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Posts Tagged ‘Bush’

Two years ago, there was a flurry of excitement because some guy named Rex Nutting crunched annual budget numbers and concluded that Barack Obama was the most fiscally conservative President since at least 1980.

I looked at the data and found a few mistakes, such as a failure to adjust the numbers for inflation, but Nutting’s overall premise was reasonably accurate.

As you can see from the tables I prepared back in 2012, Obama was the third most frugal President based on the growth of total inflation-adjusted spending.

And he was in first place if you looked at primary spending, which is total spending after removing net interest payments (a reasonable step since Presidents can’t really be blamed for interest payments on the debt accrued by their predecessors).

So does this mean Obama is a closet conservative, as my old – but misguided – buddy Bruce Bartlett asserted?

Not exactly. A few days after that post, I did some more calculations and explained that Obama was the undeserved beneficiary of the quirky way that bailouts and related items are measured in the budget.

It turns out that Obama supposed frugality is largely the result of how TARP is measured in the federal budget. To put it simply, TARP pushed spending up in Bush’s final fiscal year (FY2009, which began October 1, 2008) and then repayments from the banks (which count as “negative spending”) artificially reduced spending in subsequent years.

So I removed TARP, deposit insurance, and other bailout-related items, on the assumption that such one-time costs distort the real record of various Administrations.

And that left me with a new set of numbers, based on primary spending minus bailouts. And on this basis, Obama’s record is not exactly praiseworthy.

Instead of being the most frugal President, he suddenly dropped way down in the rankings, beating only Lyndon Baines Johnson.

Which explains why I accused him in 2012 of being a big spender – just like his predecessor.

But the analysis I did two years ago was based on Obama’s record for his first three fiscal years.

So I updated the numbers last year and looked at Obama’s record over his first four years. And it turns out that Obama did much better if you look at the average annual growth of primary spending minus bailouts. Instead of being near the bottom, he was in the middle of the pack.

Did this mean Obama moved to the right?

That’s a judgement call. For what it’s worth, I suspect that Obama’s ideology didn’t change and the better numbers were the result of the Tea Party and sequestration.

But I don’t care who gets credit. I’m just happy that spending didn’t grow as fast.

2014 Spending TotalI’m giving all this background because I’ve finally cranked the most-recent numbers.  And if we look at overall average spending growth for Obama’s first five years and compare that number to average spending growth for other Presidents, he is the most frugal. Adjusted for inflation, the budget hasn’t grown at all. That’s a very admirable outcome.

But what about primary spending? By that measure, we have even better results. 2014 Spending PrimaryThere’s actually been a slight downward trend in the fiscal burden of government during the Obama years.

This doesn’t necessarily mean, to be sure, that Obama deserves credit. Maybe the recent spending restraint in Washington is because of what’s happened in Congress.

I’ve repeatedly argued, for instance, that sequestration was a great victory over the special interests. And Obama vociferously opposed those automatic budget cuts, even to the point of making himself a laughingstock.

But don’t forget that TARP-type expenses can mask important underlying trends. So now let’s look at the numbers that I think are most illuminating. 2014 Spending Primary Minus BailoutsHere’s the data for average inflation-adjusted growth of primary spending minus bailouts.

As you can see, Obama no longer is in first place. But he’s jumped to third place in this category, which is an improvement over prior years and puts him ahead of every Republican other than Reagan. Given that all those other GOPers were statists, that’s not saying much, but it does highlight that party labels don’t necessarily mean much.

My Republican friends are probably getting irritated, so I’ll share one last set of numbers that may make them happy.

I cranked the numbers for average spending growth, but subtracted interest payments, bailouts, and defense outlays. What’s left is domestic spending, and here are the rankings based on those numbers.

2014 Spending Primary - Defense - Bailouts

Reagan easily did the best job of restraining overall domestic discretionary and entitlement outlays. Bill Clinton came in second place, showing that Democrats can preside over reasonably good results. And Richard Nixon came in last place, showing that Republicans can preside over horrible numbers.

