Chart of the Day: Did Bush Destroy a Booming Economy?

(Originally published Aug 21, 2014)

ANSWER: No. The economy was receding months before Bush took office, and years before his first economic package took effect.

Transitions after elections provide a good deal of grist for the political mills of both parties. It’s to the advantage of the incoming party to claim they were the recipients of a “receding” economy, so they can claim credit for its improvement. Conversely, if you can show that your competitor was the recipient of an improving economy that later receded, that works to your benefit as well.

With that in mind, misinformation has ensued regarding the Clinton/Bush II transition. The facts show that Bush inherited a receding economy, with the dot-com boom peaking in March of 2000.

1) The 2nd quarter of 2000 was both the last quarter of high GDP growth and the market peak of the Dow, S&P, and NASDAQ indices.

2) The Bush inaugural occurred well after the economy had begun to turn down (aka the “Dot Com Bust”“. The end of the last Clinton budgetary period occurred about halfway through the Bust period, and the first Bush economic package went into force on January 1 of 2002, about 3/4 through the recessive period.

DISCLAIMER and PERSPECTIVE

When attempting to attribute economic behavior to individuals, groups, or parties (a dicey proposition at best, it should be said — the economy has LOTS of moving parts) it is generally accepted that the incoming President “takes responsibility” in September after their inauguration, which is when the prior President’s budget expires. Even then, it is generally true (not always) that the incoming President does not legislate any of his own economic priorities into law until January 1 of the year FOLLOWING his inauguration. This was the case with Bush II, with his first economic package taking force on Jan 1 of 2002.

FACTS

In the case of George W. Bush, he clearly inherited a receding economy, which is clearly displayed in the chart above. (Not that this was Clinton’s fault — an asset bubble is rarely even recognized until it has already burst). On top of it all, 9/11 then happened, throwing the economy into further stress.

Reasonable people can disagree about the political culpability of various players, but one thing is clear from the fact: George W. Bush inherited an economy that had been slowing for nine full months prior to his taking office, and he then implemented no economic legislation until the receding economy had been in place for over 20 months.

— — -KBM