What Bush Boom?

Jonathan Cait in TNR:

For several years--the "Bush Boom" years--Republicans were essentially arguing that the mere fact that the economy was expanding should be taken as proof that Bush's economic policies succeeded.
President Bush would routinely announce facts such as (from a speech last year), "During the time when we cut taxes to today, our economy has grown by more than $1.9 trillion." He would mock his critics and declare, "events have proven them wrong."

The whole trick here was to start at the bottom point of the economic cycle and assume that any subsequent improvement was the result of his policies. Of course, this is a ludicrously forgiving measure. Over time, the economy tends to grow, and it also goes through cycles. To point out that we're better off at the peak of a cycle than at the trough is something that could be said of any economic cycle. Bush was claiming his miracle fertilizer succeeded because his plants were taller at the end of the summer than at the beginning of spring.

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I'd never go as far as conservatives do in attributing economic growth to tax rates. But that's the right's game, so let's see how the Bush Boom measures up, now that it's gone to macroeconomic heaven. A recent paper by the Economic Policy Institute (EPI) compares the Bush Boom to the ten previous periods of economic expansion since 1949. If you measure it from the peak of the previous business cycle, the Bush Boom ranks eighth out of the last ten expansions. If you measure it from the trough of the recession, Bush's preferred gauge, it ranks dead last.

And the meager growth that did occur accrued almost entirely to the rich. One of the few categories where the Bush Boom really did boom was corporate profits, which rank, depending on which measure you use, second or fourth. But wage and salary growth ranks last out of the ten previous expansions. Median family income actually declined. As the EPI paper notes, "this marks the first time this has happened since World War II in a business cycle lasting anywhere near as long as the most recent cycle." So, from the standpoint of making most people better off--which, of course, is the whole point of economic growth--the Bush Boom was a staggering catastrophe.

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If you're keeping score at home, this makes two consecutive economic cycles that have annihilated the premises of right-wing economics. When Bill Clinton raised the top tax rate in 1993, conservatives unanimously predicted it would destroy the economy. When Bush cut the top tax rate, conservatives insisted it would produce (in fact, already had produced) widespread prosperity.

Of course, you could say that this was all horrible luck for the Republicans, and tax rates had little effect either way. But that would also undercut the right's case. The initial effect of tax cuts for the rich is to increase public debt and income inequality. Conservatives justify these consequences by pointing to the alleged second-order effects of tax cuts--promoting stronger incentives and higher growth. But, if the second-order effects are so tiny they get washed out by larger economic factors--and the evidence overwhelmingly suggests they are--why should we pay the price for them?