The Great Debate

Whatever happened to George W. Bush? While 88-year-old George H.W. Bush still goes skydiving and chats about Justin Bieber with his granddaughter Jemma, the faux Texan who brought us two wars, waterboarding, an economic meltdown and record public borrowing is strangely missing. Just as well, you might think. What could he possibly say?

But George W. is a key witness in the trial of Barack Obama. Under attack from Mitt Romney for presiding over a stagnant economy, Obama blames his plight on the gaping hole in the country’s finances left by his predecessor. “Huge reckless bets were made with other people’s money,” Obama told an audience in Cleveland, this month. “And too many, from Wall Street to Washington, simply looked the other way.” Then, “in the fall of 2008 it all came tumbling down with a financial crisis that plunged the world into the worst economic crisis since the Great Depression.”

Obama has made light of his sour inheritance, joking: “Some have said I blame too many problems on my predecessor, but let’s not forget that’s a practice that was initiated by George W. Bush.” But in invoking the ghost of George W. he is deadly serious. To be left nursing the worst economy since Herbert Hoover is no laughing matter. The figures for the Bush years suggest Obama has a lot to complain about. Whether you judge it by stock market prices, or the number of Americans in poverty, or median household income, or growth in public debt, or GDP growth, or job growth, or number of Americans without health insurance, Bush passed on to Obama an economy heading South.

Americans seem to understand this. Bush, not Obama, is mostly blamed for the wretched state of the economy, according to a recent Gallup poll. Even Republicans are split, holding Bush and Obama equally responsible. This perhaps surprising evidence of fair play among voters goes a long way to explain why Obama continues to pound away at the narrative that he inherited a wrecked economy and deserves more time to fix it.

So what does W. think about the economy he left behind? In April, he spoke at Southern Methodist University in Dallas about the “decision that contradicted a principle I told the American people I stood on, which is that markets are the best way to allocate goods, resources, and services. That decision was to use taxpayers’ money to bail out Wall Street in order to make sure that we didn’t have an economic disaster.” The remark echoed what he wrote in his 2010 memoir Decision Points, that he believed the intervention “helped spare the American people from an economic disaster of historic proportions … the Second Great Depression that Ben Bernanke warned about did not happen.”

You’d never know it from the Republican primary debates, but for the first time in more than four decades, illegal migration from Mexico has fallen to a net zero. All data indicate that the undocumented population of the United States is no longer growing. According to estimates from the U.S. Department of Homeland Security, that population peaked at around 12 million in 2008, fell to 11 million in 2009 and has remained constant since then. Independent estimates prepared by the Pew Hispanic Trust show the same thing, and Mexican census data reveal unusually large numbers of former U.S. migrants remaining home rather than heading northward.

These population estimates are consistent with individual-level data collected by the Mexican Migration Project, a binational program I co-direct that has been surveying legal and unauthorized migrants on both sides of the border for 30 years. Statistical analyses reveal that the rate of new migration to the United States is essentially zero, while repeat visits by returned migrants are rare. In keeping with these calculations, border apprehensions have fallen to the lowest number since 1970 despite the fact that there are more Border Patrol agents on duty than ever.

Surprisingly, this turn of events does not likely have anything to do with border enforcement. Historically, the volume of undocumented migration is uncorrelated with the size or budget of the Border Patrol. According to a recent assessment by the National Academy of Sciences, studies of migrant behavior “generally show that rising enforcement has little deterrent effect on undocumented migration,” which instead reflects the economic trends in Mexico and the United States and ongoing opportunities for legal entry to the U.S.

What might stand in the way of a robust economic turnaround. Gary Becker outlines the following factors:

The federal government is creating many programs, such as reducing student loan repayments and mortgage payments for persons with low incomes, which discourage the unemployed from finding jobs, and encourage the employed to become unemployed. The proposed caps of various kinds on executive pay, especially in the financial sector, the large government debt being created due to huge fiscal deficits that will put upward pressure on interest rates, the European style reorientation of anti-trust policies toward protecting competitors rather than consumers, the enormous excess reserves that have a considerable inflation potential, the federal government's likely incompetent management of two of the three American auto companies and a major insurance company, and the planned creation of a consumer czar that will interfere with the goods and services offered consumers are examples of policies that are likely to discourage business investment and risk taking.

Me: It is not about aggregate demand, gang, it's about confidence.