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Comparing job growth among presidents

Ron Brownstein notes that "if the economy produces jobs over the next eight months at the same pace as it did over the past four months, the nation will have created more jobs in 2010 alone than it did over the entire eight years of George W. Bush's presidency."

As Brownstein admits, this can seem to say more than it actually does. For all its unpopularity, for instance, TARP worked to stabilize the financial sector and it was put in place by the Bush administration. So the Obama administration owes them a thank you card for that one. On the other hand, the Bush administration did nothing about the housing boom -- save to encourage it -- or the excesses in the financial sector, so that goes on the other side of the ledger.

You've also got the simple effect of timing. When George W. Bush entered office, unemployment was 4.2 percent. It was the tail end of a stock market boom driven by the tech bubble. When he left, it was 7.7 percent. But if he'd left one year before, it would've been 5 percent, which wouldn't look so bad.

What we can say is that George W. Bush's pre-crisis policies and regulatory approach contributed to a slew of economic catastrophes. He also ran huge deficits given that we were in a sustained period of growth. By contrast, Obama's stimulus has been, from an economic standpoint, suited to the times, and his administration has done an effective job finishing the stabilization of the financial sector. They've not done enough on housing, however.

By Ezra Klein  |  May 14, 2010; 5:56 PM ET
 
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Comments

Who should be taking the blame for lack of progress on housing? Wunderkind Shaun Donovan has been pretty much unheard of (I think I read he was in Brazil awhile ago). Obiviously it's a problem area, so what's keeping the the congress working on it?

Posted by: Owen_Truesdell | May 14, 2010 6:59 PM | Report abuse

"Who should be taking the blame for lack of progress on housing?"

Completely off-topic question, but...

It was a B-U-B-B-L-E. The wrong thing to do would be to re-inflate a bubble. The market will eventually return to normal, but don't confuse the mid-2000's for normal - that time period was not normal.

Meanwhile there is little the government can or should do about housing prices. The best we can do is have programs designed to make sure that people who can possibly manage to avoid foreclosure will get some reasonable level of help doing so.

Posted by: Patrick_M | May 14, 2010 7:06 PM | Report abuse

Patrick,

Agreed, we do not want to reinflate the bubble.

The government could do a lot to reinflate housing prices - none of it good in the long run - but reinflate it could.

Just a few ideas:

A new, bigger tax credit - say $25,000 per home.

Buy foreclosed homes and bulldoze them.

Prohibit construction of new homes for awhile.

Set in a schedule of rising minimum downpayments for FHA loans - say 3.5% in 2010, 5.0% in 2011, 10% in 2012, etc.

Loosen credit requirements - direct FNMA and FHLMC to buy subprime loans.

Posted by: justin84 | May 14, 2010 8:12 PM | Report abuse

By the way, complaining about Bush's deficits isn't consistent if you're praising Obama's.

In the 2001 downturn, unemployment rose from 3.8% to 6.3% from 2000 to mid 2003 - basically for most of Bush's first term. Bush kept being attacked for weak growth. Bush ran a deficit that topped out around 3.5% of GDP, and that deficit was at 1.2% of GDP in 2007. Like today, the Fed had interest rates at historic lows, and people worried about the risk of deflation.

Obama's FY2011 budget suggests a budget deficit of 10.6% with unemployment expected to be in the mid 9% range.

So an extra 3% of unemployment not only requires a 7% increase in the budget deficit, but the 3.5% budget deficit in the context of 6%+ unemployment was bad but a 10.6% budget deficit with 9%+ unemployment is not only prudent but potentially too small?

Yes, Bush had budget deficits when back at 'full' employment, but the Obama budget assumes a 4.2% deficit - larger than any of Bush's - in 2020 when unemployment is about 5%.

So say what you want about budget deficits, but you can hardly call Obama's responsible and Bush's reckless. You can say either was a waste or either was probably appropriate for economic conditions, but not both. Consider the likely attacks Bush would have endured from Democrats - such as Krugman - in mid 2004 if he had run a balanced budget and unemployment was still in the high 5% range (higher if you believe deficits increase demand materially). Kerry & Co already tried to compare him to Herbert Hoover as things were!

