When Bill Clinton passed the keys of the Oval Office to George W. Bush, on January 20, 2001, the American Economy was in great shape! Clinton had just balance the Federal Budget for the first time since 1964. The Unemployment Rate sat at 4.40%, somewhat lower than what the Federal Reserve deems “Full Employment,” at 5.00%. (The 5.00% is an assumption for those between jobs, changing jobs, recent lay-offs, etc.)
George Bush then took the Economy and devastated it, in order to accomplish ideological goals. He commenced to take the country into two never-ending wars, first, in Afghanistan, in 2001 and, then, Iraq in 2003. Both wars are still going on, which causes one to wonder what our Mission Statement was. Were they necessary? Will we ever leave?
Also early in his First Term, Bush decided to implement a series of Tax Cuts, which were primarily skewed toward the very wealthiest Americans. Why? Generally, a nation doesn’t lower taxes when it has one war to finance, let alone two! Also, tax cuts for the wealthy do not usually encourage consumer spending. On January 1, 2005, just after he had won his re-election, the Unemployment Rate was 5.30%, and the National Debt had increased from the tax cuts.
That rate began to edge up as the Economy began to stagnate. Banks, which were undercapitalized had been taking undue risks. Sub-prime mortgages were sold to homeowners who could least afford them. Even worse was the packaging of these questionable loans, which were sold to unknowing bond investors as AAA-rated mortgage-backed securities. And in the end, many of the banks, insurance companies, auto makers, etc., had to be bailed-out by the Taxpayers.
That Banking Crisis, which is commonly referred to as “The Great Recession” was first made public in October of 2007, when George Bush forced the very largest banks to take tens of billion of dollars, at virtually no interest. He described the scenario as such: “America is looking down into a Financial Abyss.” If you hadn’t been deeply concerned during the fourth quarter of 2007, when this all began, you certain became so after Bush’s announcement!
The Unemployment Rate of 5.00% at the beginning of 2008 quickly rose to 7.80% at the beginning of 2009. The Bush Tax cuts, coupled with financing two wars caused the Federal Budget to spike, and the interest on the, now higher, National Debt absorbed a larger slice of the budget, as well. Lay-offs reduced the tax polls, consumer spending declined considerably, and many small businesses closed their doors. And credit became virtually non-existent.
Just after Barack Obama took office, on January 20, 2009, the Dow Jones Industrial Average dropped to 6,500, from the prior high of 14,015 in October of 2007. Unemployment continued upward to 10.00% in early 2010.
The Obama Administration did the reverse of what George Bush did by allowing the Bush Tax Cuts to expire; but, he lowered rates for the middle class who, unlike the wealthy, spent their excess cash, thus giving new life to small businesses—the real job creators! Obama’s combination of Monetary and Fiscal Stimulus began the economic recovery, which continues to this day. The Unemployment Rate stood at 4.80%, when Obama left office last January.
Let’s consider how the two prior presidents—before Donald Trump—managed the American Economy. George W. Bush took over a nation, which had balanced its budget, and he ran it into the ground—turning the budget surplus to a deficit, lumping the expense of ineffective tax cuts and two unnecessary wars, doubling the Unemployment Rate and halving the stock market.
Barack Obama took a completely different stance. He almost balanced the budget, allowed the ineffective Bush Tax Cuts for wealthy to expire while lowering taxes for the middle class—the consumer class, put many small businesses back on their feet, tried to withdraw from the two Middle East wars in a gradual and rational manner, and he halved the Unemployment Rate while doubling the stock market.
Donald J. Trump seems dead set on following President Bush’s scenario. Are we ready for another Great Recession?