Bush Recession of 2001: Just The Facts
Now before you get start reading this post, I did not include all the different things that were being done to fix the economy or the many positive numbers that were coming out of 2000. I just focused on signs that the economy was slowing down and Bush’s plan to fix it. I looked at New York Times articles from June 2000 to Inauguration Day in 2001.
This is a blatant attempt to fortify liberals with ammunition against the Bush revisionists who cannot and will not take responsibility for the Recession of 2001. Yes, the signs were there that a slow down was imminent, even occurring in different segments of the economy. However, the job of the President and his administration is to mitigate those economic slow downs, so they don’t turn into a recession.
Economies are cyclic, but the economy does not have to go into a recession as part of a slow down. Just look at the administrations of Kennedy, Johnson and Clinton to see years without recessions.
The question I come away with all of this is how much notice did the Bush Campaign and then Transition Team need in order to move the economy in the correct direction? I believe eight months is enough time.
Two economic reports released yesterday pointed to a further slowdown in the economy, with growth in construction and manufacturing slackening this spring.
Sales in stores open more than a year, a key figure for measuring the health of the retail industry, rose by only 2.6 percent in June compared with figures in the period a year earlier. Analysts said the numbers were in line with expectations that the economy is losing steam. Consumers are spending less at all types of stores, ranging from specialty apparel stores like the Gap to discount stores like Kmart.
Mr. Greenspan will almost certainly note that the economy slowed in the second quarter from its blistering winter pace. He has no choice: the statistics are fairly convincing. The argument that saw the Fed through six interest-rate increases over the past year is temporarily unavailable. The economy no longer appears to be growing so rapidly that the demand for goods and services exceeds the supply, threatening faster inflation.
The first drop in orders in 19 months restrained manufacturing in July but consumer spending rebounded in June, two reports showed today.
The National Association of Purchasing Management said that its factory index was unchanged last month at 51.8, the lowest level since January 1999. The index for new orders fell below 50 — meaning that more companies reported a drop than reported an increase — for the first time since December 1998, when recessions in many Asian countries held down demand for American products.
A separate report from the Commerce Department showed consumer spending rose 0.5 percent in June after rising 0.3 percent in May. While that was the largest gain in three months, higher energy costs accounted for most of the rise, analysts said. Incomes rose 0.4 percent after an increase of 0.3 percent in May.
In another Commerce Department report, spending on construction of houses and apartments in June registered the largest drop in five years.
With economic data pointing to a slowdown, it seems more and more evident that the Federal Reserve Board is piloting the economy to the soft landing that everyone has hoped for.
”We are in an economic slowdown,” said Mickey Levy, chief economist at Bank of America. ”Employers are clearly holding back on hiring, and adding hours much more slowly for those on their payrolls.”
Nobody cared about this earnings illusion while stock prices were rocketing. Now, growth rates are slowing and investors are dumping their former darlings. The Nasdaq composite index lost 8.5 percent last week and is down 17.41 percent for the year.
Gov. George W. Bush plunged into the final three-week stretch of the presidential race today, arguing that Vice President Al Gore would endanger the nation’s prosperity and using his own pledge of tax cutting to rally his party’s base.
Start with the perennial problem-in-waiting: an economy that’s been running on eight cylinders for longer than any in history. It could begin running on, say, just four. Or, as one of President Clinton’s former top economic officials puts it: ”Not a recession. Just something that, after all this prosperity, feels like a recession.”
The signs are already there. The stock market’s fall to Earth has made free-spending consumers feel a little less wealthy. Out here on the frontier of the new economy, a lot of E-entrepreneurs are suddenly sending resumes to old-line companies that compensate their employees with a regular salary, not stock options. Detroit is sitting on car inventories so big that eight of the country’s 55 auto plants are taking a weeklong holiday.
”The bottom line really is we’ve got a tech wreck in the stock market that isn’t necessarily over,” said Ed Yardeni, chief investment strategist of Deutsche Bank. Alex Berenson.
