The Legacy of George W. Bush

President Bush is likely to go down in history as one of America’s worst presidents. The main basis for such a judgment will probably be his miscalculations about the Iraq war and stubborn persistence in pursuing it. There are, however, other factors that will weigh against Bush. One will be Bush’s indifference to the growing recession that has engulfed the nation. On December 2, 2008, the National Bureau of Economic Research confirmed that the country has been in a recession since December 2007. It seems that everybody knew about it except Bush and his befuddled Administration.

In 2006, when Bush was bragging about the “booming economy,” I wrote a commentary in which I said: “If you live in the Miami Valley of Ohio and you have watched the collapse of the Delphi Corporation, the hobbling of General Motors, the rise in gas prices, the cuts in jobs, the cuts in wages, the abolition of pensions, the removal of or reduction in health insurance coverage, the increase in adjustable mortgage rates, and the increase in mortgage foreclosures, you probably don’t feel that the ‘booming economy’ is happening here. That is because the booming economy is an illusion.” Because of Bush’s opacity to the gathering clouds of recession, he and his administration failed to take action that might have eased or averted the calamity we now face.

Throughout 2007 and 2008 Bush continued to claim that the fundamentals of our economy were strong. As late as September 2008, Bush declared that the U.S. economy was healthy enough to withstand “the adjustments that are taking place” in the financial markets. Also in September 2008, White House spokeswoman Dana Perino said: “I will tell you that our—from what I understand from the experts, that our economy has the strength to be able to deal with these shocks.”

It has always been a cardinal principle of the right-wing conservatives surrounding Bush that we should leave the markets alone to work-out their problems and that federal intervention in the economy is wrong. The result of that benighted concept is that Bush let things go until they were completely out of hand.

In 2005, faced with signs that the housing market was in serious trouble, bank regulators proposed new guidelines for banks writing risky mortgage loans. Regulators advised banks that no-down-payment, interest only, and low monthly payment or “option ARM” mortgages were often inappropriate for buyers with bad credit. The proposed regulations would have required banks to increase efforts to verify that buyers actually could afford the houses being bought. Banks that bundled the mortgages for investment were told to be sure investors knew exactly what there were buying.

Banking executives opposed any change in the rules. The managing director for public affairs of Countrywide Financial Corp., the nation’s largest mortgage lender, claimed that the proposals “appear excessive and will inhibit future innovation in the marketplace.” Subsequently, the Bush Administration buckled to pressure from some of the same banks that are now being bailed-out, and backed-off proposed crackdowns on dangerous loans to unqualified home buyers. Paris Welch, a California mortgage lender, wrote bank regulators: “Expect fallout, expect foreclosures, expect horror stories.”

ABC News said: “The administration’s blind eye to the impending crisis is emblematic of a philosophy that trusted market forces and discounted the need for government intervention in the economy. Its belief ironically has ushered in the most massive government intervention since the 1930s.” Today, those “sub-prime” mortgages constitute an indigestible lump in the stomachs of the leading banks now calling for multi-billion-dollar bailouts.

The philosophy that we should let free market forces correct the imbalances in our economy caused by greed and mismanagement, and that government intervention is contrary to the best interests of the nation, is simply dead wrong. The market does not always create wealth, jobs, and growth. Sometimes, the market creates chaos. In order to have a vibrant economy it is necessary to have strong governmental regulation and oversight to prevent the kind of disaster we are now facing.

Bush, who inherited a healthy economy with a budget surplus, is leaving it in shambles. That is his legacy.