Obama, meanwhile, winds up in the middle of the pack. Which is probably very disappointing for the President since he wanted to be a transformational figure who pushed the nation to the left, in the same way that Reagan was a transformational figure who pushed the nation to the right.

Instead, Obama’s only two legacies may turn out to be a failed healthcare plan and a tongue-in-cheek award for being a great recruiter for the cause of libertarianism.

P.S. Historical numbers sometimes change slightly because the government’s data folks massage and re-measure both inflation and spending. Though I confess I’m not sure why the 2013 calculation for Nixon’s primary spending minus bailouts is somewhat different from the 2012 and 2014 numbers. Perhaps I screwed up when copying some of the numbers, which has been known to happen. But since Nixon’s performance isn’t the focus of this post, I’m not going to lose any sleep about the discrepancy.

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The establishment fervently believes that more money should come to Washington so that politicians have greater ability to buy votes.

That’s why statists from both parties are so viscerally hostile to Grover Norquist’s no-tax-hike pledge. They view it as an obstacle to bigger government.

And it also explains why politicians who raise taxes are showered with praise, especially when they are Republicans who break their promises and betray taxpayers.

Which is why President George H.W. Bush was just awarded a “profiles in courage” award for raising taxes and breaking his read-my-lips promise by the crowd at Harvard’s Kennedy School.

Here’s some of what was reported by the Dallas News.

Former President George H.W. Bush was honored Sunday with a Kennedy “courage” award for agreeing to raise taxes to confront a spiraling deficit, jeopardizing his presidency that ended after just one term. …The budget deal enacted “responsible and desperately needed reforms” at the expense of Bush’s popularity and his chances for re-election, Schlossberg said. “America’s gain was President Bush’s loss, and his decision to put country above party and political prospects makes him an example of a modern profile in courage that is all too rare,” he said.

I’m not surprised, by the way, that Mr. Schlossberg praised Bush for selling out taxpayers.

But I am disappointed that the Dallas News reporter demonstrated either incompetency or bias by saying that Bush raised taxes to “confront a spiraling deficit.”

If you look at the Congressional Budget Office forecast from early 1990, you’ll see that deficits were on a downward path.

CBO 1990 Deficit Forecast

In other words, Bush had the good fortune of inheriting a reasonably strong fiscal situation from President Reagan.

Spending was growing slower than the private economy, thanks in part to the Gramm-Rudman law that indirectly limited the growth of spending.

So Bush 41 simply had to maintain Reagan’s policies to achieve success.

But instead he raised taxes. That got him an award from the Kennedy School this year…and it resulted in bigger government in the early 1990s.

Writing for National Review, Deroy Murdock is justly irked that President George H.W. Bush was given an award for doing the wrong thing.

…former president George Herbert Walker Bush received the Profile in Courage Award from the John F. Kennedy Library Foundation. What intrepid achievement merited this emolument? Believe it or not, breaking his word to the American people and hiking taxes by $137 billion in 1990.  …Bush’s tax hike was a political betrayal for Republicans and other voters who believed him when he pledged to the 1988 GOP National Convention: “Read my lips: No new taxes.” …Bush violated his promise and hiked the top tax rate from 28 percent to 31. Bush also imposed a luxury tax on yachts and other items. This led to a plunge in domestic boat sales and huge job losses among carpenters, painters, and others in the yacht-manufacturing industry.

The worst result, though, was that the tax hike enabled and facilitated more government spending.

Here are the numbers I calculated a couple of years ago. If you look at total spending (other than net interest and bailouts), you see that Bush 41 allowed inflation-adjusted spending to grow more than twice as fast as it did under Reagan.

And if you remove defense spending from the equation, you see that Bush 41’s bad record was largely the result of huge and counterproductive increases in domestic spending.

With such a bad performance, you won’t be surprised to learn that market-oriented fiscal experts do not remember the Bush years fondly.

Deroy cites some examples, including a quote from yours truly.

