If a president’s performance was solely based on how the economy performs during their stay in office, George W. Bush may have been the worst president in US history. Clearly there are other measures to judge a presidency. GWB, for example, initiated a great humanitarian effort in Africa to treat people with the AIDS virus. The President’s Emergency Plan for AIDS Relief, started in 2003, lowered the AIDS death rate on average by 10.5 percent a year in a dozen African countries. That’s a nice impact.
The state of the economy really does tend to paint the broad strokes of a president’s legacy. I’m not sure how fair that is given the president only has so much impact on the economy, but the Aughts were something of a lost decade on Bush’s watch. As Neil Erwin of The Washington Post explains, zero net jobs were created from 2000-2009.
As you can see, this type of job creation is not typical, nor is the household net worth data. When adjusted for inflation, household net worth actually declined 4% in the 2000s. Plus, median households made less money in 2008, when adjusted for inflation, than they did in 1999.
Lawrence Mishel, president of the Economic Policy Institute, a liberal think tank, summed it up this way:
“This was the first business cycle where a working-age household ended up worse at the end of it than the beginning, and this in spite of substantial growth in productivity, which should have been able to improve everyone’s well-being.”
Productivity and technological innovation did improve people’s lives last decade, but the benefits probably don’t exceed the costs if you have no job, are underemployed, and/or have been pushed into a less prosperous line of work. Why weren’t there any net jobs created in the Aughts? The continued rise of globalization, with countries like China and India utilizing cheap labor to take over the production of our goods, is one story. So, too, are technological innovations. From factory jobs to office assistants, technology has simultaneously made many positions obsolete AND increased the productivity of the economy.
The decline in household net worth could be explained by the fact the data begins at the peak of the dot.com bubble and ends during the worst economic period since the Great Depression. Surely the assets people are holding will bounce back eventually (at least partially). However, it is fairly indicative of the boom and bust cycle we ride, with a constant engine of inflation coming from the Fed. It wasn’t long ago that Greenspan and company were telling us they had mastered the business cycle. Every word that came from his mouth was like gold. Well, we all would have been better off financially just buying gold.
Somehow I have a feeling the lost decade will be the fault of capitalism and corporations. And let’s not forget all of our wonderfully free markets. While corporations deserve some of the blame, particularly the financial industry, let’s not forget the government. They have fostered a system in which GE allegedly just paid zero federal taxes for last year’s $14.2 billion in worldwide profits, with $5.1 billion of the total from operations in the United States. There has been a colorful debate over the New York Times claim, but it appears GE has used the ridiculously large tax law to pay zero or very little federal taxes; a tax law with all sorts of exemptions, credits, and deductions fought for by lobbyists of special interests groups, or groups in politician’s favor. The government has just led us into another war in Libya, without coming to Congress first (despite the fact the Fed loaned Muammar Qaddafi $26 billion in nearly interest-free money over the last three years). Apparently the United Nations will do. This means we will spend billions more to remove another despot, dismantle another country, and partake in more nation building. The government will continue to deficit spend to roughly the tune of a trillion dollars per year. The Fed will continue to engineer inflation, in good times and in bad.
We need change. I would start with balancing the federal budget and scaling back the military complex. The feds receive $200 billion per month in revenue. They should be able to run themselves on that paltry sum. If it means not bombing Libya or axing entire departments, so be it.
Next I would enact a Fair Tax, and begin taxing consumption rather then income. As I explain here, it would reduce the number of tax returns substantially for the IRS to review, free up time and human capital for more productive endeavors, and largely eliminate the lobbyist culture in Washington. State and local taxes are largely regressive anyway, and a Fair Tax could be structured to benefit the poor and middle class much more than the current system. The very nature of an esoteric federal tax code of 100,000+ pages is always going to benefit those with great tax accountants more, which is usually not the poor.
The next step is ending the moral hazard problem. Let companies fail. Speed up bankruptcy processes and get a failing company’s assets back to productive uses more quickly.
We need to rein in entitlements. Fewer people are going to receive fewer benefits. Plan for those transitions now, and start promoting personal retirement and health savings accounts. Health and retirement security are essential. The public needs to know what they can except from public programs and be empowered to make their own plans. If we fail to get programs like Social Security and Medicare on a sustainable path, the fiscal consequences will be grave.
I’d like not to be sitting here in 2020 writing a similar article about another lost decade for the United States. There are reasons to be optimistic about global progress over the last few decades, however, the status quo in the US just will not do any longer.