The central mantra of President Obama’s campaign is false. That mantra is: “The Republicans tried their plan for the economy and it failed. I tried a new plan and it worked.”
As I pointed out on National Review Online yesterday, the facts are otherwise. Closing out his fourth year in office, President Obama has an 8.3 percent unemployment rate. He also boasts the lowest rate of participation in the labor force in 30 years (63.7 percent). More Americans are out of work than at any time in the preceding 30 years. There are 7 million more persons in poverty than when he took office, a jump from 39.8 million to 47 million. When pressed to explain these figures, the president points his finger at the state of the economy when he took office. That’s his excuse.
But the reasons for the 2008 economic calamity were set forth at least eight years before its onset by colleagues of mine at the American Enterprise Institute, led by the prescient, intrepid, and persistent Peter Wallison.
Wallison and the others did their best to strip the disguises off the darling ideas about housing held by Democrats Barney Frank in the House and Christopher Dodd in the Senate. Through Fannie Mae and Freddie Mac, those two and other Democrats (with a minority of Republicans) were force-feeding government-guaranteed mortgages to borrowers who had no reasonable chance to keep up with monthly payments. Such borrowers would never before have been approved for mortgages. These empty-headed, thoughtless (albeit well-intentioned) approvals undermined the whole U.S. (and world) financial sector.
The collapse of 2008 was not due to a lack of revenues taken in by the IRS. In fact, the total revenue taken in by the IRS that year was very nearly the highest in IRS history. More impressive, 70 percent of all that revenue was paid by the top 10 percent of earners. The top 1 percent alone paid over 38 percent of all income taxes. The burden on the middle class (that is, the next 40 percent below the top 10 percent) was down to just over 27 percent of all income taxes paid. The bottom half of Americans paid only 3 percent of income taxes. Many from the bottom half got money back for the income taxes they did pay, and their payroll taxes went into their Social Security accounts.
Just who did not pay their fair share of the income taxes under George Bush in 2008? The top 10 percent? Does Obama really mean that paying 70 percent of income taxes all by themselves is not enough? Does he really mean that the top 10 percent should pay something approaching all the income tax, for the whole population? And that the bottom half should contribute almost nothing?
Bush began his presidency in the mild recession he inherited, which was exacerbated by the dramatic collapse of the dot-com bubble. Far worse than that recession were the orange balls of flames exploding from the Twin Towers on 9/11. In ashes and in smoke, heroes worked by lights against the darkness to pull the many dead bodies (and, amazingly, a few still-living ones) from the foul-smelling rubble.
That act of terrorism crippled the U.S. airline industry — it made millions of us afraid to fly for some weeks — and wrecked tourism, the restaurant industry, hotels and entertainments, some banks, and the stock market for many months to come. It caused the U.S. economy to lose a trillion dollars. It weakened the reserves of the financial industry. It taught the world how much damage could be inflicted by so small a blow — so primitive a blow — to a vast, complex, interrelated modern economy.