Forget The Recession--Bush Economy Sucked BEFORE Then

by: Paul Rosenberg

Sat Aug 29, 2009 at 14:30


One symptom of the total dysfunction of our political system is the fact that we just suffered a catastrophic economic system failure without anything remotely approaching a coherent political response. Although the economy as a whole shows signs that it may soon bottom out and begin to recover, jobs will continue to be lost for some time, and there is no assurance that we will not see another severe downturn in the near term, given that the systemic problems behind the recession have not yet been fathomed, much less addressed.

Still, at least we know that there is a recession, and that its orgins lie in the financial sector and its facilitation--if not outright creation--of the housing bubble, as discussed in the previous diary.  But is that simple fact itself a distraction from even more fundamental problems?  I would argue yes, on two counts: First, that the Bush economy was already a miserable failure compared to the Clinton economy before it.  Second, that the Clinton economy was actually much, much better for those at the very top levels, and thus was not substantially any different than the Bush economy, when viewed in comparison to the pre-1970s economy, for example.  Indeed, it was during the Clinton economy that housing bubble got its start. One can, in a sense, see the Bush economy as an outgrowth of the Clinton economy, in which all the flaws of the latter are heightened, while a whole new round of flaws are larded on top.  This was visible first in the recession, then the incredibly anemic employment recovery, and then the income data--all before the ultimate crash.

In this diary, I only look at data through 2007, so there's only the impact of the early slowdown to be seen--nothing of disastrous crash.

We begin by looking at the income levels for the top of the first four quintiles, plus the bottom of the top 5%, collected by Census Bureau, and published in the H1 Table.  The second part of the diary will look at the high-end income data--up to the top 0.01% of income-earners--compiled by Dr. Emmanual Saez of UC Berkeley (Excel spreadsheet here).  A simple visual inspection is enough to see that growth of all income levels in the census data came to a virtual stand-still during the Bush years:

Here's the underlying data:

As can be seen, income growth basically stopped for just about everyone.  Those on the bottom lost a substantial amount, however.  Does the phrase "worst President ever" ring any bells?

Removing the top 5% allows us to rescale the first graph, for a clearer view of what's happening with the lower quintiles:

Paul Rosenberg :: Forget The Recession--Bush Economy Sucked BEFORE Then

The loss of growth under Bush compared to Clinton can be calculated and charted, to make the lost income growth dramatically obvious:

The chart above was generated by by applying the annual percentage change for each income level under Clinton to the comparable years under Bush, starting with the 2000 year figures as a baseline.  The actual income levels under Bush were then subtracted from the projected income levels generated from the Clinton annual changes.

Here's the table of the underlying data:

By 2007, those at the 20th percentile (the top of the bottom percentile) were making about $5,000 less under Bush than they would have made if the economy grew as well under him as it did under Clinton. But those at the 80th percentile were lagging behind more than three times as much--over $15,000--and those at the 95th percentile were almost $40,000 short of where they would have been if the Bush economy had been as good for them as the Clinton economy had been.  Cumulative losses over the first seven years of the Bush presidency were substantially larger.

Finally, we look at the annual growth rates throughout the period.  We can see that the economy was slowing significantly in 2000, even before the economy was officially in a recession.  However, Bush's "recovery"--which Republicans loved to attribute to his tax cuts, rather than the housing bubble--was so weak that it was not until 2005 and 2006 that the annual increases were higher than in 2000, and in 2007, they were a mix of higher and lower compared to 2000:

In summary, these income figures paint a picture of an economy spluttering along.  It's no wonder that people took money out of their houses--their incomes weren't advancing, but real estate was skyrocketing.  Houses, not work, was where the money was.

But what about the wealthiest Americans?  Was the Bush economy sub-par for them as well?  Perhaps surprisingly, the answer to that question is "yes." The Bush economy sucked at the top as well, relatively speaking.

Upper Incomes-90th Through 99.99th Percentile

In this section, I use the data compiled by Emmanuel Saez, in the table that combines capital gains with ordinary income.  As can be seen in the first chart, the top 0.01% of income earners took a big hit in the Bush recession. Their incomes did not return to pre-Bush levels until 2006:

And here's the underlying data:

Remember at the beginning of this diary, I wrote:

the Clinton economy was actually much, much better for those at the very top levels, and thus was not substantially any different than the Bush economy, when viewed in comparison to the pre-1970s economy, for example.

