Saturday, January 17, 2009

The Bush Economy

Not what you think it is. Here's an analysis of the economy during the Bush years and the causes of the current downturn:
By pushing all of this excess credit into the economy, the Fed created a housing and mortgage mania that Wall Street was only too happy to be part of. Yes, many on the Street abandoned their normal risk standards. But they were goaded by an enormous subsidy for debt. Wall Street did get "drunk" but Washington had set up the open bar.

For that matter, most everyone else was also drinking the free booze: from homebuyers who put nothing down for a loan, to a White House that bragged about record home ownership, to the Democrats who promoted and protected Fannie Mae and Freddie Mac. (Those two companies helped turbocharge the mania by using a taxpayer subsidy to attract trillions of dollars of foreign capital into U.S. housing.) No one wanted the party to end, though sooner or later it had to.

Enough words. You want a graph? I've got a graph. Try this one:

Bush inherited the dot com crash from Clinton and Bush's tax cuts got the economic engine going again after 9/11. Things are worrisome, sure, but so far they're about as bad as it was in 2000 and not nearly as bad s it was in 2001.

So, hang tight. We may not be out of the woods yet but we know what got us here and, if we have the will, we can avoid making things worse.

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