Home > Democratic Controlled Congress, Economics, The Obama Administration > Digging Out of the Bush Chasm: How to Win the Midterms

Digging Out of the Bush Chasm: How to Win the Midterms

April 4th, 2010

In a development one can be assured Republicans will try to find a way to attribute to the Bush administration, the U.S. economy added 162,000 jobs in March, the biggest job gain in three years, since the Bush recession began. Analysts expected 190,000 jobs gained, but that figure is likely to be realized with adjustments over the next two months. Unemployment remains at 9.7%, but is below double-digits; while the job market remains tough, we are still in an upward trend and are now in positive territory. Compare this to January 2009, when Bush left office and 741,000 other Americans lost their jobs at the same time.

March Jobs

Obama’s stimulus was put into play, and immediately Bush’s plummet was reversed. Aside from Obama’s election in general, no other major factors aside from the stimulus seem to be able to explain the upswing in job creation. This month’s job report puts us comfortably on the plus side, and hopefully that trend will continue along the lines it has over the past year.

Compare this to when Bush was handed a shaky yet overall positive job market in 2001; he passed his massive tax-cuts-for-the-rich and immediately send jobs down the toilet–and did not see this kind of recovery until October in his third year in office. Bush, on the other hand, handed Obama the worst recession in recent history, the worst since the great depression, and we were hemorrhaging jobs–and Obama is back in positive jobs territory after just 14 months.

Any way the conservatives want to spin this, even despite the still-distressed economy, it cannot be denied that the Obama recovery is remarkable, perhaps even startling. If the current trend continues, we could be seeing aggressive job gains by summer (in the 400,000 ~ 500,000 range), in time to impress voters before the midterms. That would allow Obama and the Democrats to tout their two major victories–the Stimulus and Health Care Reform–in a light that makes clear the long-term benefits of both. And they can point to undeniable massive Republican obstructionism, and state truthfully that the Republicans tried to stop the recovery. Remember, they said it aloud: they wanted Obama to fail. Just run on the record: Republicans were driving us into a recession, and then tried hard as hell to stop the legislation that we can now see is bolstering the economy.

Republicans will no doubt bring up the deficit in criticism of this, but Obama and the Dems can correctly point out–aside from the fact that most of the debt is Republican-generated–that in order to drive down the debt, you must first have a strong economy. We had to spend before we could do anything else; failing to do so would have been courting economic collapse. Had Republicans gained power and there had been no stimulus–or worse, more massive tax cuts for the rich like Bush used in 2001 to drive job losses further–we would have been in a hell of a mess by now, maybe even in a depression.

The Dems just have to show the Bush trend and where it was leading, and contrast it with the Obama trend. This is the magic chart that could win the midterms:

Bush V Obama Wt

Look at that red trend line and imagine where we would have gone had McCain won, or worse, the Republicans had also controlled Congress. One shudders at the thought.

The difference could not be more stark. Republicans were driving us straight into the toilet; a depression was imminent. Obama and the Dems intercepted that long-bomb pass Bush threw straight to the depths of hell, and are now rocketing out of the chasm Bush was dragging us into, a recovery clearly foreseeable. (It won’t be so easy to recover from the staggering debt Bush drove us into, but aside from that….) Back this up with strong job gains into the summer, with people feeling the recovery in their guts, and the point will be driven home.

This is not one of those bogus charts where a regular trend line to the present is “predicted” to take ridiculous turns in the future, with “our” party’s line going straight up and “their” party’s line going way down. These are actual figures showing definite trend lines based on hard fact.

That chart should be made into a theme for the next seven months, it should be iconic for these elections. Show it every chance you get. Put it up on walls, show it on broadcasts, make it into backdrops for rallies and speeches. Convert it into a simpler graphic:


Slap that on every car bumper and home and store window in sight. Drive the point home.

  1. Leszek Cyfer
    April 5th, 2010 at 03:03 | #1

    Nice sticker 😀

  2. Troy
    April 5th, 2010 at 05:18 | #2

    My understanding of the underlying reasons have a bit more granularity . . .

