Rip Walsh is an Adjunct Professor at Long Island University who writes about U.S. History and Politics.
The Economy- The Rich get Richer
THE ECONOMY- THE RICH GET RICHER…
Let the government take care of the weak, the strong can take care of themselves-
Before we get to an analysis of the economy during each of the three presidents’ administrations, some general observations on the overall economic health of the United States since 2000. The second part of Mr. Brownson’s statement is as true today as when he said it in the 1800’s. In the 20th century, beginning with the Great Depression, the federal government has stepped in to help the disadvantaged. Since the 1960’s, however, the focus has seemed to shift toward increasing welfare and unemployment insurance, not so much offering better opportunities for the less fortunate. Some portions of the populace are dependent on the federal government for their monthly welfare checks, which is not what FDR had in mind with his New Deal programs. His desire was to provide the dignity of work to people until the economy recovered from the crash. Bush, Obama, and Trump (especially) have all touted how great the economy has done under their stewardship, especially the stock market; the facts (if we dare) say differently. Not to burst Mr. Trump’s imaginary bubble, but the greatest economic growth the nation ever experienced happened during the presidency of Harry Truman from 1949 to 1953. As has already been mentioned, Trump dismisses the historical record for his own skewed (to put it mildly) version of events.
One of the biggest indicators of economic growth, GDP (Gross Domestic Product), has basically been flat since 2000. In that year, the increase in GDP was 4.13%, the highest rate for the next 20 years; it reached a low of -.14% in 2008, in the 13 years from 2005 to 2018, GDP growth rate was less than 3% every year. In 2018, it rebounded to a modest 3.18%, not numbers that qualify as the best ever. Of equal concern, the wages and incomes of the average American, adjusted for inflation, have stagnated as well during the previous two decades, continuing a trend that stretches even further back in time, to some 40 or 50 years ago. Unacceptable income gaps between certain groups in society also still exist: men (higher) vs. women (lower); the income gap between black and white workers has actually increased since 2000; recent college graduates are earning less on average than they did in 2000.
In addition, other economic indicators do not paint a rosy picture. The national debt has gone up four-fold since 2000 from 5 trillion to 22 trillion in 2019. Our children and descendants to who knows what generation will have to pay that back some day (thanks for the inheritance grandpa and grandma). Fiscal responsibility is a term that has vanished from the Washington lexicon. Real unemployment, a better measure than the government’s recording, which stops counting those whose benefits have run out or are not looking for work anymore, has spiked twice in the last two decades. It hit 15% in 2010 during the Great Recession and an almost new record 22.8% in August 2020 due to the Covid-19 depression. FDR holds the mark for the highest and lowest unemployment rates in our history, 24.9% in 1933 and 1.2% in 1944. The biggest failure of the American economy since 2000 is that poverty levels have actually risen slightly from 11.3% in 2000 to 11.8% in 2018.
For a country that touts its economy as the world’s best, the poverty figure can only be called a national disgrace. Some 1 out of 6 children in the U.S. live in poverty (the biggest crime), while the rates among some minority groups are just staggering- 25% for Native Americans, 20% for African-Americans. Our presidents point to the magnificent increases of the stock market as proof the economy is strong, the overall growth of Wall Street has been 4.5% since 2000, 8% since 2009. Bull markets tend to just highlight a massive problem with the American economy- the income inequality gap. The gap between rich and everyone else has grown to the most significant amount in U.S. History. The country needs to harken back to the Square Deal idealism of Teddy Roosevelt, capitalism yes, but a fair and competitive business environment. The rich can indeed take care of themselves, the poor do not require more hand-outs but better opportunity, education, health care, housing (the list goes on and on).
GEORGE W. BUSH- IT’S THE ECONOMY, STUPID!