If a bad economy can break a president, then this is not the moment to become president of the United States. The economy is clearly faltering, on all fronts. What we are experiencing is no brief dip, to be followed soon by a fresh surge of activity. America faces a dry period — long enough, perhaps, to taint the next chief of state, whether he is Al Gore or George W. Bush.
After months in which investors have become increasingly pessimistic — and after Gov. George W. Bush and his running mate, Dick Cheney, publicly raised the possibility of an economic downturn ahead — Mr. Greenspan’s comments seemed intended to reassure the markets and the country that the Fed would step in as needed to keep the 10-year-old expansion going.
George W. Bush said today that he was concerned about a ”possible slowdown” in the economy and called the change in the economic outlook an argument for going forward next year with his campaign proposal for a sweeping, $1.3 trillion tax cut across a decade.
It looks like George W. Bush is going to get lucky again.
The amazing United States economy no longer looks so amazing. Economic growth has plummeted, from 5.6 percent in the second quarter to 2.7 percent in the third, and companies from Microsoft to U.P.S. have warned that the slowdown is likely to lower their profits.
With energy prices high, stocks weak and a sudden slowdown in demand for personal computers, some analysts predict that the economy could enter a recession as early as the first quarter of next year, shrinking for the first time in a decade.
”We’re slowing down, and we’re slowing really hard,” said Doug Cliggott, American equity strategist for J. P. Morgan.
It’s all just perfect — if you’re the president-elect. First off, if a recession hits just as he takes office, he can blame it on President Clinton.
The economy that George W. Bush will inherit when he takes the oath of office as president next month remains fundamentally solid, with low unemployment, relatively stable inflation, rising wages and the benefits of continued advances in technology.
Mr. Bush has an ambitious agenda that he intends to pursue right out of the blocks, including a package of tax cuts that he says could give the economy a boost and keep the slowdown from becoming a recession.
President-elect George W. Bush has been warning for the last two weeks that there may be a downturn just ahead, and that his proposal for a $1.3 trillion tax cut over the next decade is just the prescription for a faltering economy. Mr. Bush and his team have cited rising energy prices in particular as a cause for concern.
George Bush: There’s a reason why the Treasury Department is right next to the White House. It’s because the secretary of treasury and the president must work closely for the good of the American people. The secretary of treasury is the chief financial officer of our nation, the successor to Alexander Hamilton. This job is obviously always important for any administration. But I think it’s incredibly important as we head into the 21st century. The world is more connected than ever. Our economy and the lives of every American depend upon our standing in the world.
Secondly, our economy is showing warning signs of a possible slowdown. And so it was incredibly important for me to find somebody who had vast experience, who is a steady hand, who, when he speaks, speaks with authority and conviction and knowledge. I found such a man in Paul O’Neill.
Mr. Bush said Thursday that he was simply being a realist in considering the dangers ahead, ”and if there are warning signs on the horizon, we need to pay attention to them.”
In a generally optimistic forecast that stands in contrast to the increasing gloom of many private analysts, the White House’s chief economist said the economy remained fundamentally sound and should continue to benefit from three factors that drove the long expansion of the 1990’s: improvements in the growth rate of productivity, better business management and a shift from federal budget deficits to surpluses.
Mr. Baily said one of the keys to keeping the economy going would be to stick to a path of using the budget surplus to pay down the national debt — another way of warning the incoming Bush administration not to push for a tax cut so big that it would risk a return to deficits.
”This is not the time to abandon fiscal discipline in favor of large tax cuts,” he said. Mr. Bush’s team has said the surplus should be large enough to accommodate both a substantial tax cut and debt reduction, and that the stimulus of a tax cut would help kick-start the economy if it proves to be stalling.
Bush: Here’s what I am willing to tell you. I am willing to tell you that to the extent that the entire package gets passed, I will work with Congress. I want the entire package passed. And I’m answering all kinds of questions about speeding up, slowing down. Those are all tactical decisions. The key is that the economic recovery plan be implemented.