While much of the Bush deficits were related to tax cuts, a great deal came from government spending, particularly on the military, along with various ad-hoc stimulus programs, tax credits to children, and regular automatic stabilizers in the budget.

Posted by: justin84 | May 14, 2010 8:14 PM | Report abuse

justin84 -

Bush deficits were the result of massive tax cuts at the high end, the wars in Afghanistan & Iraq, and unfunded programs like the prescription drug benefit, not FDR style jobs programs. Most of our current deficit is the result of that legacy.

Merely creating a budget deficit by tax cuts and regime change on the other side of the world is not the same as creating an economic stimulus with targeted spending to preserve and create jobs and thereby stimulate demand. It is the difference between investing your savings in building your business or blowing it on drugs. Bush's deficits were a lost weekend in Las Vegas for the nation.

I am glad we agree that reinflating the housing bubble would be a bad thing. It is funny to me that some people think the government should make housing artificially expensive again...I don't remember anyone arguing that the government should re-inflate the value of failed internet start-ups after the dotcom bubble burst. However, to your list I will add one idea that I think would be fair. Phase out the mortgage interest deduction over ten years. That would create an incentive to buy sooner rather than later, and would ease the deficit over time.

Posted by: Patrick_M | May 14, 2010 8:38 PM | Report abuse

The FY2009 deficit when Obama took office in January 2009 had just been projected to be $1.2 trillion by the CBO (1/7/09). The actual budget came in at $1.4 trillion, thanks to stimulus spending and tax cuts, an extra COLA for social recipients, extra and extended unemployment benefits. TARP money came back faster than expected, so reduced the deficit from the projection.

Now hovering about 10% of GDP, Obama's budgets plan to reduce it to well below half of that by 2015. We will have a ways to go to cut the deficit even then, but it will have been a start.

There really is no way to compare a president who inherits a $200 billion surplus and leaves with a $1.2 trillion deficit with a president who inherits that $1.2 trillion deficit in the midst of a sever recession and leaves office with the deficit at, say, $500 billion.

Posted by: lnpbgv | May 15, 2010 4:00 AM | Report abuse

I think you guys are missing my point. I'm not saying Bush was a poster child for fiscal prudence, and fighting wars of choice is in general a bad idea.

Bush undertook a mix of increased government spending (from $1.863 trillion in 2000 to $2.293 trillion by 2004, and several hundred billion in excess military expenditures) and tax cuts (government revenue fell from 18.96% of GDP in 1997 to 15.84% in 2004 - since revenue rose back to 17.97% in 2006, during times of equivalent unemployment, we can say tax cuts reduced revenue on net of about 1% of GDP annually). I'm saying that a consistent Keynesian would believe that this would stimulate the economy.

The Obama Administration is using a mix of government spending programs and handouts to stimulate the economy.

This includes:
$116 billion in payroll tax credits.
$70 billion for the AMT fix.
$51 billion in corporate tax breaks.
$51 billion in other tax breaks.
$82 billion in aid to low income Americans.
$147.7 billion in healthcare transfers.
$90.9 billion in education.
$51.2 billion in infrastructure investments.
$29.5 billion in government vehicle investment.
$61.3 billion in energy investment.
$12.7 billion for housing.
$8.9 billion in science.
$18.1 billion random other things.

Several things standout.

For starters, lots of this package is in the form of tax cuts - about $288 billion worth.

The actual investment items only add up to $160 billion (including housing and science), spread over 2 years. This is about $80 billion/yr.

That $80 billion in extra investment doesn't look a whole lot different in size than the extra war spending - and that war spending increased wages paid to soldiers, went to suppliers for weapons, munitions, vehicles, etc.

Aid to the states is all fine and good, but unless it keeps getting extended for the next several years, bloated state budgets will get cut back.

