Bush Wrong to Ignore Economic Slump

In recent weeks, a number of analysts have started drawing comparisons between the economic situation under President George W. Bush (Bush 41) and the current president, George H.W. Bush (Bush 43). This is a matter I have also been considering for some time. Sadly, I have to agree that the parallels are all too similar.

In a September 30 Los Angeles Times article, Ron Brownstein clearly articulated the similarities between Messrs. Bush 41 and 43. "Nearly halfway through his term," he said, "President Bush’s economic record is beginning to look a lot like that of his father, former President George Bush. That isn’t good news for the younger Bush. Or for the economy."

The major similarities are these. Both Bushes became totally preoccupied with Iraq to the exclusion of almost everything else. Both presided over economic recessions that were very slow to end. Both seemed utterly disinterested in economic policy and avoided their economic advisers like the plague.

Treasury Secretary Paul O’Neill seems especially disengaged. Insiders tell me that he was instrumental in killing a plan to propose new investment tax incentives. President Bush had indicated that such an initiative would shortly be forthcoming after his Waco economic summit in mid-August. But within days, it appeared to die of neglect. I am told that O’Neill argued forcefully that no additional stimulus was needed because the economy did not need it.

Joining O’Neill in opposing new stimulus was Commerce Secretary Don Evans, I am told. He shares the treasury secretary’s view that everything in the economy is just peachy and opposed efforts by National Economic Council Director Lawrence Lindsey and Council of Economic Advisers Chairman Glenn Hubbard to do something before Congress adjourned.

A September 30 Time magazine article indicates that the split between O’Neill and Evans, on the do-nothing side, and Lindsey and Hubbard, on the do-something side, is getting nasty. The article says there will be a major housecleaning of Bush’s economic advisers after the election. It strongly implied that Lindsey and Hubbard would be out and that Evans will "step up to become the public voice of the economic team."

For as long as I have been in Washington, commerce secretaries have been trying to promote themselves into major players on economic issues. It has never worked because the Commerce Department simply lacks control over key economic issues, such as tax policy or the budget. Nor does the commerce secretary have the access that White House staffers like Lindsey and Hubbard have. Consequently, all commerce secretaries, with the possible exception of Herbert Hoover in the 1920s, have largely been irrelevant.

Clearly, among Bush’s economic advisers, O’Neill is and should be preeminent. But his unwillingness to step forward and address the economy’s problems makes him seem like a Pollyanna. Nor is he even willing to seriously address the key issues within his purview. For example, rather than put forward a significant tax reform proposal, which almost everyone agrees is desperately needed, he plans to offer a grab bag of tiny little simplification options later this year.

The fact that O’Neill is not willing to offer his tax plans before the election is enough to tell you that the effort will probably sink like a stone in Congress. After all, Congress’s own Joint Committee on Taxation put forward a similar initiative in April of last year without anyone paying the slightest attention. What makes O’Neill think that rehashing the same hash will have a different impact today?

To be sure, the economy is in better shape today than it was at a similar point in Bush’s father’s administration. Then, taxes were being increased, rather than cut, and interest rates were considerably higher. At the beginning of the 1990-91 recession, the Federal Reserve had the federal funds interest rate at 8.25%. By this point in that recession, it had only fallen to 4.75%. At the beginning of this recession in March of last year, the fed funds rate was at 5.5% and today is at just 1.75%.

But while some economic comparisons between Bush 41 and 43 may be different, the public perception is almost the same. People felt then and feel now that the Bush White House isn’t really interested their personal concerns, caring only about foreign policy.

According to a new poll by The Washington Post and ABC News, the percentage of Americans saying the economy is in excellent or good shape has fallen from 70% in January 2001 to only 29% today. At the same time, the percentage saying the economy is not so good or poor has risen from 31% to 69%-a 180-degree turnaround on both counts.

Bill Clinton understood that you have to feel peoples’ pain and show that you care, even if you can’t actually do anything. He also understood that "it is the economy, stupid." This seems to be a lesson the Bush family has never learned.