To his credit, the nominee for treasury secretary has been a less than enthusiastic team player. In his Senate hearing, Paul O’Neill came remarkably close to damning the whole sales pitch with faint praise. ”I’m not going to make a huge case that this is the investment we need to make sure we don’t go into a recession,” he conceded. ”But I don’t know why we wouldn’t want a tax cut now. It wouldn’t hurt.” The good news here is not that Mr. O’Neill knows that his boss is making a bogus argument; Mr. Bush’s inner circle knows that too. It is that the new treasury chief has some scruples about saying things that he knows to be untrue. I wonder how long that will last.
Tags: Bush's Fubar Economy
Please.
Thanks for proving my point Dave.
He’s so polite.
It’s really not even worth it.
Yes, FSP, when faced with facts that don’t support your argument, one must retreats. I understand.
The “chicken” argument won’t do it either. I’m not 12. You’ve got to try a lot harder than that to get me in.
This may make me really unpopular, but I don’t think Bush can take the blame for the 2001 recession (although I think he deserves the blame for letting 9/11 occur by his inaction). The slowdown was evident before he took office. Now, I think Bush did nothing to stop the recession and I think his policies made it the slowest and worst recovery possible. I think he owns this recession lock, stock and stinking barrel.
The “chicken” argument is not an argument at all. It’s a description of your absolutely brilliant one word commentary.
I agree with UI’s assessment.
5 words in and already a typo…sheesh…didn’t you work for a paper at one time?
and yes, bush is to share some blame for the recession
which one you ask? the first one.
the second one is all his, which isn’t even close to debatable. The fact we are arguing 2 were his is astonishing in and of itself
Bush’s response to the 2001 recession (a natual occurrence, there are booms and busts in the business cycle) is what led to the current one, which is far deeper.
Bush’s problem is that he has the attention span of a toddler. I want a cookie turns into I want tax cuts. I want to go to the park… I want to invade Iraq.
He’s simply incapable of seeing beyond his immediate wants. It didn’t matter what the economy was doing when he entered office. He wanted his cookie.
I agree X. Bush’s policies did very little to stop the 2001 recession and hastened the 2007-2009 recession.
The problem hasn’t much to do with G. W. Bush’s proclivities but of Bushco and what ‘they’ were looking for…and got.
As nemski notes, economic slowdowns do not all turn into recessions and the 2001 recession was largely caused by Bush and his people not paying attention. Tax cuts that produced deficits was never enough to jumpstart any robust growth (yes there was some, but it was always anemic compared to the Clinton recovery) and tax cuts were the only response BushCo had to anything. Tax cuts restarted the deficit spending business and BushCo didn’t think that they needed to pay much attention to the slowing economy — they just saw it as a vector to get one of their ideological planks done.
The 2001 recession started in March of 2001, Cass, 39 days after Bush took office.
Even if “Bushco” was paying attention, you can’t turn the entire US economy on a dime, or in 39 days.
The Bush tax cuts passsed Congress in May of 2001, Bush signed the tax cut bill into law in June of 2001, after the start of the recession, and the recession ended in November of 2001.
So, the tax cuts had absolutely nothing to do with the start of the recession.
Maria, the problem is that he did not start on Day One regarding the economy. As a matter of fact, he spent his time pushing through the tax cuts to fix the economy which is akin to using a screwdriver to hammer in a nail. But that’s for Bush Recession of 2001: Part II, coming soon.
The good old days of the recession of 2001, that will seem like a walk in the park compared to this coming meltdown
The argument is not that the tax cuts started the recession, but that BushCo did not do anything (whether it would work in 39 days isn’t really germaine to this point, but may have shortened they cycle) — they simply did not address the problem with any policy except for tax cuts. Which jumpstarted the deficit spending and weakened the recovery.
And the 2001 tax cuts were designed to make the rich get richer and the poor get poorer, widening the economic gulf in the country and laying the goundwork for the mess we are in today.
Mr. Baily said one of the keys to keeping the economy going would be to stick to a path of using the budget surplus to pay down the national debt — another way of warning the incoming Bush administration not to push for a tax cut so big that it would risk a return to deficits.