Democratic strategist James Carville coined the phrase, It’s the Economy, Stupid!, during Bill Clinton’s 1992 presidential run against George H.W. Bush. After seeing his approval ratings sky-rocket at the end of the Gulf War, President H.W. Bush watched them crash down to earth when the economy sank into a recession in 1991-1992. With their bank accounts hurting, the American populace voted for a change in 1992, propelling Mr. Clinton into the presidency. When George W. Bush became president in 2001, the economy was strong, the GDP growth rate for 2000 being 4.13%. In 2001, it would be 1.00% and has not edged above 3% for the last 20 years. George W. also inherited a budget surplus from Clinton, a big question being what he would do with it? Pay down the national debt? Invest in social programs? Give it back to the American people through tax cuts? George W. chose the option behind door number 3, a massive tax cut for the country.
By so doing, Bush tried to emulate the conservative hero, Ronald Reagan, and his support of supply side or trickle-down theory. A tax cut for the rich would stimulate the economy as the wealthy re-invested their extra money into U.S. businesses. It did not quite work out that way in the 1980’s, and it would not this time either. One may wonder if George W. remembered that his father had lambasted Reagan’s beliefs during the 1980 Republican nominating race as “Voodoo Economics”. He decided not to recall or to ignore it. A problem for the new President Bush was that he did not seem to approach the situation from a larger historical perspective. The U.S. economy in the late 20th century had been moving toward something prevalent in Teddy Roosevelt’s day- greater consolidation, away from competition to a more monopolistic model. Providing the rich with greater wealth might only accelerate the process toward uncompetitive markets. TR battled ferociously against this movement with his trust-busting campaign. George W. determined not to, steering the economy further down monopoly road.
Pulling the historical curtain even further back, it is very understandable that the rich complain about the amount of taxes they have to pay. The federal government is not known for spending money wisely, giving it more being almost like throwing the dollars away. Perhaps Washington should undergo a thorough internal review, cutting waste wherever possible before any new levies are implemented (a pipe dream there, right). Franklin Roosevelt, upon taking office in 1933, immediately cut all government salaries by 15% (including his own), displaying his awareness that with the country in the throes of a depression, government must do its share (government workers had jobs while millions of their fellow citizens did not). With the nation in deep distress, FDR did not possess the time or luxury for a comprehensive audit of the capital’s functioning. George W. would not attempt any such review and combined with the aftermath of 9/11, the tax cut contributed to the ballooning of the national debt to dizzying heights never witnessed before. While in office, Roosevelt initiated a study on how the federal government worked, searching for a means to make it run better, while being fiscally sound. The investigation would be subsumed by the Great Depression and World War II and never completed. The nation desperately needs such a study, but we might be holding our breath indefinitely before one actually occurs.
In June 2001, Bush convinced Congress to approve a 1.43 trillion-dollar tax cut, which critics such as then Federal Reserve Chairman, Alan Greenspan, warned might lead to recession. As they possess more to begin with, tax breaks benefit the wealthy greater than the middle class or poor, but they failed to stimulate the economy as hoped. In 2001, the economy fell into a slight recession due to the collapse of the dot.com business boom. Things picked up a bit by 2003, when another tax cut was enacted, but growth remained slow (average of 2.1% for the W. Bush presidency), median household income dropped, and poverty rates went up; not a sparkling economic record to say the least, with worse yet to come. George W. also doubled the national debt from 5 trillion to 11 trillion during his two terms.
The United States entered its longest post-World War II recession in December, 2007, mainly because the housing market crumbled, the result of a subprime mortgage crisis, aided by soaring oil prices and a decline in the value of the dollar. Many economists point to the repeal of the Glass-Steagall Act in 1998, which separated the functioning of commercial banks and investment firms, as a major cause of the 2007 collapse. Others dispute this, arguing that the crash would have happened even with Glass-Steagall still on the books. Just the facts, ma’am. It is true, commercial banks became highly aggressive in pushing investment products on their regular customers that they did not fully understand, necessarily want or need. Mortgage lenders preyed on the part of the American dream which prized home ownership. They convinced buyers to assume mortgages which were beyond their means to pay, enticing the home aspirants with reasonable monthly payments for the first several years of the deal, before the amount mushroomed in subsequent years. People found they could no longer afford the monthly payments, defaulted on the loans; their homes went into foreclosure. Piling on the clusterf**k, investment firms bought and bundled up these toxic mortgages and re-sold them to investors for the quick buck. Not a sound or healthy economic atmosphere. It is undeniable that within a decade of Glass-Steagall’s repeal, the banks and Wall Street wrecked the housing market and sent the economy into a tailspin.