“Bush’s tax hike repealed the real spending restraint of Gramm-Rudman and imposed a big tax hike that facilitated a larger burden of government spending,” says Cato Institute scholar Dan Mitchell. “No wonder the statists . . . are applauding.” …“Of course the Left wants to celebrate Bush’s broken tax promise,” Moore says. ”It is what cost Republicans the White House and elected Bill Clinton…” says Grover Norquist, president of Americans for Tax Reform. “This is an award for stupidly throwing away the presidency to the Democrats…” Norquist further laments: “You never see a Democrat get a ‘courage’ award for saying ‘No’ to the spending-interest lobby.”

The moral of the story is that Washington tax-hike deals are always a mechanism for bigger government.

And President George H.W. Bush should be remembered for being a President who made Washington happy by making America less prosperous. As I wrote last year, “He increased spending, raised tax rates, and imposed costly new regulations.”

Hmmm…an establishment Republican President who increased the burden of government. If that sounds familiar, just remember the old saying, “Like father, like son.”

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I got involved in a bit of a controversy last year about presidential profligacy.

Some guy named Rex Nutting put together some data on government spending and claimed that Barack Obama was the most frugal President in recent history.

I pointed out that Mr. Nutting’s data left something to be desired because he didn’t adjust the numbers for inflation.

Moreover, most analysts also would remove interest spending from the calculations since Presidents presumably shouldn’t be held responsible for servicing the debt incurred by their predecessors.

But even when you make these adjustments and measure inflation-adjusted “primary spending,” it turns out that Nutting’s main assertion was correct. Obama is the most frugal President in modern times.

When you look at the adjusted numbers, though, Reagan does a lot better, ranking a close second to Obama.

I also included Carter, Nixon, and LBJ in my calculations, though it’s worth noting that none of them got a good score. Indeed, President Johnson even scored below President George W. Bush.

Some of you may be thinking that I made a mistake. What about the pork-filled stimulus? And all the new spending in Obamacare?

Most of the Obamacare spending doesn’t begin until 2014, so that wasn’t a big factor. And I did include the faux stimulus. Indeed, I even adjusted the FY2009 and FY2010 numbers so that all of stimulus spending that took place in Bush’s last fiscal year was credited to Obama.

So does this mean Obama is a closet conservative, as my misguided buddy Bruce Bartlett has asserted?

Not exactly. Five days after my first post, I did some more calculations and explained that Obama was the undeserved beneficiary of the quirky way that bailouts and related items are measured in the budget.

It turns out that Obama supposed frugality is largely the result of how TARP is measured in the federal budget. To put it simply, TARP pushed spending up in Bush’s final fiscal year (FY2009, which began October 1, 2008) and then repayments from the banks (which count as “negative spending”) artificially reduced spending in subsequent years.

And when I removed TARP and other bailouts from the equation, Obama plummeted in the rankings. Instead of first place, he was second-to-last, beating only LBJ.

But this isn’t the end of the story. My analysis last year only looked at the first three years of Obama’s tenure.

We now have the numbers for his fourth year. And if you crank through the numbers (all methodology available upon request), you find that Obama’s numbers improve substantially.

Pres Spending 2013 - PrimaryAs the table illustrates, inflation-adjusted non-interest spending has grown by only 0.2 percent per year. Those are remarkably good numbers, due in large part to the fact that government spending actually fell in nominal terms last year and is expected to shrink again this year.

We haven’t seen two consecutive years of lower spending since the end of the Korean War!

Republicans can argue, of course, that the Tea Party deserves credit for recent fiscal progress, much as they can claim that Clinton’s relatively good numbers were the result of the GOP sweep in the 1994 elections.

I’ll leave that debate to partisans because I now want to do what I did last year and adjust the numbers for TARP and other bailouts.

In other words, how does Obama rank if you adjust for the transitory distorting impact  of what happened during the financial crisis?

Well, as you can see from this final table, Obama’s 2013 numbers are much better than his 2012 numbers. Pres Spending 2013 - Primary Minus BailoutsInstead of being in second-to-last place, he’s now in the middle of the pack.