    The Clinton boom 1995-2000 came from increased office productivity from WIndows 95, cellphones, the nascent internet, falling oil prices, the peace dividend (the peace dividend was economically painful 1992-94), under-priced real estate (rising wages and falling interest rates), the rise of the Big Box retailers and perhaps most importantly the growing trade deficit with China that filled these Big Box retailers with cheap goods.

    The NASDAQ was in a stupendous bubble by early 2000 as internet stocks were stupendously over-bought. The ensuing tech recession of 2001-2002 panicked the powers running the show — they did not want a repeat of 1992, not with control of the 5-4 supreme court on the line — so Greenspan put the pedal to the metal with money supply creatio, the tax cuts were accelerated, and the financial system was rather deregulated, allowing a repeat of the Reagan-era les bon temps roulez activity in commercial and now residential lending. Also 2 wars.

    The economy voomed in response, but most of the activity was not actual useful wealth creation, we mainly just pushed the prices of real estate up, bought a lot of stuff from China, went more into debt into OPEC, and spent a trillion or so in the wars.

    In 2007 the music generated by the almost entirely fraudulent real estate market — we were pulling HUNDREDS of billions of dollars a year out of our houses, completely unsustainable given the stagnant wages of the decade. Continued v

  3. Troy
    April 5th, 2010 at 05:31 | #3

    In 2007-2008 every mistake of 1995-2006 came home to roost.

    A the heart of the issue is the trade deficit. Increasing global trade allowed Greenspan to increase money supply starting in 1995



    2009 was the crisis point as the unsustainable lending and economic activity it was powering went away, and the powers behind the scenes did what the could to avoid a meltdown like 1929-30.

    Foreign holdings of US debt increased $600B (20%):


    Divided by $45,000 that is THIRTEEN MILLION McJobs right there.

    Today, the national debt is $8.3T. On January 20 it was $2T less.

    Two trillion at $100K/job is TWENTY MILLION decent jobs.

    As Ashleigh Brilliant said, “I don’t have any solution, but I certainly admire the problem”.

    The tldr is that 2003-2007 was a bubble 2X bigger than Japan’s 1986-89 period, and the US has a lot more irons in the fire and foreign debt holders “bailing” us out.

  4. Troy
    April 5th, 2010 at 05:32 | #4

    My comment is awaiting moderaton. I hate writing stuff that disappears, all too common with this blogging sw.

  5. Troy
    April 5th, 2010 at 12:03 | #5

    Calculated Risk has a good graph of the employment situation:


    The only thing that got us out of the 2001 tech recession was the housing sector boom and the trillions of lending and cash-out refis that went on.

    All of this came from borrowed money not actual wealth creation.

    We ended 2007 with $11T of mortgage debt. 2009 ended with $10.7T of debt, showing how unsustainable that was on the current wage base.

    2Q02 ended with $5.5T of mortgage debt, so we DOUBLED the amount of mortgage debt in just 5 years. Wages didn’t go up that much, but the Bush income tax cuts, lower interest rates, stated-income loans, interest-only financing, and the total stoppage of actual loan underwriting (ie making sure borrowers could actually repay the loan) engendered the mother of all real estate bubbles that pushed the economy forward 2004-2006.

    For a real recovery to occur going forward we need to start creating more wealth and consuming less. Real estate valuations need to be liquidated more, prices and rents have to be beaten down like Japan so people can devote more of their income to actual goods and services and not just land valuation.

    We’re spending $700B+ a year on the DOD. Most of that is waste that is not resulting in any wealth creation or capital concentration, yet every $50B we cut will theoretically throw A MILLION people out of work.

    We’ve got sky-high incarceration rates — California alone is spending $25B/yr on criminal justice, and I’m detached from the situation but thanks to NCLB and the general media environment I don’t think education is producing quality output any more.

    We need to stem the outflow to OPEC by developing a replacement to oil for our transportation. Unfortunately, this isn’t going to go online this decade — the malinvestments of the 1990s and 2000s are starting to bite now.

    Then we have spiralling health care costs, and the average baby boomer is turning 55 this year.

    Where is the wealth creation? Without that no economy is going to work. We can farm, and we have some natural resources still, but our industry is running at a 70% capacity rate.