It should be our steady aim to raise the ethical standard of national action just as we strive to raise the ethical standard of individual action-
George W. obviously did not emulate Teddy Roosevelt’s dictum of the presidency as a position of moral authority, advocating for more regulation of Wall Street as was needed, and promoting a fair and competitive field for business. Americans paid a heavy cost for this failure in leadership. President Bush followed the less government interference mantra of Ronald Reagan, and reaped a similar reward. At the end of his second term, Reagan oversaw the dissolution of the savings and loan industry, along with the Wall Street insider trading scandal (Ivan Boesky anybody). In September, 2008, the government took over control of Fannie Mae and Freddie Mac, the national loan agencies, as Lehman Brothers invest firm tanked, marking a decided increase in the seriousness of the troubles. George W. proposed a $17 billion stimulus package to help the ailing populace, but the damage was deep and not easily remedied. In the fall of 2008, before leaving office, George W. convinced Congress to pass a relief bill called TARP, which would provide up to $700 billion to bail out banks and investment firms. As it effects were mostly felt during the administration of President Obama it will be discussed in his economic section. Economically, George W. Bush left office under a very dark cloud.
As education and health care are becoming more corporate each year, they will be discussed in the Economy section of each president. George W.’s big educational initiative would be the No Child Left Behind Act of 2002, which endeavored to close the performance gap between well off and poor students, provide charter school options for parents with children in low performing schools, and increase standardized test scores in math and science. The first goal has not been accomplished, as the gap between haves and have-nots in educational performance is still too large; charter schools are a source of controversy and not living up to expectations. The “Teaching to the Test” mentality that grips the country’s educational system perhaps does not produce better educated or socially adjusted students. A shift in national priorities is needed to address the troubles with our schools. For health care, Bush’s only serious foray into the issue dealt with Medicare for seniors, as the amount of money available for prescription costs was increased, while the issuance of benefits would be in the hands of private insurance companies. George W. supported the call for possible privatization of Medicare and Social Security. The federal government is not the most efficient body, but we must be careful with handing over these programs to private entities, as the primary goal of all businesses is to turn a profit, often at a disadvantage to the customers, in this case, the American people.
BARACK OBAMA- THE GREAT RECESSION
The housing crash began in December 2007, at which time, Barack Obama’s presidential campaign was in full swing, so he had ample advance warning as to what lay ahead when assuming the presidency. If the country is in trouble, similar to 1932 when FDR ran for president, a candidate must exhibit a sense of urgency to the American people; do something different and dramatic. Franklin Roosevelt broke tradition by being the first presidential candidate to accept his nomination in person; signifying to the nation he understood the magnitude of the problem and was ready to tackle it head on. Barack Obama did not make any bold gestures during the campaign and would not hit the ground running when he took office in January of 2009. Perhaps it can be attributed to his personality, which exudes more the scholarly demeanor of a judge than that of the fiery politician such as Theodore Roosevelt.
Obama’s team had two years (the length of the presidential campaign) to prepare a legislative agenda to be raring to go on day one. It did not happen. As is well known, FDR’s First 100 Days are famous for the 15 major pieces of legislation passed to combat the Great Depression. Barack’s first piece of legislation increased the statutes of limitation for equal pay lawsuits; important but maybe not the first priority. Where were the work programs and immediate relief for distressed Americans? Obama said he studied Roosevelt’s approach to the Great Depression but did not appear to learn from it. He re-authorized a children’s health program, which gave insurance coverage to an additional four million kids; a good step. The nation, however, wanted to know what he was going to do about the economy.