I used a slightly different methodology this year to measure the impact of TARP and related items, so all of the numbers have changed a bit, but Reagan is still the champ and everyone else is the same order other than Obama.

So what does all this mean?

As I constantly remind people, good fiscal policy occurs when the burden of government spending is falling as a share of economic output.

And this happens when policy makers follow my Golden Rule and restrain spending so that it grows slower than the private economy.

That’s actually been happening for the past couple of years. Even after you adjust for the quirks of how TARP repayments get measured.

I’m normally a pessimist, but if advocates of small government can maintain the pressure and get some concessions during the upcoming fights over  spending levels for the new fiscal year and/or the debt limit, we may even see progress next year and the year after that.

And if we eventually get a new crop of policymakers who are willing to enact genuine entitlement reform, the United States may avoid the future Greek-style fiscal crisis that is predicted by the BIS, OECD, and IMF.

That would almost be as good as a national championship for the Georgia Bulldogs!

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Even though I’m a staunch libertarian, I’m not under any illusion that everyone is open to our ideas. Particularly since, as I wrote a couple of weeks ago, we get falsely stereotyped as being heartless, hedonistic, anti-social, and naively isolationist.

That’s why I’m willing to accept incremental reforms. Compared to my libertarian dream world, for instance, the entitlement reforms in the Ryan budget are very modest. But they may be the most we can achieve in the short run, so I don’t make the perfect the enemy of the good.

But I do make the bad the enemy of the good. Politicians who expand the size and scope of government get on my wrong side, regardless of whether they are Republicans or Democrats.

Which explains why I haven’t approved of any Republican presidential candidate since Ronald Reagan.

With this in mind, you can imagine my shock when I read Robert Patterson’s recent column that blames recent GOP presidential woes on…you guessed it, “far-right libertarians.”

…in the political big leagues, …the GOP strikes out with the popular vote in five of the past six presidential elections… That familiar lineup shares one big liability: libertarian economics, which has been undermining the Republican brand… That message represents the heart and soul of a party that started sleeping with far-right libertarians in 1990. …In the libertarian universe, “economic freedom” trumps everything: civilization, nation, statecraft, patriotism, industry, culture and family. This “economic freedom,” however, diverges greatly from the liberty that transformed the United States into an industrial, financial and military colossus.

What the [expletive deleted]!

Let’s go down the list of  recent GOP presidential candidates and assess whether they were captured by “far-right libertarians” and their dangerous philosophy of “economic freedom.”

  • George H.W. Bush – He increased spending, raised tax rates, and imposed costly new regulations. If that’s libertarian, I’d hate to see how Patterson defines statism.
  • Do you see any libertarians? Me neither.

    Robert Dole – All you need to know is that he described his three proudest accomplishments as the creation of the food stamp program, the imposition of the costly Americans with Disabilities Act, and the Social Security bailout. I don’t see anything on that list that’s remotely libertarian.

  • George W. Bush – I’ve written several times about Bush’s depressing record of statism. Yes, we got some lower tax rates, but that policy was easily offset by new spending, new intervention, new regulation, and bailouts. No wonder economic freedom declined significantly during his tenure. Not exactly a libertarian track record.
  • No libertarians here, either

    John McCain – His track record on spending is somewhat admirable, but he was far from libertarian on key issues such as tax rates, global warming, bailouts, and healthcare.

  • Mitt Romney – He was sympathetic to a VAT. He criticized personal retirement accounts. He supported corrupt ethanol subsidies. And he said nice things about the TARP bailout. And I don’t need to remind anybody about Obamacare’s evil twin. Is that a libertarian agenda?

I also disagree with several of the policies that Patterson advocates, such as protectionism and industrial subsidies.

But that’s not the purpose of this post. Libertarians already face an uphill battle. The last thing we need is to be linked to a bunch of big-government Republicans when we share almost nothing in common on economic policy.

