Tuesday, September 23, 2014

Six Years Later; Did Bush Crash the Economy?

Over and over the blame Bush Liberals repeatedly excuse Obama for not taking ownership of the economy or even his own policies. You still hear that Clinton handed Bush deficit free economy and Bush's policies crashed the economy (granted after 7 years of relative prosperity). But again he need to go back to the Clinton years to understand the 2008 economic meltdown was years in the making.

The seeds of the great recession were sewn during the Clinton administration. In 1999, the Glass Stegal Act was repealed; the same year Fanny Mae under the control of CEO Franklin Rains (previously the Chairman of the US Office of Management and Budget under President Clinton) launches the American Dream Commitment (ADC) with a stated goal of pledging $2 trillion dollars to increase home ownership for 18 million American families.. At this time Fannie Mae was easing credit requirements for home mortgages loans in response to increasing pressure from congress. The largest mortgage house that pushed these sub prime loans was Countrywide, at the behest of Democrat Senator Chris Dodd. Barney Frank was the leading Democrat on the House Financial Services Committee from 2003 until his retirement, and he served as committee chairman when his party held a House majority from 2007 to 2011. The end result was the housing market collapsed because the borrowers of the sub-prime mortgages defaulted on their loans.

While conservatives do believe in reducing regulations, they also believes in fiscal responsibility; no fiscally response congress would pressure the housing market to give homes away; it was surely put in place by the Democrats and Franklin Rains cooked the books of Fanny Mae; Raines resigned in Dec 2004 when his numbers weren't adding up, it was determined he misstated over $6 billion in profits adding about $90 million to his bonuses. When it was discovered that home sales were significantly below what Raines had claimed, the result was congressional pressure to catch up, championed by Barney Frank.

As far as Clinton's balanced budgets, you have to remember first that the military was being down sized after Desert Storm and he spent immediately spent the entire projected peace dividend; he also used the Social Security surplus ($2.6 trillion that had accumulated the prior 10 years) to pay down the national dept (borrowed money that is just being returned now), Also due to his taxes on the rich, the US trade deficit plummeted and middle class debt skyrocketed The Budget and Deficit Under Clinton ; so once again a Democrat makes the middle class pay. Then Bush had to ramp up the military as a response to 9/11 adding back the money that Clinton used to balance his budgets. So yes, Clinton had a balanced budget, but he raided the cookie jar to do so, leaving Bush 43 holding the bag.

As far as Democrats and better Economic growth, economists have never been able to show that it is a result of Democrat polices. A recent study from Princeton is explained, "Blinder and Watson have shown that the president has little effect on the economy. Economic performance is determined by factors that are largely outside the control of public policy, or at least the kind of policy that is directly controlled by the Commander in Chief. Explaining the mystery of fast economic growth under Democratic presidents"; More than anything else it boils down to economic trends that are out of the Presidents control; "Nixon, Ford, and George W. Bush were unlucky to have their presidencies coincide with large increases in oil prices, while Democratic presidents, with the exception of Carter, served during a time of flat or falling energy prices, a dynamic that can provide big boosts to the domestic economy." There is also a Technology benefit, again out of the hands of the President; "The best example of this dynamic is the rise of the Internet during the Clinton administration.

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