Evaluating Bush's Economic Performance: A Field Guide for the Perplexed

Forbes Magazine's online edition performed a valuable public service in July when it ran a story comparing the economic performance of the ten postwar presidents. Forbes is the right-leaning business publication that goes by the tagline, "Capitalist Tool." Its publisher, Steve Forbes, is a big hitter in Republican circles and ran as a Republican candidate for president in 1996 and 2000.

The magazine proposed six different metrics by which a president's economic performance should be judged. They are: GDP growth, real disposable personal income, employment, unemployment, inflation, and deficit reduction. All are mainstream benchmarks with their data easily accessible to any serious inquirer.

It is a measure of Forbes' integrity that it let the chips fall where they may: the top three performing presidents - Clinton, Johnson, and Kennedy - were all Democrats while the bottom three performers - Nixon, Eisenhower, and Bush the Elder - were all Republicans. The middle of the pack was a mixed bag of all the rest: Reagan; Ford; Carter; and Truman.

Interestingly, however, Forbes did not include the current occupant of the White House in the comparison. In fairness, George W. Bush's first term is not yet over, though the fact of a short duration did not stop Forbes from including Gerald R. Ford or John F. Kennedy in its evaluation. Both served less than full terms.

One wonders if the reason Forbes did not include Bush is that Bush would have come out rather poorly for the comparison. The numbers are readily available. Surely they ran them.

But with an election looming, it is worthwhile looking at Bush's record and comparing it with that of the last president, Bill Clinton. The reason for choosing Clinton is that he is not only the only Democratic president of the last twenty years, many of Clinton's economic advisers are now working with John Kerry. If Clinton's economic philosophy might inform Kerry's policies, the comparison would be very useful.

The first measure Forbes uses is real GDP growth. "Real" means that the number has been adjusted for the effects of inflation. In Clinton's first 3.5 years, real GDP grew by 3.2%. Over the similar period for Bush, the number was 2.4%, substantially less. Now, to be fair, there was a recession in 2001, but it was one of the mildest on record. And it was preceded by over six months of Bush aggressively talking down the state of the economy. So perhaps he owns more of it than he's been willing to acknowledge.

Today, part of Bush's standard stump speech includes the boast that the economy is growing at the fastest rate in the past 20 years. But this is based on only a nine-month window, not unlike a marathon runner sprinting for 500 yards and marveling that he's running the fastest marathon ever recorded. Over the more telling period of time, the duration of his presidency, Bush loses handily. Clinton 1: Bush 0.

The second measure in Forbes' schema is real disposable personal income. As with GDP, the "real" part adjusts for the effect of inflation. The "disposable" part adjusts for taxes. Real disposable personal income, therefore, is what a person's income actually buys after inflation and taxes. It is one of the most meaningful measures of economic well-being.

During Clinton's first 3.5 years, real disposable personal income rose by 10.4%. Over a comparable period under Bush, it rose by 9.3%. But the real gap in performance is actually understated. The reason is that "real disposable personal income" doesn't indicate how the income is distributed. It simply measures total income in the economy and divides by the number of workers. Since Bush's tax cuts skewed after-tax income to the wealthy, those Americans not in the highest bracket are actually less well off than Bush's number would suggest. Clinton 2; Bush 0.

Employment was the third measure Forbes used to judge economic performance. How many people hold full time jobs. When Clinton took office there were 109 million jobs in the U.S. Three-and-a-half years later, there were 120 million, or a net growth of 11 million jobs. In raw numbers, this is the most prodigious record of job creation in modern history. In percentage terms, it trails only Jimmy Carter's accomplishment of adding 10 million jobs in the late seventies.

Bush's record on employment is equally legendary though for the opposite reason. When he took office, there were 132 million jobs in the U.S. Today, more than three-and-a-half years later, there are just over 131 million for a net loss of one million jobs. The standard-and truthful-rebuke is that Bush has been the first president since Herbert Hoover to have presided over a net loss of jobs. As with GDP, Bush is now out trying to claim heroic results for a recent short period but the odium of the larger failure, especially when put into historical context, is inescapable. Clinton 3; Bush 0.

Forbes' fourth measure is unemployment-what percentage of the workforce was without jobs. When Clinton took office, the unemployment rate stood at a fairly high 7.5%. This rate dropped each year until by the summer of 1996, it stood at 5.4%--a rate that economists used to believe would start triggering inflation. But Clinton's policies continued to push the rate down without significant inflation until in stood at the extraordinarily low rate of 4.0% in December of 2000.

