With the last week’s disappointing news of only 32,000 jobs created in July, we will have to endure all sorts of I-told-you-so’s from the Left. John Kerry’s campaign is already making noise, and tomorrow we will probably see a Paul Krugman column saying that what we really need is lots of new government spending to boost the economy, and a bunch of other discredited theories that only academic economists believe anymore. The fact is, all economic recoveries have bumps in the road–both the 1980s’ and the 1990s’ recoveries had months of lackluster job growth. But if the Bush team loses this election because of economic concerns, they’ll have few to blame besides themselves.
#ad#Granted, the president only has limited impact on the economy, and not all the causes of our economic problems–September 11, corporate scandals, the inherited recession–are Bush’s fault. And those are no small things–especially the attacks. However, looking at his policy record of the last three-and-a-half years, there are definitely some missteps that have kept the recovery from starting sooner. Here’s a list of things they should have done differently and that future Republican administrations should learn from:
‐ Front Load Tax Cuts: The Bushies should have learned this from the Reaganites. The Reagan recovery didn’t begin until his income-tax cuts were fully phased in during early 1983. By the time Reagan ran for reelection the following year, the economy was creating jobs hand over fist. The economy would be doing that now if Bush had not waited until mid-2003 to fully phase in his tax cuts. In fact, in the original Bush tax cut, the income-tax reductions didn’t fully phase in until mid-decade, owing to concerns over possible budget deficits. Budget deficits still returned anyway, and the press still blamed Bush for them anyway. The lesson is to phase tax cuts in fast, and get the economy moving: Deal with deficits later.
‐ Skinflint, Not Spendthrift: In the ten quarters since Bush’s first budget took effect, the percent change from the preceding quarter of the federal-government portion of gross domestic product is an average of 7.6 percent. In the ten quarters preceding Bush, it averaged 3.1 percent. Of course, a lot of that was necessary defense spending in the wake of September 11. Yet much of it comes from the domestic side. Given that the private sector uses resources more efficiently than the public sector, the increased spending has likely slowed the recovery. And Bush has gained little from these programs. He has not neutralized the Democrats on the education issue, and seniors are, so far, not too happy with the prescription-drug program. Future Republican administrations should realize that they aren’t going to “out-Democrat” the Democrats with new government spending. All that spending will do is jeopardize economic growth.
‐ Be Principled On Free Trade: Instead, this administration has played politics with it. While it has fought for and won the reauthorization of fast-track authority and passed new agreements with Chile and Singapore, it has instituted steel tariffs and textile quotas to win races in Pennsylvania and the Carolinas. The steel tariffs in particular were both economically and politically dumb. A Consuming Industries Trade Action Coalition Steel Task Force study from last year showed that the tariffs had resulted in over 200,000 lost jobs in the steel-using industry during 2002. Those 200,000 fewer jobs are undoubtedly helping keep Bush’s numbers on the economy down at present. Clearly, short-term political payoff can have long-term negative economic repercussions. It’s the latter that can jeopardize a president’s reelection chances.
So will the economy be Bush’s undoing? Two more jobs reports, August’s and September’s, will come out before the election. Obviously, Bush needs both of those to be good ones. He also needs oil prices to drop in response to the end of the summer driving season, something that would get both the job market churning and the stock market moving up. That’s a tall order for only a few weeks. But it is because of Bush’s own shortsighted policies that he no longer has any margin for error.
–David Hogberg is a senior research associate with the Capital Research Center.