), the economy is almost 19% bigger now than it was at the beginning of the fourth quarter of 2001, the first quarter that the new president’s first budget was in effect (three of the five quarters prior to that had negative growth, first because of the bursting of the Internet bubble, and in the case of the third quarter of 2001, the September 11 terrorist attacks). Real growth during that time has averaged 2.56% — not stellar, and not as good as the best of the Clinton years, but certainly not the awful performance the CW typically assumes.
Why hasn’t it been better? I’m not alone in arguing that the post-Enron wave of burdensome regulation imposed by the Sarbanes-Oxley (Sox) law has held the economy back, both by imposing onerous compliance costs on publicly traded companies, and by largely shutting off the initial public offering market to all but the most stellar candidates. The next president and Congress are going to have to do something to reduce the excesses of Sox if we are ever to return to consistent growth of 4% or more.
Next, let’s look at overall income growth:
At the end of 2007, the average American was almost 8% better off than in 2002 ($26,078 divided by $24,176), the trough of the post-bubble, post-9/11 recession. Again, this is nothing to party hearty over. But keep in mind that BEA data excludes capital gains, the benefits of which tend to skew towards those with higher incomes; so the measurements listed above better reflect what “working people” are seeing than other available measurements.
Many of the same people who deride the Bush economy, especially its tax cuts, won’t face up to three very important points illustrated in the chart above.
First, the Clinton economy didn’t become anything special for the average person until 1997, the first year of Bill Clinton’s second term. Why is that? It certainly wasn’t because of the tax increases of 1993. It’s clear from the chart that, if anything, they held back an economy that, given the technology improvements that were occurring at the time, should have been roaring after the early-1990s recession.
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Tom Blumer owns a training and development company based in Mason, Ohio, outside of Cincinnati. He presents personal finance-related workshops and speeches at companies, and runs BizzyBlog.com.
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12 Comments
1. BizzyBlog » New Pajamas Media Column (’The Pernicious ‘No Real Economic Progress’ Myth’) Is Up:[...] It’s here. [...]
Aug 14, 2008 - 4:24 am 2. PJBlows:Since you live in Ohio Tom you can regale us with economic success stories in your wonderful state. Please concentrate on Cincinnati, Cleveland, Toledo, Columbus or any other city over 10,000 pop. please.
Aug 14, 2008 - 7:36 am 3. David Thomson:“Since you live in Ohio Tom you can regale us with economic success stories in your wonderful state.”
The citizens of Ohio are their own worst enemy. They have consistently supported socialist style economic measures. The same holds true for Michigan and California. This stupidity is not the fault of George W. Bush! They have nobody to blame but themselves.
Aug 14, 2008 - 8:26 am 4. Charlie (Colorado):PJ, if Ohio isn’t keeping up with overall results, do you suppose it might be something in Ohio that caused it?
Aug 14, 2008 - 8:33 am 5. Fred:I live in Indiana just outside of Cincinnati and from here it looks like Ohio will do anything to get their businesses to leave. Higher taxes, more regulation, higher workman’s compensation, smoke-nazis, etc. I think the Ohio Chamber of Commerce actually puts out a helpful pamphlet, “How to relocate your business to Texas.”
Aug 14, 2008 - 8:40 am 6. David Thomson:“How to relocate your business to Texas.”
I live in Texas—and our economy is booming. If nothing else, there is a lot of oil drilling going on! Our population is also growing by leaps and bounds. The economic refugees of the decadent Northern states are getting here as fast as they can.
Aug 14, 2008 - 8:56 am 7. Tom Blumer:PJB: You asked about Ohio.
Relatively conservative and largely GOP-dominated Metro Cincinnati is doing all right. The Dem-dominated city itself is struggling, but showing some signs of improvement, thanks to what appear to be (finally) a determination to do something about the crime problem.
Metro Columbus outside of the city itself is still doing pretty well.
Dem-dominated Cleveland, Akron, Youngstown, Canton, Toledo, and to a lesser extent Dayton are falling of the cliff.
The commenters who say we mostly have ourselves to blame here in the Buckeye State are correct.
Thanks for asking. :–>
Aug 14, 2008 - 11:13 am 8. Northern Light:If it’s true that everyone is doing better thanks to the economic policies of the Bush administration then all the Republicans have to do is tell all those who are doing better now than they were in 2000 to vote Republican and those who are doing worse should vote Democrat. What makes this strategy perfect is the Democratic Party has been saying the same thing since 2006.
But would somebody please tell me why the party that says it’s fiscally responsible is running a monster deficit? It seemed to start before 9/11 so that can’t be the cause and the Republicans controlled the House, Senate, and The White House between 2000-2006 so it’s hard to blame Democrats. Perhaps the Republicans only read half of Keynesian Economics 101. Funny, I’ve never heard a Republican say anything nice about Keynes.
Aug 14, 2008 - 11:55 am 9. Lefty Flynn:Richard Nixon said, “We’re all Keynsians now”.
Aug 15, 2008 - 3:12 pm 10. BizzyBlog » The Pernicious ‘No Real Economic Progress’ Myth:Feel better Northern Light?
[...] This was originally posted at Pajamas Media on Thursday, with the subheadline, “The Bush years have been better for Americans’ [...]
Aug 16, 2008 - 8:30 am 11. JeffA:If I make 1,000 more this year but my food, heating/cooling, health-care, and transportation costs went up by 2,000, how would I rate the performance of the economy and my place in it? The author only examines half the equation.
Aug 18, 2008 - 2:03 pm 12. Tom Blumer:JeffA, much (not all) of what you’re referring to relates to 2008; the jury is, obviously, still out on that.
Aug 20, 2008 - 8:46 am