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I almost feel sorry for the Obama Administration’s spin doctors. Every month, they probably wait for the unemployment numbers from the Bureau of Labor Statistics with the same level of excitement that people on death row wait for their execution date.

This has been going on for a while and today’s new data is another good example.

As this chart indicates, the White House promised that the unemployment rate today would be almost down to 5 percent if we enacted the so-called stimulus back in 2009. Instead, the new numbers show that the jobless rate is 7.9 – almost 3.0 percentage points higher.

Obama Unemployment

I enjoy using this chart to indict Obamanomics, in part because it’s a two-fer. I get to criticize the Administration’s overall record, and I simultaneously get to take a jab at Keynesian spending schemes.

What’s not to love?

That being said, I don’t think the above chart is completely persuasive. The White House argues, with some justification, that this data simply shows that they underestimated the initial severity of the recession. There’s some truth to that, and I’ll be the first to admit that it wouldn’t be fair to blame Obama for a bleak trendline that existed when he took office (but I will blame him for continuing Bush’s policies of excessive spending and costly intervention).

That’s why I think the data from the Minneapolis Federal Reserve is more damning. It looks at all the recessions and recoveries in the post-World War II era, and presumably provides a more neutral benchmark.

As you can see from this chart of job creation during all post-World War II recoveries, there’s one period that stands out for having the worst performance. Take a wild guess which line includes the Obama years.

Feb 2013 Minn Fed Employment Recession Data

An Obama defender will argue that this chart is unfair because the recession began during the Bush years.

Since there’s no significant difference between Bush’s policies and Obama’s policies, I don’t think that’s a strong defense, but let’s bend over backwards and instead look at job creation during recovery periods.

Feb 2013 Minn Fed Employment Recovery Data

These numbers are a bit more favorable (or less damning) to Obama, but you can see that job creation for this recovery has been far below the average. Indeed, it only surpasses Bush’s job numbers coming out of the 2001 recession.

But I’m not surprised that the job numbers for Bush and Obama are both dismal. As stated above, they both pursued a statist agenda (though a Bush defender doubtlessly will point out that unemployment didn’t drop that much in 2001, so it would have been impossible to have a strong post-recession bounce).

The real lesson to be learned is that we live in an era of higher taxes on productive activity, a heavier burden of government spending, and more costly government regulation and intervention. And since we’re now more like Europe, the “new normal” is to have weak European-style economic numbers.

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People in the political world say that President Obama threw Secretary of State Clinton under the bus in an attempt to protect himself from political fallout from Libya.

I don’t follow those issues, so I can’t comment about the veracity of that charge, but I find it very interesting that some conservatives are urging Mitt Romney to throw former President George W. Bush under the bus.

More specifically, they’re urging him to condemn Bush’s statism and to attack Obama for continuing Bush’s failed policies.

Since I’ve attacked Bush for expanding the burden of government spending and reducing economic freedom, this resonates with me.

Phil Kerpen of American Commitment nails the issue in a column for Fox News.

Romney’s biggest missed opportunity in the second debate wasn’t on Libya…he should have connected the dots between Obama and Bush to illustrate the accurate point that on the most significant dimensions of economic policy, Obama has accelerated Bush’s policy errors rather than reversing them. In the crucible of the 2008 financial crisis, President Bush famously remarked that “I chucked aside my free-market principles .” He was referring to TARP, his infamous big bank bailout. Obama supported the bill and voted for it. …On government spending, it’s the same story. Bush racked up one of the most disastrous records of out-of-control spending and debt the country had ever seen. Every aspect of the federal budget jumped under Bush. …Obama came in and continued spending recklessly. Bush’s $152 billion stimulus bill failed and so did Obama’s $821 billion stimulus bill. Bush flushed $25 billion in bailout funds to Chrysler and General Motors, and Obama added another $20 billion before finally recognizing that the companies would inevitably file for bankruptcy. All of the pre-bankruptcy bailout dollars were lost. …On the biggest economic policy questions, the Bush/Geithner/Bernanke approach is almost indistinguishable from the Obama/Geithner/Bernanke approach. It hasn’t worked. Obama’s failed policies of the present are all too similar to Bush’s failed policies of the past.