That is the unemployment rate that George Bush inherited from Clinton's second term: 4.0%. But in stark contrast to Clinton's policies, Bush's policies raised that rate every year until it reached 6.0% in December 2003. Since then, the rate has come down a bit: in July it stood at 5.4%. But this is still substantially higher than where Bush inherited it. Clinton reduced unemployment. Bush has increased it. Clinton 4; Bush 0.

The fifth measure is inflation. Here, Bush does somewhat better. The average annual rate of inflation over the past three and a half years has been 2.3%. Under Clinton, the rate was 2.9%. Since the measure is in percentage terms, the actual gap is six one thousandths: .023 versus .029-a negligible difference.

More importantly, inflation is already accounted for in the real GDP and real disposable personal income measures, already discussed. Inflation is really only a worry when prices rise faster than incomes or output. But that is not the case. Even after inflation, output was greater and incomes were higher under Clinton than Bush. And since inflation is commonly the product of high economic growth-a goodness-it is not entirely clear that in this range it is a liability at all. We can fairly call this one a draw.

The final measure Forbes uses is deficit reduction. Here, the gap in performance is simply off the charts. Bush the Elder's last deficit was $292 billion, the largest in history to date. Clinton took office in 1993 and immediately reversed Bush's supply side policies, raising taxes on the highest bracket tax payers. That policy allowed Clinton to work down the deficit to $107 billion by 1996. In cumulative terms, Clinton's first four years saw deficit reduction of $183 billion.

Clinton would go on in his second term to not only eliminate deficits but deliver the largest surpluses in history. In 2000, the surplus reached $236 billion. Bush quickly reversed course and turned Clinton's record surpluses into record deficits. For 2004, the deficit has soared to $422 billion. In cumulative terms, by reversing Clinton's surpluses, Bush has delivered $1.2 trillion of additional red ink.

And the red ink goes on for as far as the eye can see. When Bush took office, the government was forecast to run $5.6 trillion in surpluses over the next 10 years. OMB Watch now forecasts $7.8 trillion of deficits for the next 10 years-a literally incomprehensible reversal of $13.4 trillion. This will prove an immense boon to Bush's wealthy backers who will be the ones loaning the money and at higher rates of interest. But it will gravely cripple future economic growth.

The reason is that deficits must eventually be paid for. These bills will fall to future generations and increasingly onto the working and middle classes. But since paying those bills must come out of future incomes, they must compete with other demands on those incomes. Once basic consumption is paid for, that typically means competing with investment-the basis for sustained economic growth.

Bush's deficits, by putting inescapable claims on future incomes, have already reduced the possible levels of future investment and therefore future economic growth. Coming generations will suffer reduced living standards-perhaps dramatically so-to pay for Bush's astronomical deficits. Clinton 5; Bush 0.

A last, additional measure of economic performance is poverty. Forbes did not include this measure, possibly because accurate data on poverty levels were not kept before the 1960s. Comparisons between all of the postwar presidents are therefore impossible. But they have been kept since then, making a Clinton/Bush comparison not only possible but desirable.

When Clinton entered office, the official poverty rate stood at 15.1%. He reduced it to 13.8% three and a half years later. When George W. Bush took office, poverty had fallen still further, to 11.3%. But it has risen steadily under Bush, to 13.8% in June of this year. Clinton reduced poverty. Bush raised it. Clinton 6; Bush 0.

Confronted with such data, Republicans routinely cavil that the comparison is stacked to favor Democrats. But it can hardly be said of Forbes that it is a left-leaning publication. Quite the contrary. Forbes' framework is persuasive precisely because it comes from an unimpeachable Republican source.

And knowing all too well Bush's abysmal record, Republicans have taken lately to claiming that presidents really don't have that much to do with economic performance. Forbes addresses this as well, stating directly, "Fairly or not, each president is judged by how much prosperity is delivered on his watch."

Donald Rumsfeld is fond of saying that people are entitled to their own opinions but they are not entitled to their own facts. The facts are undeniable: Bush's economic policies lose by every measure. He fails not just one but every single comparison. The differences could not be more stark.

Bush promises four more years of policies like those he has already inflicted on the American public. But America cannot afford four more years of such destructive ineptitude. The more people understand the facts, the more likely they are to demand a change.