This is the follow-up to the previous article on Reaganomics. I wrote that two years ago, when there was very little data on Bush’s economy. During the election period this year, I wrote this follow-up since Bush’s policies are similar to those of Reagan. It is interesting to see if they produce the same results.
In the first installment, I traced the history of our economy from Carter to Bush II. I pointed out that to be fair, we must take a critical look at economic statistics from two years into a President’s administration in order for there to be any relevance to that President’s policies. At the time I wrote that piece, W hadn’t been in office long enough to apply the two-year rule. As we approach a new election, I think it’s time to see how W stacks up to his predecessors.
In January of 2001, when George W. Bush took the oath of office, the prime lending rate was standing at 9%; not all that bad. But as I documented in the other piece, we were already in the throes of a recession. The Fed started reducing the prime rate on a regular basis, trying desparately to help stimulate a recessing economy. And then 9/11 hit. This further debilitated the already lagging economy. The Fed continued to lower the prime lending rate until it reached it’s lowest rate since 1958 – 4%! That was in June of 2003, just over two years (sound familiar?) since George Bush took office. As of this writing, the prime rate stands at 4.75%.
So does that mean the economy is on the rebound? Let’s take a look at the change in GDP. When W took office in January of 2001, the economic growth number was at -1.4%. The most recent data has it at 3.3%. It certainly seems that W has had some impact on the economy. That’s a pretty dramatic turnaround in such a short time, especially when you consider that it includes the period after 9/11. Unemployment during this period has gone from 4.2% when he took office to 5.4% currently.
Bear in mind here that George Bush was elected with a promise to cut taxes. He started by giving us a rebate in the summer of 2001. Every American who paid taxes received a check from the government. Shortly after, 9/11 hit. In 2002, another tax cut. Despite the devastating effect of 9/11 on our economy, the third quarter of 2001 was the last quarter of negative growth in George Bush’s presidency – the beginning of a recovery that is still growing.
But this doesn’t include the two-year rule. Let’s apply that and see where we are. Ok, so here we go. In January of 2003, unemployment was at 5.8%. Now it stands at 5.4%. Not much of a change, but the significance here is that it is going DOWN not up! Brace yourself, we’re going to check economic growth next. Are you sitting down? In the six quarters we actually have stats for, economic growth is up 4.23%! That beats Reagan and smashes Clinton. Now I realize this is just six quarters, a snapshot really. But it is all we have to go on and probably not a fair assessment to compare to our last two-term Presidents. And yet, it is absolutely a fair assessment of how he is doing right now! Having inherited a receding economy, unemployment (although low) on the rise, and the worst terror attack on our nation’s soil, It seems that he’s done pretty well.
Recently, Edward Prescott, a professor at Arizona State University and a researcher at the Federal Reserve in Minneapolis, was co-awarded the Nobel Prize for Economics. He believes that George Bush’s tax cuts were too small. According to the Washington Times, Prescott says that adding tax cuts usually provides an incentive to work. Hopefully, President Bush will take his advice when he begins his second term!