by Daniel Gardner
President Obama is still blaming George W's fiscal policies for this mess we're in. Rather than playing the blame game, maybe we should be asking whether we're moving in the right direction?
The housing and banking sectors in league with Wall Street and Uncle Sam largely caused our current economic mess, and the foundations were laid as far back as the Carter administration with the Housing and Community Development Act of 1977 that offered incentives to lending institutions to meet needs of low-income borrowers in their communities.
Over the years and under both Republican and Democratic administrations and congresses the law was tweaked and lenders began granting what were called subprime mortgages, i.e., mortgages that were not as safe or secure as prime mortgages.
When Fannie Mae went public in 1968, Uncle Sam allowed Wall Street and just about anybody else to create its own mortgage-backed securities. In the mid-1990s money-managers found ways to bundle subprime mortgages so investors couldn't really tell what were in the bundles.
When subprime borrowers began defaulting on their loans, everybody started losing money, and in 2007 failed loans began hitting the fan in bundles. By the fall of 2008 (no pun intended) banks and Wall Street were declared too big to fail, and Washington (Bush, Obama, and McCain) agreed to push the Troubled Asset Relief Program (TARP) authorizing up to $700 billion to keep these businesses from failing.
Explain to me again how George W's fiscal policies created all this debt? Actually, revenue and spending under President Bush were remarkably stable considering we were fighting two wars and recovering not only from effects of 9/11 on all sectors of our economy, but also from the dot.com recession.
During Bush's eight years in office revenue averaged 17.6 percent of GDP, bouncing between 16.1 percent at its lowest and 19.5 percent at its highest. Outlays during these eight years averaged 19.6 percent bouncing between 18.2 percent and 20.8 percent.
Revenue and outlays changed radically during Mr. Obama's reign, with revenue averaging just over 15 percent of GDP and outlays averaging nearly 25 percent of GDP. That ten-point spread is why we have incurred an average of $1.34 trillion in deficits annually during Mr. Obama's first three years in office, and our debt has skyrocketed from $10.63 trillion to $15.74 trillion today, over $5 trillion in just three-and-a-half years.
Mr. Obama came into office saying we needed to borrow tons of money and spend it as quickly as possible to stimulate the economy, and that by do so unemployment would not rise above 8 percent. His fiscal philosophy says spending more and more money will stimulate the economy enough that we'll bring in a lot more revenue…especially if we raise taxes on rich folks.
In Mr. Bush's last year in office, the treasury brought in $2.52 trillion in revenue. In Mr. Obama's three years in office, the treasury has brought in $2.10 trillion, $2.16 trillion, and $2.30 trillion respectively, or still $220 billion less revenue than the treasury received during Mr. Bush's last year.
Mr. Obama's economic policies of spending more money, not to mention having to borrow more money, have brought in less money than Mr. Bush's polices. We're really not moving in the right direction.