The failure of Republican economics

Those clinging to Bush-era ideologies and illusions show they simply do not understand economics.

Former US President George W Bush's new book might be poorly timed [GALLO/GETTY]

What’s wrong with this picture? The George W Bush Institute has just released a book, The 4% Solution: Unleashing the Economic Growth America Needs with a foreword by former President George W Bush. A better question would be, what’s not wrong with this picture? It’s not just the matter of timing – the former Republican president releasing a book just as the current Republican nominee is struggling to establish his own identity and political bona fides. Nor is it simply the additional embarrassment that the book’s subject is economics, which Mitt Romney pretends to be an expert on. It’s not even just the fact that Bush had his chance at producing four per cent growth for eight long years and never once managed to even come close. In fact, he only managed three isolated quarters when the economy grew that rapidly. 

It’s all that and much, much more. Because Republicans in general are downright terrible at producing four per cent growth, while Democrats are relatively good at it. In fact, since FDR took office in the depths of the Great Depression, Democratic presidents have produced four per cent annual growth an average of three out of every five years – 60.5 per cent of the time – while Republican presidents have only managed it a little more than one year out of every four – 27.8 per cent of the time. With figures like that, it’s a no-brainer: the best thing you can do to produce four per cent growth is to vote for a Democrat for president. 

Fastest years of economic growth

The five fastest years of economic growth all took place under a Democratic president. His name was Franklin Delano Roosevelt. In fact, the 11 fastest years of economic growth all took place under Roosevelt or Truman. Democrats presided over 16 of the 20 fastest-growing years, 22 of the fastest-growing 30 years, and 28 of the fastest-growing 40 years. There have only been 36 years in which growth has actually topped four per cent, and Democrats were in charge during 26 of them. 

Republicans love to idolise Ronald Reagan – even though they’d never nominate him if he were running today.

George W Bush was in charge during zero of them. His best year clocked in at 3.5 per cent growth – in 41st place. 

Republicans love to idolise Ronald Reagan – even though they’d never nominate him if he were running today. His record of raising taxes more often than he lowered them would immediately disqualify him, even though the cuts far outweighed the increases, and tilted heavily in favour of the super-rich. So how did Reagan do on the growth front? Relatively well for a Republican. He topped four per cent growth in four out of eight years – 50 per cent exactly.  

Bill Clinton did it five times out of eight. And Clinton produced that better record while turning massive federal deficits into a surplus, while Reagan almost tripled the federal deficit during his two terms. 

In fact, since Reagan took office in 1980, Republican presidents have only produced four per cent growth or better 20 per cent of the time, compared with 45.5 per cent of the time under Democrats. 

Republicans like to argue that they are the party of business and therefore the party of economic growth. Democrats are the party of economic redistribution. Republicans grow the pie, Democrats cut it up. This is what Republicans argue, and the so-called “liberal media” largely echoes their message. But the facts simply don’t add up. 

Since 1932, growth under Democrats has averaged 4.8 per cent annually, while growth under Republicans has averaged just 2.7 per cent. For a two-term presidency, this amounts to a growth rate almost double under the Democrat: 45.5 per cent growth, compared with 23.8 per cent growth under the Republican. And if it’s sustained growth, year after year that you’re looking for – the sort of growth that Bush is dishonestly promising, the results are even more lopsided. 

When’s the last time since 1929 that a Republican president presided over four straight years of four per cent GDP growth? The answer is simple: Never. When’s the last time a Democrat did it? Bill Clinton, from 1997 through 2000. Democrats also put together four or more years of four per cent + GDP under Kennedy/Johnson (five years: 1962-66) and FDR – twice. First was a four-year stretch from 1934-1937, followed by a six-year stretch, 1939 to 1944. 

The only year FDR missed four per cent + GDP growth over an 11-year span was 1938, the year he fell prey to the rhetoric of deficit hawks and cut back spending to try to balance the budget. It scared the bejesus out of folks, fearful that the Great Recession would return full force and Roosevelt never considered it again. But that budget-slashing disaster is exactly the same “solution” that Republicans are pushing today – and demonising Obama because he’s reluctant to go along with them. 

Obama recently told CBS News that there was a significant difference between running a business and running an economy: 

“When some people question why I would challenge his Bain record, the point I’ve made there in the past is, if you’re a head of a large private equity firm or hedge fund, your job is to make money. It’s not to create jobs. It’s not even to create a successful business – it’s to make sure that you’re maximising returns for your investor. Now that’s appropriate. That’s part of the American way. That’s part of the system. But that doesn’t necessarily make you qualified to think about the economy as a whole, because as president, my job is to think about the workers. My job is to think about communities, where jobs have been outsourced.” 

Tax cuts for high earners

This is a valid point, and economist Paul Krugman justly backed him up, his point that “business is not economics” linking to a 1996 paper where he makes the larger argument about the systemic differences between a micro-economic and a macro-economic view of the economy – that is, that “a country is not a company”. 

Democrats are so much better at growing the economy that even super-wealthy Republicans do better when a Democrat is in the White House.

But the problem remains, that despite what Obama is saying, he sounds like he’s saying something else. He still sounds like he’s talking about cutting up the pie – particularly given the conventional wisdom cited above. But he’s really talking about growing it.  

In fact, Democrats are so much better at growing the economy that even super-wealthy Republicans do better when a Democrat is in the White House. Attention has repeatedly been focused on the Bush tax cuts for high-income Americans. But those tax lower tax rates pale in comparison to the much stronger income growth under Clinton. So what if you’re paying four per cent more in taxes, if you’re earning way more than you otherwise would?  

That’s exactly what’s going on, if you compare the records of income growth under Clinton and Bush – as I did back in August 2009 at Open Left. At the time, 2008 data wasn’t yet available, but I turned necessity into a virtue. Forget the disastrous financial collapse of late 2008 and the Great Recession that followed. Let Bush off entirely for that horrendous mess. His economic record was still a disaster, even without the last year on his record. How bad was it? Comparing income growth rates using US Census data, it was no surprise that I found Bush was worse for those at the 20th percentile (those making more than 20 per cent of other US citizens and less than 80 per cent). From 2001 to 2007, they made $18,898 less than they would have if incomes grew under Bush at the same rate they grew under Clinton. What was surprising, though, was that everyone else came up short as well. In fact, the more money you made, the more you came up short under Bush. 

Those in the 60th percentile, for example, made $37,085 less under Bush than they would have done under Clinton’s growth rates, and those in the 95th percentile made $135,049 less. But things really get bad when you move on up from there, using data from the IRS. (Census data stops at the 95th percentile). Those in the 99th percentile – the bottom of the one per cent – lost a whopping $622,022 to slower income growth in the Bush years compared with Clinton’s. The bottom of the 0.1 per cent lost almost $5 million ($4,834,752, to be exact) and the bottom of the one per cent of the one per cent were the biggest losers of all. They lost out on a whopping $41,993,216. 

So Republicans aren’t just bad for the economy as a whole. They are especially bad for obscenely wealthy Republicans… such as Mitt Romney. 

Obama’s message on the economy is getting better, clearer, sharper. But it’s still got a long way to go to match the lopsided reality of the historical record.

Paul Rosenberg is the senior editor of Random Lengths News, a bi-weekly alternative community newspaper.