This is where we can clearly see this.  There was not that much difference in income growth across the quintiles under Clinton.  In fact the bottom quintile incomes grew more (18.3%) than the fourth quntile incomes (17.2%), and almost as much as the bottom of the top 5% (22.0%).  But when we factor in capital gains and look closely inside the upper echelons, as the above table does, then we see the top 1% incomes galloping along at a 48.5% increase, the top 0.1% incomes easily surpassing that at an 84.5% increase, and the top 0.01% leave both those in the dust with a 136.6% increase.

To make it easier to see what's happening with the relatively lower income levels, once again we remove the top level from our chart, as we did above, and we find that the shape of the income curve of the top 0.1% is strikingly similar to that of the top 0.01%:

When we calculate the income gap, using the same method we used with the Census data, we find that the top 0.01% ended up more than $10 million short in 2007 alone, compared to where they would have been if the Bush economy were as good for them as the Clinton economy had been.  So much for the notion that Bush was good for the upper crust.  He was good for his cronies, perhaps.  But not much else:

And here's the underlying data:

Man, that's got to hurt! You're in the top 0.01% of income earners, so you vote for the guy who's going to focus like a laser beam on cutting your taxes, and it ends up costing you $40 million up front over the next 7 years... and then there's the mother of all recessions!

Ouch!

Republicans bad for the economy much?

Again, in order to get a clearer picture, we remove the top 0.01% income level, and this is the result, a surprisingly similar-looking graph, although at about 1/10 the scale, with those at the top 0.1% level falling $1.1 million shy of their Clinton-projected levels in the Bush economy:

The data are still so concentrated at the top, that we repeat the operation, removing the top 0.1% income level.  The shortfalls under Bush are quite substantial for each income level relative to their base income:

Finally, looking at the annual income growth rates, we see a much more violent drop during the first Bush recession, compared to what we saw with the Census data--hardly surprising with capital gains as part of the mix--with a much stronger rebound as well. However, sub-2000 growth returned as early as 2006:

What we see from these charts is clear evidence that Bush performed poorly for the rich and super-rich, the same as he did for the rest of the American people.  And all this was before the disaster of 2008 kicked in.  Indeed, the very weakness of the Bush economy overall should be seen as a major contributing factor to the severity of the downturn, and the difficulty we still face of producing a genuine recovery.


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hey thats easy (0.00 / 0)
the economy always sucks under a republican, check the facts they are undeniable.

What's Astonishing (0.00 / 0)
is just how much they suck.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
This has been happening since 1980. (4.00 / 3)
with the emergence of 'neo-liberal' economic growth model as the dominate force in policy.  This model relies on asset price inflation, high leverage and cheap imports.  Forget about wage growth. We got to change the model. One way to that is re-examine our international trade engagements and a national manufacturing policy and yes, allow for labor organizing.

New economic equation:

Income inequality + Financialization + Globalization = Destruction of Middle Class

RebelCapitalist - Financial Information for the Rest of Us.


You have hit the nail on the head.... (4.00 / 2)
...and I will even go further and say it is not really a Democratic - Republican issue.  Those in power in both parties have been at fault.  The catastrophic trade agreements and deregulation that have taken place since the late 70's have really been a product of both parties.  Clinton was a proponent to some of the worst trade agreements in American history, Bush continued on with them, and now Obama does as well.  When it comes to Reagan, Bush, Clinton, Bush, and Obama, we really exaggerate the differences, when it came to trade they are all enemies of middle class Americans and good strong allies to multi-national corporations.  It is no mistake that Obama's biggest financial supporter was Goldman Sachs, companies this pro-multinational do not support candidates who will strongly oppose their corporate aims in defense of the middle class.

Regards,

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me-and I welcome their hatred. - FDR


[ Parent ]
Median (0.00 / 0)
Some day I want to see the country convert to median as the standard statistical measure instead of average or total.  While median income doesn't tell the full picture, it is much more accurate than average.

If the media used a better measure for its talking points and politicians felts some pressure to improve that measure (like they do for GDP or average incomes) I think we'd see a touch more equity.


