In an Economic Downturn, Who'll Get the Blame?
July 7, 2008 - 8:27 PM
(CNSNews.com) - President George W. Bush will likely spend the next couple months in a public relations battle with Democrats who seek to blame the downsizing economy on his monetary policies, financial analysts said.
But accusations against Bush are unfounded, said James Gattuso, the vice president of policy for the Competitive Enterprise Institute, as current economic losses can be traced to a variety of federal actions that occurred months and even years ago.
"Bush has only been president for 11 days," Gattuso said. "If a recession started in his first 11 days, that would be an [abnormality] of historical proportion."
Gattuso said he is trying to clear up any misconceptions that might be presented in the first weeks of the Bush Administration.
"People that follow the economy will see it started a downturn a couple months ago," he said. "But one big danger for Bush is that [other] people will perceive the economy changing on the eve of his inauguration."
Bush cannot be held responsible - or, conversely, claim much credit - for any economic trends that emerge in the first year of his presidency, said William Niskanen, the chairman of Cato Institute and the acting chairman of the Council of Economic Advisors under former President Ronald Reagan.
That's because it takes that amount of time for the public to feel any changes in fiscal policy, he said.
Besides, he continued, the current economic plight - less-than-stellar stock market activity, decreased consumer confidence reports, and widespread company layoffs - was actually predicted by some economic forecasters two years ago, when federal policymakers enacted a measure to boost U.S. growth, as measured in terms of total sales.
"The high demand growth, that's the primary variable the feds can affect," Niskanen said. "They had maintained a very steady demand growth for six years [since 1992] ... at five and one-half percent, but for the past two years, they had it at about eight percent. They let it grow too fast, and started correcting it in the fall of 1999 by raising interest rates."
In June of 2000, Niskanen said he tried to advise fellow members of the Congressional Budget Office Advisory Committee to reduce their growth projection figures, but to no avail.
It is "very difficult," he said, to assume a "nay-sayer" persona amid seeming economic prosperity and successfully convince other forecasters of the need to curb estimates.
Additionally, the Clinton administration did not want to "tighten monetary policy" by correcting the eight percent growth figure "right before the election" in 2000, he said.
"The Bush people will correctly claim they inherited a recession and an energy crisis [in California]," Niskanen said. "In the summer of 1999, if the feds had tightened then, it would have corrected it."
The California energy crisis also should not be underestimated in terms of how it might hurt the U.S. economy, said Marty Reiser, vice president of the federal and state campaign program at Citizens for a Sound Economy.
Escalating under Clinton - in part because of environmentalist extremism and faulty government policies, according to some energy analysts - the problems currently seen in California will eventually "ripple" and "hit the whole nation," Reiser said.
"It's unclear how long this economic slowdown will last," Reiser said, "but Bush can greatly reduce it with a tax cut and by handling the energy problem by opening up domestic production. He can do that by getting rid of some of the environmental executive orders from Clinton."
Reiser also said those who seek to discredit Bush's economic policies by comparing them with Clinton's are basing their arguments on erroneous information.
"There's been manipulation of figures in the Clinton administration in that they claim the economic recovery started eight years ago," at the start of the Democratic leadership in the White House, he said. "The recovery actually started in 1981 ... by President Reagan."
Reagan's economic measures - substantial tax cuts coupled with a "very stable ... federal monetary policy" which has continued for the past 20 years, provided for the financial security the nation experienced under Clinton.
"But what the Clinton administration and media have done is said all this [economic growth] started in 1993 - coincidentally right after he passed the greatest tax hike in American history that no Republican voted for, by the way," Reiser said.