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 In 1999, the Glass Stegal Act was repealed; the same year Fanny Mae under the control of CEO Franklin Rains (previously the Chairman of the US Office of Management and Budget under President Clinton)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.

The BP Oil Disaster; Obama's Clinton/Bush Sub Prime Meltdown

In a recent article on his blog, Clinton Catalyzed Gulf Oil Drilling Boom Dick Morris shows the many similarities between the BP oil disaster and the sub-prime mortgage meltdown; both had unintended consequences due to government not knowing what it is doing and both had their beginnings with the Clinton administration.

In 1995 President Clinton signed the Outer Continental Shelf Deepwater Royalty Relief Act, which encouraged the oil companies to drill deep-water wells in the Mexican Gulf. This was an act that was cheered on by the Republicans in Congress; the oil industry took its cue from Washington and went full speed ahead into drilling and production in deepwater Gulf oil wells with the predictable result that something, somehow, sometime would go very, very wrong and that nobody would have the faintest idea of what to do about it (Dick Morris).

In 1999 the Financial Modernization Act (FMA) set the stage for the sub prime mortgage bubble. The act repealed the Glass Stegal Act in 1999, which removed the boundaries between Commercial and Investment Banking, this also allowed the bundling of mortgage back securities which previously had only been allowed by Government-Sponsored Entity, such as Fannie Mae. And finally, the FMA re-instituted naked-derivatives such as Credit Default Swaps. 2000 under pressure from the Clinton Whitehouse, Franklin Raines (Clinton's former Secretary of US Office of Management and Budget) institutes the American Dream Commitment (ADC), and the bubble forms and starts to inflate.

All three Administrations – Clinton, Bush, and Obama – bear the blame for this (BP Disaster) abject failure. None took the danger of a massive spill seriously or sought to hold up the massive expansion of off shore drilling until failsafe measures could be developed (Dick Morris).

Of course, there is still the blame bush crowd, that claim the current lack of regulation and poor contingency planning was inherited by President Obama. This ignores the facts from my previous blog, A Note On How President Obama Can Really Take Ownership of the BP Oil Disaster, “that while oil industry gave twice as much money to the Republicans as Democrats, BP oil gave twice as much to Obama over McCain during the presidential election. President Obama also appointed BP senior manager Silvia Baca to the federal office of Minerals Management Service and BP’s chief scientist Steve Koonin as undersecretary of science to the Department of Energy. Then, when the President created a commission to look into the BP Oil Disaster, he chooses William K. Reilly as a commissioner, who is currently on the payrolls of both ConocoPhillips and Dupont”. You also have Obama’s secretary of Energy, Steven Chu. Chu previously received a $500 million grant from Koonin when Koonin was at BP. Koonin then followed Chu to the Department of Energy.

But, as with the subprime crisis, policy initiatives taken during the Clinton years – with the best of motives – were implemented without adequate regulation and without due consideration of the dangers involved. We are now suffering mightily for this failure of foresight and planning (Dick Morris).

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