Before we delve into that, a brief look at the people Mr. Obama surrounded himself with. Barack ran on a campaign slogan of “Change you can believe in”, but his choices for top advisors were safe political picks, not exactly inspiring. If you are promising change, appoint fresh faces with new ideas and energy. Vice-President Joe Biden was a long time Washington insider without an impressive legislative record as a Senator from Delaware. Secretary of State Hillary Clinton could be perceived as part of the problem with Washington, not a solution. The biggest disappointment would be Barack’s choice of Wall Streeter Tim Geithner as Secretary of Treasury. Appointing someone who helped to create the economic collapse to fix the problem did not generate confidence in the American people. FDR chose the brightest people he could find to serve in his Cabinet and also named the first female Cabinet member, Frances Perkins, as Secretary of Labor. She did an excellent job in the position, serving until Roosevelt’s death in 1945.
Another incentive for President Obama to move fast was the fact Democrats controlled both Houses of Congress. He would possess that luxury for at least two years until the 2010 mid-term elections. Presidents tend to find that two years passes quickly and their majority can be easily lost, which would happen in 2010. The Republicans gained controlled of the House of Representatives. For the economy, Obama got Congress to pass the American Recovery and Reinvestment Act in February 2009, which allocated $787 billion to stimulate business and help the hurting. How beneficial it was to the country overall is open to debate. It contained many pet projects for Democratic Congress people but little in the way of “Shovel Ready” jobs, a term tossed about by the White House frequently. This would be the biggest difference between Barack Obama and Franklin Roosevelt in the handling of an economic depression. Roosevelt put millions of people to work on infrastructure projects that not only provided a weekly paycheck but the dignity and respect of work, while creating improvements that benefited everyone. One might be hard pressed to name a work program established during the Obama Administration. Unemployment insurance would be extended numerous times, touted as a stimulus to the economy, but did that produce any lasting benefits for the nation or hope to the people collecting it.
In their approach to a banking crisis, FDR and Obama also took opposing approaches to the problem. FDR did not bail out any banks but closed all the nation’s banks for 4 days to permit their financial soundness to be reviewed. In a fireside address, Roosevelt explained to the populace what was happening in plain language. He did not make any false promises that nobody would lose money, but that the losses would be kept as low as possible. People were re-assured about the viability of the banks, and began taking their money from underneath their mattresses and returning it to their local branch. In 2009, the rationale for allocating $700 billion with no strings attached, for the rescue of the failing financial institutions, became that the world might slip into a greater depression. The expression “Too big to fail” entered official Washington speak.
One might ask if President Obama and those Champions of Capitalism bank CEO’s considered the irony of their proclamations. The CEO’s complained continually of too much government interference in their businesses, but after wrecking the economy, they were the first ones with their hands out, demanding to be saved. Economics 101 tell us that in a capitalism system, no business is too big to fail. A corporation that ruins itself through bad practices should be allowed to close its doors, replaced by another more responsible firm. The actions of the bank bigwigs after they got their money also shed great doubt on the wisdom of the policy. Testifying before Congress they all claimed no wrong doing, and most refused to attend a meeting with President Obama at the White House.
As for the notion that the bailout saved the world from greater depression, how the banks used the money puts a pin in the balloon of that assertion. The kingpins gave themselves and their associates huge bonuses and company junkets, while the ordinary people who lost their life savings and IRA’s received nothing. To say they knew the risk of investing is to callously ignore the fraudulent methods employed by the banks and investment firms to convince them to invest. In 2012, President Obama would boast that all the money given to the banks had been repaid. That is true depending on how you crunch the numbers, not honest by adding up another way. Forgotten in this “Pat ourselves on the back” rhetoric is that the banks raised the funds for repayment by increasing fees and other costs for their regular customers, a double gut punch for the American people. The bank bail-out fiasco might be summarized as just another instance of government and business for the rich and powerful, with the burden borne by the rest of the nation.