All I'm saying is that while the specifics of the spending areas (military vs. public vehicles and roads) and tax cuts (short term handouts which largely get saved vs. a top rate tax cut which didn't much increase the incentive to earn income) are different, why doesn't Bush get credit from Keynesians for running deficits of 3.5% of GDP when unemployment rose from 3.8% to 6.3% during his first term whereas Obama deserves praise for running deficits of 10.6% of GDP when unemployment rises from 4.4% to 9.9%?

Posted by: justin84 | May 15, 2010 9:45 AM | Report abuse

By the way, going off of these two sites for data:

http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009

http://www.usgovernmentspending.com/downchart_gs.php?year=1995_2015&view=1&expand=&units=b&fy=fy11&chart=F0-fed&bar=1&stack=1&size=m&title=&state=US&color=c&local=s
(yeah I know this guy is a tea partier but I cross checked his data and it looks pretty good).

Posted by: justin84 | May 15, 2010 9:52 AM | Report abuse

Jobs increased after the Iraq War. The economy got better too. But it was a short-lived rally.

The Iraq War also caused energy prices to skyrocket as well as home construction costs to drastically rise globally as materials such as concrete and timber became in short supply. People foolishly bought those homes despite the increased costs and that in turn made the housing bubble even worse for them when it crashed.

The soaring energy costs caused by the Iraq War directly contributed to the breadth and depth of the current recession, quite possibly turning an ordinary downturn (recession) into a historic one.

Also, Bush quietly presided as energy companies like enron stole $100s billions from western states in the fake energy crisis of 2001. Almost overnight states like California went from having surplusses to giant deficits, even before the current recession started. And once the current recession started--bad timing for those western states whose treasuries had just been depleted by Kenny Boy Lay and Georgie Porgie (whilst Arnold sat on the sidelines cheering them on)--their fiscal situations turned from worse into a nightmares.

Add to all that everything Ezra said (doubling the debt, letting the foxes rule the hen house, slashing regulations, increasing derivative leverage ratios from about 1-10 to 1-30, and so many other incompetent ideas), and we are lucky we are not in the midst of total economic collapse because of Bush.

Like Obama said, Bush drove us into a ditch, and now Sarah Palin wants the keys to the car.

Fool me once, shame on me.
Fool me twice, shame on independents.

Posted by: Lomillialor | May 15, 2010 10:20 AM | Report abuse

justin84 says:

"That $80 billion in extra investment doesn't look a whole lot different in size than the extra war spending - and that war spending increased wages paid to soldiers, went to suppliers for weapons, munitions, vehicles, etc."

Even setting aside the question of the accuracy of your analysis, it is hard to think of any way of spending money that is more of a dead end for the purpose of economic stimulus than to buy things that go "boom!" in some rat hole half way around the world. If you own a business, are you better off investing in more skilled employees and more advanced equipment for production, or in a big bag of firecrackers?

"Aid to the states is all fine and good, but unless it keeps getting extended for the next several years, bloated state budgets will get cut back."

The notion that any state budget is "bloated" is just a a laughable propaganda talking point. States spend their precious and very limited revenues to provide the most basic social services in our society: essential infrastructure maintenance, justice and law enforcement systems, and education. States don't waste a trillion dollars invading Iraq like crazed Republican Presidents.

An adequate counter-cyclical stimulus investment would restart economic growth, which will lead to the states again having adequate revenues to meet their obligations. Aid to the states as a component of stimulus is an extremely good investment, it helps to preserve jobs and essential services at the same time. Allowing state budgets to collapse will only increase unemployment, further reducing demand in the private sector and increasing unmet needs for basic services.

Posted by: Patrick_M | May 15, 2010 2:27 PM | Report abuse

Since Herbert Hoover every Democratic left office with the unemployment rate lower than when he took office, but only one Republican president left office with a lower unemployment rate than he inherited.

If you compare the growth in employment from the end of the recession under George Bush to the cyclical growth in employment in every other economic expansion, Bush still had the weakest employment growth of any expansion on record even before employment growth plunged in the latest recession. No matter how you cut it,
employment growth under Bush was the worse on record.

Posted by: seerrees | May 17, 2010 10:55 AM | Report abuse

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