    The stupid thing is that we collectively are very productive and there should not be poverty or massive consumer debt. The problem is that the economy is being run like a Monopoly game, and there are a few wealthy players and the rest are screwed.

    Wealth disparity is the worst it’s ever been. There’s a lot of money out there but 50% of the population doesn’t have any of it.

    Redistributive spending towards education and health care is a first step, but the Democrats may only have a few more months in control of the ship, and their replacements are really bad actors.

  6. Tim Kane
    April 5th, 2010 at 13:21 | #6

    Great post Luis.

    I have to say, I like the first graph better than the second.

    I would make posters of that – just showing the stripes. Nothing demonstrates the difference better.

    I take exception to the unemployment figure though. The real the U6 figure is much worse, over 17% and a recent poll I read somewhere found that one in five workers were underemployed or unemployed. We are still deeply in a jobs Depression.

    Having said that… I an’t imagine the public trusting the Republicans any better. Their policies made the recession.

    In regard to the debt: (1) it will go down as employment increases, and (2) when the Bush tax cuts for the rich expire next year.

  7. Tim Kane
    April 5th, 2010 at 13:41 | #7


    My take on the Economy is closer to your final points dealing with wealth disparity.

    Economics is dominated by the law of supply and demand.

    Governments have to choose a policy bias: supply or demand.

    If you have too much demand, you get inflationary recessions (see 1978). If you have too much supply, you get deflationary recessions. (see 1929, 2001, 2008).

    The Rx for the later is supply side bias policies. The Rx for the later is demand side bias policies.

    The question is, what to do during normal times? Well laisse faire, market economies have a tendency toward too much supply, simply because, left to their own devices, over time, the rich get richer, and everyone else over time get poorer. (If I am a successful investor, I accrue more money from consumers buying products I invested in, thus my pool of savings grow, but that pool represents money being sequestered from the demand side of the economy over in the supply side of the economy).

    Also, economist note that deflationary recessions are notoriously hard to manage, while inflationary recessions can be easily managed simply by monetary policy alone. Also, deflationary recessions cause the most amount of suffering to large masses of people, damage to the economy and foments radical political movements.

    So in normal times, a government policy of mild demand side bias is the best policy bias.

    Continued v

  8. Tim Kane
    April 5th, 2010 at 14:08 | #8

    But what we’ve had, for at least 30 years is a supply side bias (one that favors the rich).

    The median wage hasn’t changed since 1972. In fact, right now, it could be below 1972’s figure. Money is the life blood of the economy… if to much money is sequestered on the ‘supply side’ of the economy, then the economy shrinks in demand.

    I see this the mother of all evils – because prolonged ‘supply side bias’ policies leads directly to deregulation AND investment bubbles.

    Bear with me.

    Uncle Ronnie said that it is the job of the rich to invest in building factories (or other socially productive &/or constructive endeavors). Call those types of investments, orthodox investments.

    Ronnie then said, if we give more money to the rich, they’ll then build more factories creating more jobs for all of us, and see, the money trickles down.

    The problem with Uncle Ronnie’s analysis is that the rich care only about ROI – return on investment. Yeah, they like to invest in orthodox activities, but if they don’t generate ROI, then the rich person might have to go back to holding a job – the abomination of abominations – so …. therefore the only thing important to a rich person is ROI.

    Reagan had to deal with an inflationary recession. So supply side bias might have been called for at the time. But at most it shouldn’t have lasted more than four or five years (at most) – we’ve had 30 years of it.

    Here’s the problem with it:

    When supply is too great relative to demand, then it becomes harder and harder for investors to find a decent return on investment while investing in ‘orthodox’ (socially constructive/productive endeavors). Nobody is going to build a factory if there is no demand for the products. This leads directly to deregulation and investment bubbles.

    First, because they can’t get good ROI from orthodox investing, investors will start pressing for access to unorthodox investment areas that they have been roped off from by regulation: things like pay day loans, loan sharking, subprime loans, deriviatives and default swaps etc… because what they need, what they must have at all times is good ROI.

    Because the investors are insistent and unrelenting, and because they are rich (and therefore influential), eventually the government relents and deregulates.