The Obama Administration also bailed out the auto industry, which did save some American jobs, while enriching the auto executives. President Obama would claim at the end of his presidency that 8 million new jobs had been created during his two terms, a figure which can be deceiving. A vast majority of these were part-time work, not a wage to support a family on. People had to toil at 2 or 3 jobs to make ends meet. The job numbers tie in with the unemployment rate, which peaked at almost 11% in 2010, before declining in the remainder of Obama’s two terms. As noted before, real unemployment reached as high as 15% if not higher. Millions of people saw their unemployment benefits run out, and gave up looking for work. The number of Americans actually working decreased significantly. This sleight of hand with the numbers also pertains to the national debt. It became common place to refer to the percentage of debt increase as the deficit. So Barack could assert in his last few years that he had reduced the national deficit, which in fact, he did not by 1 cent; only decreasing the percentage of increase. Following in George W. Bush’s footsteps, Obama increased the national deficit from 11 to 19 trillion while in office. In his defense, President Obama did have to deal with the Great Recession, where Bush inherited a robust economy from Bill Clinton.
The Affordable Care Act of 2010 would be the centerpiece of President Obama’s legislative agenda. It was the federal government’s first foray into providing large scale health insurance for the American people. Since its passage, Republicans in Congress and then President Trump tried numerous times to have it repealed, with no success. The Act has been a major source of controversy since its passage. The writing and procuring the necessary votes in Congress for Obamacare seemed another instance of the non-urgent approach of the Obama Administration. It took over a year to put together and passed only because the Democrats held a super majority in the Senate to end filibustering by the Republicans. This is the thing you wanted to be remembered for, why would you not have the blue print ready to go on day one? In addition, the delayed enactment of the law until 2014 might not be interpreted as a hearty endorsement of your confidence in the measure. Let’s look at the positive effects first.
The bill allowed millions of people to gain health insurance who did not possess it before. The numbers vary, but an estimated 16 to 20 million additional Americans now had health insurance. People could not be denied coverage due to a pre-existing condition. Parents might keep children on their plans until the age of 26. Companies with a certain number of employees had to provide coverage for their workers. A more contentious provision said individuals without insurance had to get a plan or pay a fine. Health care should only be a positive, not associated with fines and punishment. During the process. President Obama repeatedly asserted that people could keep their existing coverage, which was false. Millions found their plans changed by their insurance company, with rates increasing, driving many of them into the ranks of the uninsured. That led to a bitter debate on whether the two numbers offset each other, the people who gained insurance versus those who lost it due to rising costs. While undoubtedly providing benefits, Obamacare did not address the main problems with healthcare in this country, cost and availability. Ten years after its passage, 25 to 30 million Americans do not have health insurance. If the federal government is going to be involved in health insurance, everyone needs to be covered. Theodore Roosevelt first proposed universal health care as part of his 1912 platform during his Bull Moose bid for the White House.
Obamacare also did not challenge the stranglehold insurance companies have on the health care industry. Health care has become increasingly corporate-centered, with medical decisions seemingly based on cost analysis, rather than on what is best for the patient. Costs for medical care remain absurdly high. Health care should not be like going to Costco to buy toilet paper or paper towels in bulk. A young college graduate should be able to obtain a low cost plan, health insurance not influencing their career path with the pressure to work for a large corporation so they have coverage. The United States has several choices in terms of health care. Stay on our current course, which works for the well-off, but not so much for millions of Americans, most prominently those without any coverage. Move to the dreaded (by those haters of anything smacking of socialism or even worse communism) universal health care, a system the rest of the world adopted without catastrophic effects, or to an improved mixed system (a mixed system being basically what we have now). A better mixed plan would require injecting more competition into the system by breaking up the monster insurance companies, so people have greater choice and lower costs. People who are lucky enough to have insurance through their job currently have no real choice. They must accept what their company offers or purchase their own plan, which no doubt would be incredibly expensive. Medicare could continue to cover the rest of the population. President Obama deserves credit for beginning the journey toward better health care in this country, but one can wish he had attacked the issue with the gusto of a Theodore Roosevelt and with the resolve to include all Americans in the process.
