It's time to measure President Bush's economic leadership. Since 2001,
the economy has benefited from a massive, prolonged fiscal and monetary
stimulus. By cutting taxes and running ever-expanding deficits, the federal
government has pumped a staggering $600 billion into the economy over
the last 30 months. The Federal Reserve has slashed short-term interest
rates to 1 percent, the lowest level since the Eisenhower administration.
So why isn't the economy recovering? With that much stimulus in place,
the lack of economic recovery can't be just blamed on bad luck. Bush's
economic policies are also to blame. Let's look at the results.
When the Bush administration took office in January 2001, the unemployment
rate was 4.1 percent. In June 2003, it was 6.4 percent, the highest rate
in nine years. The total number of jobs lost since the peak in employment
in February 2001 is now 2.5 million, and payroll jobs are still falling
(Figure 1).
In January 2001, the S&P 500 stock index stood at 1,336. By June
of 2003 it was 988, about the same level as January 1998 (Figure 2).
It's clearly the Bush administration's fault that the federal surpluses
of 1998-2001 are long gone, replaced by record deficits of $400 billion
a year or more (Figure 3). Unless we take action, the deficits could balloon
to economically calamitous levels after 2010.
To be fair, the first year of the president's term was destined to be
rocky. Few voters blame the administration for the recession that began
just two months after Bush took office, in March of 2001. And no one blames
Bush for the economic dislocations caused by September 11. Moreover, many
economists underestimated the impact of the corporate accounting scandals,
which burst into the news in late 2001 and kept the stock market depressed
in early 2002.
But Bush's economic policies have failed to restart the economy. And
the outlook for the latter years of this decade -- when the baby boom
generation starts to retire and join the entitlement rolls -- is grim.