Always overlooked when talking about economic growth and recessionary patterns is debt. Clinton tooks Reagans bloated deficit, submitted a balanced budget 6 out of 8 years, raised taxes on the wealthy and left the White House with a $4 trillion surplus. Bushco spent that in a few days, then cut taxes, mostly on upper income earners leading to massive deficits. Those deficits hinder economic development and unduly pass burdens onto future generations. They limit the government’s ability to stimulate the economy, are inflationary and over time stifle growth. That has been one of the consequences of republican economic principles historically, but especially this time. The debt on the debt crushes economic activity. Lowering taxes is not always the responsible thing to do. Raising taxes is not always the wrong thing to do. Knowing the difference and understanding economic thinking and not confusing it with ideology is essential. It was obviously way over Bushco’s head. More important to him was following the typical republican script. We see what that got us.
The Bush/Gore SC battle ended on December 12, 2000, that gave Bush a little over a month to put together a transition team. The recession officially began in March of 2001, 39 days after Bush took office.
Incidentally, the stock market began it’s downturn in March of 2000. All other economic indicators were downtrending for the latter part of 2000. You can read that in a bunch of those articles you posted.
See Johnny’s post. It is among the best posts on this subject. (Thanks Johnny!)
But the argument is still that BushCo didn’t even try to do anything stimulative.
Johnny’s post doesn’t change the fact that the recession started 3 months BEFORE the Bush tax cuts were signed and 39 days after Bush took office.
And tax cuts can be stimulative, maybe the tax rebates Americans got in the summer of 2001 were the reason the recession ended in November of 2001, making it a “mild” recession by any standard.
Tax rebates do not equal tax cuts. And I think the 2001 ones were the ones you had to pay for the next tax year.
And BushCo still did nothing to even try to avoid the recession. Which is still my point.
The question I come away with all of this is how much notice did the Bush Campaign and then Transition Team need in order to move the economy in the correct direction? I believe eight months is enough time.
You are kidding right? Eight months to turn the worlds largest economy in some other direction than where it was going (which even given the ‘slowdown’ was outpacing the rest of the Western world). I hope Obama has that kind of power… you gonna hold him to that standard? You will be disappointed…
Bush is a theif and war criminal… you are going to pick a (ill advised and completely unnecessary) tax cut and try to point to that as a driver of the bad economy?
The crime was the post 9-11 policies. He may not have asked for 9-11, but he most certainly took full scumbag politician advantage:
– Near zero interest rates after the attack to jump start the economy started the housing bubble (not his decision, but he and his administration failed completely to see the future issue this would cause)
– Subsequent spending on Homeland Security and Defense Expenditures added little to the economy and and were basically consumption with little to nothing to permanantly help the economy – they would create a larger structural deficit once you start looking to payments to the veterans and the new buracracy
– The war with no plan to match expenses with revenues helped devalue the dollar due to the massive deficit spending
– The decision to un-regulate the investment banks and unleash 30X leverage on the mortgage markets at what would have been close to the top of a modest housing bubble threw gasoline on the fire.
The economy became distorted in several ways – dedicating massive resources to the homebuilding and financial sectors where imaginary money spurred consumption (adding to trade deficits and further weakening the dollar). Now these sectors of the economy that are getting sorted out… that coupled with the the free flow of Home Equity cash coming to a halt have created the economic storm we are in. We are in what is called a ‘Demand Shock’… not a lot of them outside of the Great Depression that we can look to (East Asian financial crisis is another)…
He fucked up good… he fucked up incredibly well… the tax break was stupid and was not going to help spur consumption (since it went to the people with the lowst propensity to spend an additional dollar of income), but this was a footnote in his theiving and fucking up our country…
The crimes and mismanagement of the Bushies will be discussed in textbooks for decades. Nothing that happened pre-911 is likely to be seen in that terrible a light.
wow, well said nb
You are kidding right? Eight months to turn the worlds largest economy in some other direction than where it was going (which even given the ’slowdown’ was outpacing the rest of the Western world).
Bush didn’t win the SC battle until December 12, 2000, that gave him a little over a month to get a transition team in place, then the recession started 39 days after he took office. So that was less than 3 months from day he became president elect to the start of the recession, not 8 months.