    Second, because it is generally difficult to get good ROI from most orthodox investing, when some area of the economy does offer above average ROI for an orthodox style investment, say… a new technology which brings with it its own latent demand… investment money floods into that sector creating an investment bubble.

    Both of these are what was happening in 2000. In 2000 then, we had ‘supply side saturation’. With deregulation going on all over the place, and with investment bubbles in technology sectors, the thing to do was implement demand-side bias policies.

    However, Bush was president, he was put there by the rich to feed the rich even if it meant starving everyone else. Bush moved at the very least $5 trillion (and perhaps as much as $14 trillion: see tax cuts for the rich, under enforced tax code, no bid contracts, medicare part b, and so on)…. from the demand side to the supply side of the economy in his first 4 years alone (the median family income declined 5% while the income for the top .01% increased by 500! staggering percent!). This meant that even if Kerry had been elected in 2004, the 2008 recession was probably already baked in and unavoidable.

    Too much money has been sequestered on the supply side of the economy, by the trillions. In a similar vein, on an international level, China and Japan may have contributed to a sequestering effect by having too much of a trade surplus, for too long, aggrevated by extremely high rates of savings.

    In the short, medium and long run, then we need demand side bias policies. That means high taxes on the rich, huge government spending programs on infrastructure to make our society more efficient. Single payer health care system would put so much spending power in the hands of consumers immediately, if it could be pulled off, that it would single handedly walk us out of the depression in a fortnight.

    Other things that would help: greater bargaining power for workers (in the short run – card check), and forcing publically held corporations to have a large % of workers have tenure (as they do in Japan).

    That’s my take. Of course the rich now have so much power that it is almost impossible to get a sustained demand driven policy bias going. They are doing some now, but only in a limited fashion.

  9. Troy
    April 5th, 2010 at 15:17 | #9

    I see we’re on the same page.

    One thing missing in your analysis is real estate. It is an immense sector of the economy — 20% or so. It is also everyone’s dominant monthly expense (just ask Luis!).

    Most of the money we spend on real estate isn’t even paying for actual, tangible goods or for wealth-enhancing services somebody rendered — with rent or the mortgage payment we’re largely just paying for the privilege to exclude others from our space! This is called ground rent and is entirely driven by how much money we have left in our paychecks after taxes and basics like food and the cost of getting to work.

    This meant that even if Kerry had been elected in 2004, the 2008 recession was probably already baked in and unavoidable.

    Yup. That you would phrase it as “probably” is indicative that you don’t fully grok the unsustainable, debt-driven nature of the 2002-2006 recovery/expansion.

    From 2003 thru 2006 up to $500B/yr was being dumped into the economy via cash-out home equity financing. $500B/yr divided by $50K per job is TEN MILLION jobs!

    The party was winding down in 2007 and home equity withdrawal fell to under $100B in 2008. Hello recession.


    Also, the boom in real estate transactions also fed an immense number of paper-pushing jobs — real estate agents, mortgage brokers, title & trust companies. All this was unproductive make-work but the money they skimmed from the flows was big money that supported millions of jobs either directly or indirectly (Mercedes dealers, manicurists, hair salons, dry cleaners, etc).

    Real estate is the source, and the sink, of all wealth.

  10. Tim Kane
    April 6th, 2010 at 08:26 | #10

    Well, actually, in my own mind, I did factor that in some, I think. My feeling was, that Bush moved anywhere from 5 to 12 trillion dollars from the demand side to the supply side in give aways to the rich, but was able to hide the drop in demand through cheap money from China (in exchange for much of our industrial base), that manifested in people refinancing their houses at drastically lower rates. Those lower rates created added purchasing power for the re-mortgagers, temporarily generating an increase in demand – and when that wore out, then second mortgages (pawning ones house), and then subprime mortgages, and then the thread ran out and the jig was up.

    However, I had never added the numbers together as you did, and so things make perfect sense.

    Krugman had also stated, at one point that Bush policies just shifted the dot.com asset bubble over to the housing sector, and while I could follow the explanation he use, I have since forgetten the analysis that he used to make that point.