For what it is worth... (4.00 / 2)
My income growth since 1992 and contraction since 2001 closely matches the averages in your graph. I had a few job events, like moving to another company. But, since I have just been with a couple of employers since 1992, the presence or absence of raises averaged out to almost exactly match your graphs. In my case, raises, or conversely, salary cuts, closely matched the fortunes of my employers, and their sales increased steadily in the 90's and suffered greatly since 2001. I am an engineer and only rarely involved in sales, but in the long run there is no escaping the depressing effect on compensation of a lousy economy.

So, I am a left-wing guy, but I must admit that my visceral hatred of Bush and the GOP has more to do with their mismanagement of the economy than even their other crimes. The basic reason they screwed it up is that it was more important for them to be able to steal from us than do try and make something that works for everyone. A typical result of corruption.

ec=-8.50 soc=-8.41   (3,967 Watts)


One more (4.00 / 1)
It's less importantant but the stock market also benefited those in the top quintile greatly under Clinton.  The Dow was 2770 when he started, rose to about 12,500 and closed at 10,555.  That's unprecedented since the Dow was started around 1900.  As for Bush, the Dow shrunk to 7,500, rose back to over 14,000 and then sunk below its opening level.  A few speculators and hedge funds made money but that just accelerated the loss for the average Joe Millionaire.

What was the line: Clinton created 22 million jobs.  Bush maybe 3 to 5 million briefly that were soon lost.  Manufacturing jobs under Clinton in the US actually increased considerably despite NAFTA.  As Jesse Jackson stated while running for President in 1988, "A rising tide lifts all boats."  That's actually very good economics.  It's also very good morality.  Greed, it turns out, is not good at all.

In the last 50 years before Obama, Democratic Presidents gave us two 8-year stretches of spectacular growth and four years under Jimmy Carter that were a little above average.  Republicans gave us recession after recesssion.  I used to joke (accurately) that the last Republican President who did not preside over a recession was Herbert Hoover.  Hoover presided over the Great Depresssion.  


Well, There Was A Boom Under Reagan (0.00 / 0)
But it came after a severe double-dip recession, and was the result of unprecedented deficit spending (a perverse application of Keynsian economics done in the name of Friedman!) and covered over the S&L megascandal which left our financial systems in ruins (the joke at the time of the Gulf War was that the US & Kuwait were a perfect match--a country without a banking system and a banking system without a country).

In short, GOP "booms" cost more than your average recession.

p.s.  And who could forget the "Bush Boom"?

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
In the end though... (0.00 / 0)
...NAFTA was catastrophic to our country.  The destruction it and the additional agreements caused took some time to take place, but when it did it was the type of destruction never seen before in our economy and it continues to look worse and worse.

Regards,

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me-and I welcome their hatred. - FDR


[ Parent ]
Never before seen? (0.00 / 0)
NAFTA did not cause all of the economic problems.  Eight years of Bush tax cuts, privatization of FEMA, unneccesary wars in Iraq and an unneccesarily long (at the least) war in Afghanistan (six months was too long) caused more damage than NAFTA IMO.

Even so, the economy was certainly worse in the Great Depression and the Panic of 1893 and the Panic of 1837 would be comparable to a continuing the current recession for at leas tanother three years at nearly this level of severity.  They were very bad.

I'm not praising NAFTA.  But NAFTA is not the whole story of the past 20 years.


[ Parent ]
on the cusp of the $oundbite$ - EVERY (0.00 / 0)
peeee-on $hould be able to find out what EVERY rule co$t$ the peee-on from hi$ or her pocket.

IF you're willing to subsidize boeing and microsoft and halliburton and aig and ... , well,

YOU STUPID FUCK,

THEN you de$erve the $hit they dump on your head.

In my NOT humble opinion, if the lefty organizations had started this kind of analysis decades ago,

instead of grooming a bunch of I wannabee MLK on the mall / I wannabee george kennan as X,

oh, and had considered some effective messaging,

we'd be light years away from our current flavor of kindler gentler compassionate fascism.

rmm.

It is too full o' the milk of human kindness To catch the nearest way


Are there policy makers who get it? (4.00 / 2)
Who understand what is happening?  Our economic growth model is broken.  I am asking this out of complete frustration.

We have numerous economists saying the same thing in slightly different ways: Prof. Saez, Prof. Krugman, Simon Johnson and Dr. Palley and many more.  

But who in Washington gets it?

RebelCapitalist - Financial Information for the Rest of Us.


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