Amen. Bush was a statist, period.

Peter Wallison of the American Enterprise Institute made similar points in an article for the Weekly Standard.

Obama’s claim that Bush’s policies caused the recession resonates with American voters. Almost four years after George W. Bush left office, polls show the American people continue to blame him—more than Obama—for the recession that created today’s dismal economic conditions. Throughout the fall and in their debates, it’s a sure thing that Obama will continue to argue that Romney is just another George W. Bush. How can Romney respond? …Romney should not deny Bush’s error. Although Clinton began the process of forcing low mortgage underwriting standards, Bush continued and enhanced it. Instead, Romney should point out that the government should never have been in the housing finance business, and that he will eliminate Fannie and Freddie to restore a functioning housing market—something Obama has failed to do in almost four years.

But here’s where I disagree with Kerpen and Wallison, or at least where I would add a big caveat to their analysis. What makes them think that Romney would be any different that Bush or Obama?

This post highlights a few of Romney’s policies that would undermine free markets and expand the public sector.

If all one cares about is whether politicians have an “R” or a “D” after their names, then my concerns don’t matter.

But if you’re actually interested in making America a better place, then policy matters a lot.

I’ll close with a final point. I have no idea whether Romney is a closet statist or a closet Reaganite. All I’m saying is that, if Romney wins, people who value limited government and freedom should begin working on November 7 to take whatever steps are necessary to prevent Romney from becoming another RINO such as Bush or Nixon.

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Wow. I wasn’t surprised to learn that the United States dropped in the new rankings unveiled today in Economic Freedom of the World.

But I’m somewhat shocked to learn that we fell from 10th last year all the way down to 18th this year, as can be seen on the chart (click to enlarge).

Last year, the U.S. fell from 7th to 10th, and I though dropping three spots was bad. But falling by eight spots this past year is a stunning decline.

Who would have thought that Scandinavian welfare states such as Denmark and Finland would rank higher than the United States? Or that Ireland, with all its problems, would be above America?

But since I’m not a misery-loves-company guy, I’m happy to see some nations doing well. I’ve previously highlighted the good policies in Hong Kong and Singapore. And I’ve trumpeted the good policies in Switzerland and Australia, as well as Canada, Chile, and Estonia.

So kudos to the leaders in those nations.

American politicians, by contrast, deserve scorn. Let’s update the chart I posted when last year’s report was issued.

As you can see, it’s an understatement to say that the United States is heading in the wrong direction. We’re still considerably ahead of interventionist welfare states such as France and Italy, though I’m afraid to think about what the U.S. score will be five years from now.

Here’s what the authors of the report had to say about America’s decline.

The United States, long considered the standard bearer for economic freedom among large industrial nations, has experienced a substantial decline in economic freedom during the past decade. From 1980 to 2000, the United States was generally rated the third freest economy in the world, ranking behind only Hong Kong and Singapore. After increasing steadily during the period from 1980 to 2000, the chainlinked EFW rating of the United States fell from 8.65 in 2000 to 8.21 in 2005 and 7.70 in 2010. The chain-linked ranking of the United States has fallen precipitously from second in 2000 to eighth in 2005 and 19th in 2010 (unadjusted ranking of 18th).

For those interested in why the United States has dropped, the “size of government” score has fallen from 8.65 in 2000 to 7.70 in the latest report. That’s not a surprise since the burden of government spending has exploded during the Bush-Obama years.

But the trade score also dropped significantly over the same period, from 8.78 to 7.65. So the protectionists should be happy, even though the rest of us have less prosperity.

The most dramatic decline, though, was the in the “legal system and property rights” category, where the U.S. plummeted from 9.23 in 2000 down to 7.12 in the new report. We’re not quite Argentina (3.76!), to be sure, but the trend is very troubling.

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