The Washington Times
It seems quite clear that by the end of this year, if not in fact by spring, the Bush administration is going to “own” the economy. When something based on the new tax legislation the president has proposed actually clears Congress, which I think is almost certain, the American economy’s success or failure in the future will have a presumed author, the president himself, whom voters will hold accountable accordingly.
It’s striking that Mr. Bush is not yet the “owner” of the economy. By this time in the course of their first terms, most presidents are. Ronald Reagan passed a big tax cut his first year in office, giving birth to “Reaganomics.” He took a huge political hit from the recession that resulted from the Fed’s purge of inflation from the economy, but when strong growth resumed, it was “morning in America” for him with voters.
George H.W. Bush was elected having promised essentially a non-agenda for the economy – that is, not to raise taxes. But within two years, he had abandoned that pledge in the name of deficit reduction. When the economy later faltered, so did he.
Bill Clinton’s first major legislative push was for a tax increase that passed without a single Republican vote [along with a “stimulus” spending package that failed]. The tax vote cost Democrats dearly in the 1994 election. But when the economy continued growing and then grew faster, it was “Clintonomics” – from the new, Wall-Street-friendly Democratic Party – that got most of the credit. Republican attempts to attribute the good times of the late 1990s to their control of Congress never quite chipped away at Mr. Clinton’s claim of ownership.
Strikingly, Republicans had a better time with the argument that the 1990s prosperity was the policy legacy of Mr. Reagan. And one Democratic rejoinder to that has been to note that the long period of economic liberalization characterizing the last two decades of the 20th century actually began under Jimmy Carter, with deregulation initiatives that would not produce their extraordinarily munificent returns to the economy in time to do Mr. Carter any political good. The identification of presidents with the condition of the economy is so deep that to quarrel with one president’s “ownership” of the economy, you generally assert another’s.
Given that the first thing the new administration did when it hit town in 2001 was to shift into overdrive in successful pursuit of a $1.6 trillion tax cut, one might think President Bush’s ownership of the economy would be an established political fact by now. And yet it isn’t. Why not?
Well, September 11, first of all. The attacks were designed not only to kill Americans but also to disrupt the U.S. economy. An outside shock of that kind is apparently not something Americans hold against presidents.
Second, hangovers from the late Clinton administration. The sluggishness of the economy when the Bush administration took office began in the previous administration. And clearly, so did the corporate chicanery that emerged starting with the Enron scandal. It’s not that Mr. Clinton got blamed retrospectively, though some tried. But the timing was such that the Bush administration had a strong case for its own non-culpability.
Third, Alan Greenspan. During the 1990s, the Federal Reserve chairman had something of the reputation of a philosopher-king. If, during this period, you were looking for someone other than Mr. Clinton to credit, Mr. Greenspan was probably your choice. His reputation accordingly had a little unmaking to undergo when things got bumpy. This probably deflected at least some attention from Mr. Bush.
Fourth, Mr. Bush’s 2001 tax cut passed with significant Democratic support. He got 12 Democratic votes in the Senate, for example.
Finally, ahem, what Bush tax cut? In policy terms, upon its full implementation, the 2001 tax cut is a pretty big deal. Except that it was scheduled to take just about the whole decade to kick in. And the percentage of that $1.6 trillion actually cut in the first year, as my Hoover Institution colleague Martin Anderson likes to note, was down in the single digits. That’s less than 1 percent of an economy the size of ours.
So maybe the problem with Mr. Bush’s ownership of the economy, for better or worse, is that in real-world terms, the last major revision in the policy guiding it was Mr. Clinton’s. In 1997, he signed legislation that cut taxes on capital gains, among other things.
The change of ownership is at hand. In moving to implement scheduled cuts swiftly and in adding a potentially far-reaching reform – the elimination of double taxation of dividends – Mr. Bush’s new proposal is bold in a way the 2001 legislation was not, quite.
Maybe the real lesson here is that if you’re going to end up owning the economy anyway, you really ought to take your best shot at getting as much as you can of the policy you believe in. Mr. Bush was lucky in the sense that he had two full years to figure this out before getting title. Most presidents have less than one.