Recessions are usually credited as having the power to kill a President, figuratively speaking. Expansions, on the other hand, make them heroes. When Bush I intervened and attacked Iraq back in the early 1990s, his popularity soared. When the recession hit in 1991-1992, it soured. Critics accused him of being indifferent to domestic policy. Democrats followed a strategy of delineating, in the mind of the public, his foreign policy from his domestic policy, and brutally attacking him for his domestic policy. They blamed him for the recession, for unemployment, etc. And even though the recession was mild and its duration brief, historically speaking, it was enough to cost him the election.
Now enter Bush II. On the surface, there are similarities between the two presidents. They look the same. They sound the same. They both had great impersonators on SNL. They also oversaw a war in Iraq and a recession.
But regarding the war and the recession, the differences between father and son are more important than the similarities. While both saw a recession happen during their watch, the crucial of those recessions have been very different. Bush II inherited his recession almost immediately, and having built a taxcut into his budget, he was prepared to fight the recession immediately after taking office.
Bush I, on the other hand, saw a recession hit shortly before re-election. As such, the entire re-election campaign centered upon domestic policy. He also raised taxes, rather than lowered them, during his tenure - despite promises that he wouldn't. The timing of the recession couldn't have been worse.
The other difference concerns the war. September 11th brought us the destruction of the modern city-state Iraq and the capture of its leader, Saddam Hussein. Arguably, one of the more important "take-downs" in United States history. And to the degree that Americans associate Saddam with the war on terror, there's some satisfaction everyone feels from knowing he's captured because of (a) 9/11, and (b) what a cruel dictator he was to his people. In my mind, this already makes the two presidencies unique. While everyone could agree that it was wrong for Saddam to invade Kuwait, Kuwait was still a place no one in America knew anything about. Most had never even heard the word "Kuwait" until they learned that Iraq invaded and even then, no one could figure out why Americans should care.
Yet 9/11 will forever be tattoo'd to the brain of every American who was over 10 years old at the time. They'll remember sitting in front of their televisions watching the towers fall - watching the towers actually fall! - and the thousands of innocents left dead by the event. They'll remember the cover of the New York Times the next day which showed several people jumping from the windows of the World Trade Center's 100 stories up. The terrible events of the day are seared in our minds and hearts.
Bush II is in a different situation, in part because his tax cuts seem to be working and in part because of the nature of this war. The third quarter of 2003 saw a historic annual growth rates in GDP (over 8%). Three of the largest sustained expansions in US history were all preceded by tax cuts - the Roaring Twenties, the prosperity following Kennedy's tax cuts, and the sustained growth throughout the 1980s after Reagan's tax cuts. The re-election is only eleven months away, but already we're seeing signs of improvement inthe economy. Playing the "Bush has ruined the economy" card is going to be much harder 11 months from now assuming we're steadily back on our longrun growth path.
Plus, Saddam Hussein has been deposed, captured, and will probably be executed a few months prior to the re-election. The trial will be televised, and evidence will be presented supporting accusations about his cruelty, as well as possibly to support the US's unproven claims that Iraq had a weapons program. The way I see it, the timing of this coupled with the 9/11 have made this a very different four-year term for Bush than his father, despite the obvious similarities. I'll be very curious to see how these events affect the Democratic primaries.
Posted by scott at December 15, 2003 04:10 PM | TrackBackTreading into unfamiliar waters here...(I don't typically comment on politics or particularly on economics) but hasn't Bush II done a particularly bad job of curtailing gov't spending, a traditional conservative emphasis? What effect do you think that will have on his base?
If it were going to be Bush vs. Dean, though, I think Bush would win, since Dean is such a polarizing figure.
Posted by: Evan Donovan at December 15, 2003 06:51 PMEvan: that's probably a matter of opinion. I've heard a lot about that, about the increasing defecit, etc. But I don't know the exact financials on where the new expenditures are going, nor their magnitudes. I know we're at war, and so I'm assuming that some of those expenditures are military purchases and military salaries. So to that degree, the increased spending is legitimate.
But, conservatives, neo-cons, libertarians, paleo-conservatives, and others make up the ideological spectrum of the Republican party, and each of them is going to have a different opinion about Bush's spending. As for what effect it'll have on his constituents, I don't think it'll affect him too much in the race. It seems like his strengths coupled with the opposition are enough to dominate those weaknesses.
The thing about Bush, too, is that he does seem to be a savvy political player. Some of these increased spending - for instnace in the area of education - are consistent with him trying to make the tent bigger. I get the sense that to avoid the same fate as his father, he did some things on the domestic front, such as funding various things, as a way of both satisfying some critics as well as to hopefully avoid problems about his domestic policy in the upcoming election.
Posted by: scott cunningham at December 16, 2003 11:04 AMHopefully, despite this being late, you get to this Scott...
Simple economic question:
While the Reagan tax cuts can take some of the credit for helping to spur the economy, they - along with a massive increase in defense spending - also put the U.S. into a gigantic deficit.
Bush II seems to be moving along a similiar path. The economy is starting to get rolling again, partly due to the two rounds of tax cuts, but thanks to those cuts - and a massive increased in defense spending (however needed it is) has returned the U.S. to gigantic deficits.
Simply put, how much will these deficits hurt the economy in the long-haul? To my knowledge the economists' camp is split on this - one group saying the cuts will actually lower the deficit (through increased tax revenues as the economy grows) and others saying it will suffocate it as interest rates hinder growth.
Just wondering what your take is on this whole thing.
Posted by: Jmac at December 21, 2003 11:05 PMScott,
Speaking of elections, could you respond to this thread:
http://www.barlowfarms.com/sensusplenior.php?blogid=1&the_post=1866757 ?
My latest questions have been waiting for your response for nearly two weeks now.
Sorry about that Bob. I thought that thread was long since dead.
Posted by: scott cunningham at December 22, 2003 02:07 PMJmac, I don't know the answer to that. Robert Barro, in one of the articles I linked to earlier, actually said that the effect of defecits on interest rates is ambiguous, empirically as well as theoretically. The IS-LM models predict that defecits will crowd private investment and will raise interest rates. Other models seem to say the opposite. I'm actually trying to figure out exactly what the consensus is at this point.
Macroeconomics has a lot of different camps - much moreso than microeconomics. In microeconomics, everything is more or less agreed upon, but in macroeconomics, a lot of the really big questions like the causes of recessions and expansions, the driver's of growth, questions over the neutrality or non-neutrality of money's effect on real variables, etc. are still debated even to this day. I taught my students that defecits decreased national savings, which in turn raised interest rates. I've since learned that this is not universally agreed upon, and so I'm trying to determine what exactly was meant by those earlier models, and whether they were simply untrue, or true in a qualified sense. But the IS-LM model does indeed predict that defecits will raise interest rates.
Posted by: scott cunningham at December 22, 2003 02:16 PM