September 9, 2010
The Good Old DaysBy Randall Hoven
When he was running for President in 2008, Barack Obama frequently used the phrase "the last eight years." Now that he's president and it's two years later, he often uses the phrase "the last decade." The standard Democrat story is that our current troubles are simply the result of some bad trend set into motion the very second George W. Bush stole the 2000 election -- that we've had a full decade of horror and decline.
Our JournoList friends can prove with Queeg-like geometric logic that current deficits, for example, are mostly Bush's fault and that Obama, or any other Democrat, is virtually blameless. Here is one their favorite charts.
Source: Ezra Klein, The Washington Post.
Allow me to refudiate. This will take some doing, so I will break up my refudiation into three articles, a sort of before, during, and after: the good old days, two years that changed the world, and the end of Western civilization as we know it.
The good old days were those when fiscal year budgets were written and passed by a majority-Republican House and Senate and signed by Republican President George W. Bush. Those four years culminated in 2007, which I'm afraid will forever look like heaven on earth in retrospect.
By 2009, the world would look completely different. In a future article, I will address 2009 and what happened between 2007 and 2009, not the least of which was a complete reversal of party control of both Houses of Congress and the presidency.
After 2009, the deluge. Western civilization would be over, though its inhabitants would not quite be aware of it yet. That also will be addressed in a future article.
For now, I return to 2007. While George W. Bush was president for eight years, there were only four years in which both Houses of Congress were also Republican: 2003 through 2006. Congress writes budgets one year ahead, so those Congresses wrote the budgets for fiscal years 2004 through 2007. (You might think the Republicans also had Congress in 2001 and 2002. They didn't. Jumpin' Jim Jeffords made sure of that.)
(Unless otherwise stated, I use fiscal years, running October through September, from here out. That's the way the federal government does its books.)
Take a look at what those darned Republicans did when they wrote budgets.
Sources: OMB (see Table 1.2) and CBO. (WOT is War on Terror.) The fifty-year averages are for the fifty years prior to 2007, or 1957 through 2006.
Why are those averages meaningful? Because they had been holding for the past half-century. For the fifty years prior to 2007, revenues averaged 18.0% of GDP, and outlays averaged 20.1%. Moreover, the revenue extremes were 16.1% and 20.6% of GDP, and the outlay extremes were 17.0% and 23.5%. We had had half a century of fairly stable budgets (believe it or not) as fractions of GDP.
(For the statistically inclined, the linear regression estimates of revenue and outlays for 2007, based on the previous fifty years, are 18.4% and 21.1% of GDP. The actual values were 18.5% and 19.6%.)
Spending. Did Republicans spend like crazy? No. Every year was at or below the fifty-year average. Also, there was no upward trend at all. In fact, spending went down that last year.
Tax Cuts. Did the Bush tax cuts, which became effective in 2001 and 2003, decimate revenues? No. In fact, revenues grew every fiscal year that a Republican Congress wrote budgets. The trend was, in fact, positive and led to above-average revenue levels in 2006 and 2007.
Deficits. Deficits declined in each of those four years. By 2007, the deficit was 1.2% of GDP, a below-average number. In fact, were it not for the War on Terror (costing $171B that year), 2007 would have been in surplus!
Debt. What about the debt (OMB, Table 7.1)? It barely budged, and it actually edged downward a bit. The federal debt held by the public was 36.8% of GDP in 2004 and 36.2% in 2007. The previous fifty-year average was 37.0%. The debt was below that for all four years of 2004-07. As with most other measures of budgeting, the levels were to the good side of average and trending in a better direction while Republicans wrote budgets.
The FY2007 budget was about as white-bread average as it gets, and even a tad to the good side. Not only were the numbers themselves close to average, but the trends were fairly level and, if anything, showed positive signs: rising revenues, falling spending, falling deficits, and falling debt.
So much for the federal budget. What about the economy itself?
Unemployment. Over the months corresponding to those fiscal years, 2004-07, the unemployment rate averaged 5.0% and hit a low of 4.4% in March of 2007. Even though FY2007 corresponded to a budget written by Republicans, the new Democrat-controlled Congress increased the minimum wage in May 2007. By that September, unemployment crept up to 4.7% and would go above 5.0% by the end of calendar 2007. We have not seen anything that low since, "despite" two more minimum-wage increases.
Jobs. At the end of FY2007 (September), the economy was producing 137,667,000 jobs. Four years before (September 2003), there were only 129,925,000. That is, over 7.7 million jobs were added in those four all-GOP years. We now stand at 130,311,000 jobs -- a loss of 7.4 million jobs since Republicans lost Congress.
Gross Domestic Product. Real GDP grew at an annual rate of 2.7% over those four fiscal years. In FY2007, it grew 2.3%. While these are not superlative numbers, they match the standard conservative estimate of 2.5% growth for a nominal year. Over those four years, the rate was between 2.2% and 3.1% for any one year, indicating both strength and stability. Economic growth was what one would call "sustainable."
The Stock Market. The last day of FY2003, the S&P 500 would close at 996. Four years later, it would close at 1527. It reached its all-time high in October 2007: 1576. That is more than a 50% gain in those four years. Since then, it has lost over 30%, standing barely above its close in FY2003.
Putting It Together. If we send ourselves back to the end of 2007, forgetting what we know about what came after, it had all the features of an ideal year: responsible budgeting, manageable debt, and good, solid economic growth. All budget and economic numbers were about average or to the good side of average, and generally trending in positive directions.
The Bush tax cuts did not hurt revenue. The Iraq and Afghanistan wars had relatively minor impact on the budgets. All the things normally blamed on Bush were simply not in play.
And no matter how much you want to blame Bush for what happened after 2007, you cannot moan about "the last eight years" or "the last decade." Up through 2007, or through seven of Bush's eight years, things were just fine.
That is to say that if you were the pilot of Flight USA and looking at your cockpit dials in 2007, you would have said "all systems nominal." And all this after Captain Bush fought off the hijackers shortly after takeoff and the craft's altitude plunged dangerously until righted, again by Captain Bush.
But Captain Bush did not just engage autopilot and put his feet up. All along, he had doubts about some systems not adequately monitored by his cockpit gauges. He had asked his mechanics to look into Fannie Mae and Freddie Mac and the regulation of sophisticated mortgage-backed investments. But the Democrats in his machine shop told him Fannie and Freddie were just fine and he was a stupid pilot for even asking the question.
And that's about where 2007 ended, except for one more thing. The entire crew of Flight USA, except for Captain Bush, was switched out about then. For the remainder of the flight, Captain Bush would try to pilot his craft through hostile weather with an incompetent and hostile crew -- the same crew who told him not to worry about Fannie and Freddie. The passengers would soon revolt as well and replace Captain Bush with the least experienced airline employee on board, one with no actual pilot experience -- a flight attendant with very good passenger rapport.
We'll save the following sequence of events for our next article.