Educationally, President Obama recommended a vague program, like all presidents do, to improve the opportunity for the less fortunate and provide better education for all children. Similar to the rest, these initiatives did not possess the will or teeth to implement any significant change. True educational improvement will require a shift in national priorities. I said that already, didn’t I? I hope one day not to have to say it anymore. How to rate the Obama economy? He did help bring the nation out of the Great Recession. The benefits, however, tilted heavily in favor of those who were already doing well. The income gap between rich and poor was at the greatest in our history when President Obama left office in 2017. Not even a minimal dent had been made in poverty levels while minority groups still experienced significant gaps in income, education, and health care. Arguments can be put forth that Barack faced an uncooperative Congress, but he was not the first, nor will he be the last president to do so. Theodore and Franklin Roosevelt governed with the concerns of the entire country foremost in their thoughts, not just the wealthy and powerful. Barack Obama attempted to help the people, but it is hard not to think many decisions in Washington today are tempered by the need to mollify those who bankroll a politician’s campaigns and control the strings of power. The key word for the American economy is opportunity, increased opportunity for those who start at a disadvantage and are continually fighting an uphill battle. The playing field needs to be leveled, not income re-distribution as Fox News warns, but an equal chance for all people, then the American economy will reach its full potential and can be considered the greatest ever.
DONALD TRUMP- PANDEMIC DEPRESSION
It might be somewhat difficult to seriously discuss the economy under a president who has consistently insisted during his term that it has been the greatest ever, but I shall try. The facts (the nerve bringing facts into this), of course, say differently. GDP in the first three years of the Trump Presidency hovered in the 2% region, with a high of 3.18% in 2018. What the figure for 2020 will be is almost impossible to predict, as the beginning of the Coronavirus pandemic in February, caused the economy to plunge into a death spiral, with no relief yet visible. Trump’s handling of Coronavirus will be covered in the Domestic section as it began as a medical crisis before engulfing the economy as well.
Unemployment soared to Great Depression levels (nearly 23% at its peak) by the summer of 2020. The president and Congress passed a relief package for the ailing country in March but the money ran out by the end of July. Not surprisingly, negotiations among Congressional leaders for a desperately needed second round of relief dissolved into nothing. It is hard to even find the right word (hypocrisy, gall, gumption, idiocy, we do not have to stop there) for Yurtle the Turtle, Mitch McConnell saying it would not be right to increase the national debt providing more help to suffering Americans. Yurtle did not even raise a peep when President George W. Bush ran up an astronomical national debt and President Obama followed suit.
In terms of concrete economic measures, Trump did sign the Tax Cuts and Job Acts of 2017, which (who would have thought) cut taxes for the wealthy and permanently reduced the corporate tax rate. The Donald also tried to re-work trade deals he did not like, beginning with NAFTA. Tearing up the 1990’s agreement with Canada and Mexico, the president negotiated a new deal which he claims is much better for the U.S. That remains to be seen. The Donald also launched a trade war with China, accusing the Chinese of unfair trade practices. Tariffs were raised on 818 different categories of Chines goods, worth about $50 billion. Positive effects for the American people from this spat with China are not yet discernible. Trump ran on a pledge to bring jobs back to America, but besides some small exceptions, there is not much to point to in that regard. Instead of working to reduce the national debt as he promised in the 2016 campaign, the deficit has billowed another 7 trillion dollars in the 31/2 years of Trump’s Administration, rising from 19 to 26 trillion.
For health care and education, there is little to report on for President Donald Trump. As noted before, he has unsuccessfully attempted to roll back Obama Care, and continually trumpets a new, better, the best, health care plan for the country. Besides a $200 card for prescription costs, that has yet to see the light of day. After saying he would protect Medicare, Trump announced at the start of 2020, he might consider cuts to the program. In education, The Donald’s only significant move was to name Betsy Devos as Secretary of Education. The nomination process for Devos became the first in our history to require the vice-president, Mike Pence in this case, to break a 50-50 tie vote. Devos had no experience in education and could be classified as a strong supporter of charter schools and parental choice. Real improvements in education remain something for the future. As president, the Donald has displayed he has not mastered the Art of the Deal in leading the world’s largest economy. Maybe he should re-read what he likes to call his second favorite book. His first? The Bible, what else?
This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.