The Great Debate UK
By James Ledbetter
During his presidency, George W. Bush was not known as an overly reflective man, or as someone with a powerful thirst for economic knowledge (despite being the only president with a Harvard MBA). It is thus unsurprising that his memoir is not overly reflective about the causes of the financial meltdown that closed out his presidency, nor even very generous with details about what it was like to preside over. Anyone who opens his new memoir, "Decision Points," intent on unearthing Bush's heretofore buried financial insights will be disappointed.
Still, there is some value in glimpsing how Bush perceives the crisis, in part because his economic perspective is so widely shared in the newly resurgent Republican Party. In the chapter devoted to the financial crisis, Bush paints an economic picture using almost exclusively his favorite primary color: tax cuts. Tax cuts, in his view, got America out of the recession that began shortly after he took office. Tax cuts provided another critical boost in 2007. Tax cuts are beautiful because they take money out of the government's hands and place it into citizens' hands; that is all Bush knows, and all he thinks he needs to know, about the economy.
Just about everything else can be delegated, which is to say ignored until it explodes. As he recounts the reasons why the financial system fell apart -- the complexity of Wall Street's mechanics, the booming housing market, overleveraging -- he says the system was "fated to collapse," but admits that he didn't see it at the time. (In another section, he claims he did see the problem of overleveraging at Fannie Mae and Freddie Mac, but that his reform efforts were blocked by Democrats.) His curiosity did not increase very quickly; Bush professes to have been "surprised by the sudden crisis" when Bear Stearns was sold at a forced bargain price in March 2008. He clearly had no idea what caused the problems at American International Group in September of that year.
More telling is his admission that when Federal Reserve Chairman Ben Bernanke told him the crisis could be the worst since the Great Depression his reaction was that he would rather be Franklin D. Roosevelt than Herbert C. Hoover. Yet his refusal to even consider that his administration's, or the Fed's, policies might have contributed to the crisis is distinctly Hooverian. About as close as Bush gets to anything approaching taking responsibility is an admission that "my administration and the regulators underestimated the extent of the risks taken by Wall Street."
The economic worst is past. But there are many issues left to worry about.
Start with the good news. GDP is now growing almost everywhere, while the unemployment rate is hardly rising anywhere. Businesses and consumers are less fearful. As much as half of the 20 percent decline in international trade has been erased.
Perhaps the best news is what has not happened. There have been no national defaults, countries dragged into political chaos, bitter divisions among the great powers or, with a few tiny exceptions, massive declines in consumption. The global political-economic-financial system is still in business.