Economically speaking, the George W. Bush administration was bracketed by bubbles. It opened in the recessionary wake of the bursting of the dotcom bubble. It ended, and the Obama administration commenced, with the drama of a world financial crisis, a stock market crash, the depression in real estate values, and the beginning of the Great Recession.
Political historians understandably are and predictably will remain fixated on the drama and heroism of 9/11, the Iraq war, and a polarized nation. But of at least equal, and arguably greater, importance is the economic stagnation that beset America during both administrations. That economic stagnation may be seen in the erosion of wages for workers, in the increase of unemployment, and of the intensification of poverty.
Unemployment is the marquee indicator. Addressing the political skirmishing around poor job growth, The Washington Post’s fact checkers concluded, on May 21, 2012:
The Post goes on to slice and dice the numbers in a variety of ways and concludes “neither president has a great track record, but neither of them has a clear advantage over the other.” This formulation politely avoids the observation that — under two dramatically different presidents, one Republican, one Democrat, and dramatically different circumstances and policies (but both with aggressive deficit spending) — this era evidences nothing but stagnation.
Contrast it with the 14+ million jobs created under Reagan’s eight years in office and the 20+ million under Clinton’s. The right policy mix allows America to generate millions, not thousands, of jobs per month: prosperity.
A common denominator for both administrations is the Federal Reserve: monetary policy. After the long prosperity of the “great moderation” established by Fed Chairman Paul Volcker and maintained, during the first half of his tenure, by the “Maestro” technocrat Alan Greenspan, quality of Fed policy began to slump dramatically.
The Economist finds these arguments unconvincing:
One is reluctant to indict a president for failure to appreciate the potency and centrality of monetary policy to economic growth and job creation. Keynes, in The Economic Consequences of the Peace, wrote, “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
Great men like Churchill, while chancellor of the Exchequer, got monetary policy brutally wrong. Peter L. Bernstein's The Power of Gold: The History of an Obsession wrote:
Yet history demonstrates that much as war, as wryly noted by Clemenceau, “is too important a matter to be left to the military,” monetary policy is too important to be left to central bankers. No matter how technically proficient and civic minded Alan Greenspan or his successor might be, managing a fiduciary currency consistently well over long periods is a demonstrated impossibility.
Central planning in other areas, such as industrial policy, has been discredited and repudiated. While the gold standard is by no means perfect, its historical record — in terms of job creation, stability, and security — shows it to be unrivaled by the record of any managed fiduciary currency. It is due to poor monetary policy for the past decade, and the absence of what Lehrman Institute founder and chairman Lewis E. Lehrman has called the golden “gyroscope”, that America — and the world — has found itself mired in a state of monetary and financial disorder and economic stagnation.
Monetary History Highlights
The Rueffian Synthesis