For one thing, the economic policies pursued by President George W. Bush were actually quite successful. Despite facing numerous challenges — including 9/11, Katrina, a recession inherited from President Clinton and the inevitable bursting of the tech bubble that bolstered Clinton’s economic performance — Bush managed to keep unemployment to an average of 5.3 percent. That is almost identical to the 5.2 percent average during the Clinton years. Bush’s overall performance would have been even stronger had it not been for the financial crisis that marred the end of his second term — a crisis which Obama inherited, as he compulsively reminds us. Obama seems determined not to squander his inheritance: He has kept our economic crisis largely intact throughout his entire presidency. Obama clings to his inheritance, just as the working class voters of his imagination cling to guns or religion, seemingly determined to keep it there to remind us how others are to blame for our current misery.
It is in his retelling of the financial crisis that Obama’s story really kicks into high gear. Bush’s tax cuts for the rich seem to be a major culprit, although Obama fails to explain that the Bush tax cuts were not just for the rich but for all taxpayers, that they resulted in the rich shouldering a larger share of the tax burden and that income tax revenues increased after they were enacted. More importantly, Obama fails to explain how there could be any logical connection between the Bush tax cuts and the financial crisis. Obama makes a more serious attempt to link the financial crisis to financial deregulation — but fails to mention that the deregulation legislation in question was signed into law by the man who will make Obama’s nomination speech at the Democratic National Convention. That man (former President Clinton, for those who aren’t good with hints) also decided against regulating derivatives; most liberals like to blame the financial crisis on the failure to regulate derivatives.
What most liberals, including President Obama, conspicuously omit from their “story” about the financial crisis is the thing that was actually at the root of it: the housing bubble, fueled by government policies designed to help less creditworthy borrowers purchase homes. The Bush administration bears some of the blame for this housing bubble. But a greater share of the blame belongs to Carter and Clinton policies that pressured banks to lower their credit standards, and to the actions of Democrats like Barney Frank that thwarted Bush administration efforts to rein in Fannie Mae and Freddie Mac. Any explanation of the financial crisis that omits the history of the housing bubble — and President Obama’s “story” always omits it — is a dishonest political alibi.
President Obama argues that his tax increases would merely restore the rates in effect during the Clinton administration, when the economy was growing at a much stronger pace. Fine, but would the president have us believe that increasing taxes to Clinton-era rates would restore Clinton-era growth? Would the president have us believe that the economy was stronger back then because rates were higher? The truth is that the economy was stronger back then in spite of higher tax rates. The economy was stronger because of a number of factors that do not exist today, including the tech boom (which later turned out to be a bubble) and the post-Cold War peace dividend. And while Clinton maintained higher tax rates on income, he slashed the capital gains tax on investments — which fueled an investment and economic boom that increased tax revenues in spite of the lower rates. President Obama, on the other hand, wants to double the capital gains rate.
By preaching false history, President Obama is telling America a “story” that can only be believed by an ignorant electorate. But notwithstanding the president’s determination to change the subject, an essential truth remains: Regardless of what got us here, the president’s policies are keeping us here.
David B. Cohen served in the administration of President George W. Bush as U.S. Representative to the Pacific Community, as Deputy Assistant Secretary of the Interior, and as a member of the President’s Advisory Commission on Asian Americans and Pacific Islanders. He is the author of Left-Hearted, Right-Minded: Why Conservative Policies Are The Best Way To Achieve Liberal Ideals.