    Anyway, I’m not smart enough to work the micro. Instead I have this 100,000 foot high view of macro economics. So, I really appreciate your views.

    Incidentally, I think the number of jobs created during the Bush presidency is less than 1.5 million, and that he had a net positive at all has to do with the number of public sector jobs created due to his expansion of government. There were less private sector jobs in January 2009 than there were in January 2001. The guys presidency, like most of his entire life, was a disaster of epic proportions.

  11. Troy
    April 6th, 2010 at 11:42 | #11

    One thing I don’t understand about the macro picture is that government spending is supposed to be around $6.5T dollars. This is probably double-counting some Federal transfer payments but going with the Feds spending $3.6T and state & local spending $2.4T. that’s $6T.

    Divide that by $100,000 and you get 60 million jobs directly or almost directly funded by government. And with the velocity of money we probably should add another 30 million jobs supported by the first group’ spending into the economy, for 90 million jobs.

    The entire private economy is only 150 million jobs.

    Either people are putting pallets of $100 bills into storage or I don’t understand what’s going on.

  12. Tim Kane
    April 6th, 2010 at 18:44 | #12

    Low and behold, by grand coincidence, Krugman post at his blog references to his past prediction of Bush’s bubbles:

    I was never good at math. But I suspect that much of that money is being sequestered by the rich, China and or Japan. And a lot of jobs being created overseas. That math of yours makes it look like all demand is created by Govt deficit spending. A frightening thing.

  13. John Stuart Mill
    July 4th, 2012 at 22:34 | #13

    A picture is word 1000 words….


  14. Luis
    July 4th, 2012 at 22:50 | #14

    A picture is word 1000 words….

    Umm… it’s a chart, not a picture. And charts lie even more easily than words.

    1. Romney’s economic challenge was far less dire than Obama’s.
    2. Romney had a legislature that was working WITH him and trying even harder than he was to fix the economic problems of the state; Obama has a legislature committed to making him fail, sabotaging every attempt he makes to fix the economy.

    And that’s assuming that your chart is otherwise accurate and honest, which I wouldn’t bet on.

    If Romney had had the same economy when he walked into office as Obama had, and had the Democrats in the Mass. legislature obstructed him even half as much as Republicans do Obama today, the effect on the Mass. economy would have been disastrous.

    Of course, if you have specific evidence of (1) what Romney actually did which caused job creation numbers, (2) evidence that it worked and was not due to other factors, and (3) how this would translate to the current economic situation at the national level, please do go ahead and elucidate. Unless you were just mindlessly regurgitating right-wing pap.

    So, nice try, but when you simply pass on conservative memes and disengage your critical thinking skills, you tend to fall so easily for weak shit such as that.

  15. Troy
    July 8th, 2012 at 04:58 | #15

    I’ve talked about this Romney vs Obama thing before, and, oddly enough, I just made a pretty good graph to explain what has happened, 2002-now.

    Romney served 2003-2006.

    You know what happened 2003 through 2006?

    The mother of all consumer debt bubbles.

    And, here it is:


    Annual (year-on-year) net consumer debt take-on is pink in that graph.

    Yellow is monthly job losses (right scale, up is bad).

    I’ll get to the red, green, and blue lines in a bit.

    But first, let’s compare MA per-capita income to CA:


    See the Romney difference?

    The national economy was not being driven by Romney’s strong, guiding hand 2003-2006. What was driving it was SEVEN TRILLION DOLLARS OF CONSUMER DEBT TAKE-ON.

    Dividing annual consumer debt take-on by wages:


    we see that lending rose from 10% of wages in the mid-90s to 20% of wages 2003-2006.

    2003-2006 — the magical Romney years.

    Anyhoo, back to the red, blue and green lines in my first graph.

    Red was the Fed printing money and giving it to the government to spend. Aka QE.

    That’s over for now.

    Blue was the Fed printing money and buying mortgage backed securities for some reason. That ended a long time ago.

    Green is increased government spending (year-on-year). That’s also over — government spending has been GOING DOWN since 2011.

    Another way to look at things is the total systemic debt:


    This shows the Reagan boom was just a debt-fueled boom.

    And it shows the Bush boom was also a debt-fueled boom.

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