Thoughts on Bush's Economic Track Record

David posted a opinion piece on his blog yesterday about why he plans to vote for Sen. John “What's My Opinion Anyway” Kerry (couldn't resist that, sorry) rather than President Bush. Some of the points David mentioned are ones that have come up a lot about the President and I had actually been wanting to deal with them for awhile — so here they are.

Health Care
David suggests that Bush's economic policies have made it so that middle-class citizens can't afford health-care. I would ask what economic policies caused such a problem? An even bigger question would be what middle-class working citizen can't afford healthcare anymore that could previously? I think it would be hard to find a quantifiable statistic that shows a reduction in healthcare coverage between now, and say, 1996 when President Clinton was in office.

The problem: Putting a price ceiling on a market doesn't work. Additionally, by limiting revenues that drug companies can make,  it will encourage less innovation and thus medical research could stagnate.

Tax Cuts
Before Bush was even became president, there was talk that the Bush tax cut would only benefit the wealthy. But it just isn't true. Everyone who pays taxes got a tax cut, some just got larger tax cuts. But, isn't a $200 tax cut still good? That's like half a week's pay for a lower middle class worker — not shabby by any means.

It all comes down to percentages. If you pay more taxes, there are more taxes that you may not have to pay any longer. There's no way someone can give me a million dollar tax cut, because I don't pay a million dollars. Does that mean I should say no one should get a million dollar tax cut? No.  Why should someone not get a tax cut simply because they make more than I do?

Imagine if the Bush tax cut said "everyone gets half a weeks wages/salary off their normal taxes owed." While the person I mentioned above might only get $200, a CEO might get $50,000. There is no way the former could ever get that much off because that is more than they make all year and certainly more than they pay in taxes. Yet, giving $1,000 or $2,000 off to the CEO wouldn't really be meaningful. So, tax cuts are almost always bound to be cases where the rich get a larger reduction, but that's only because taxes are based on what you make.

Personally I still advocate a flat tax system where everyone would pay the same rate across the board (except maybe the very lowest income tax payers). The thing is, not only do the rich pay more taxes if they were taxed at the same percentage rate, they actually are taxes at a higher rate making the tax burden higher than it should be.

Kerry, as David points out, talks about giving "average American" tax cuts and raising taxes on the richer Americans. The best system is to cut everyone's taxes, which is what the president has done. The economy is a big circle (getting bigger with globalization) — if you  allow those on top to keep more cash, they will invest in new businesses. If you  allow those on the bottom to keep more cash, they will buy more and also start businesses. The key is not to penalize anyone. If you penalize those who earn a lot for earning a lot, you lower the motivation to work hard and create the new businesses that provide for more jobs.

Price Inflation and Consumer Buying Power
Most of the universities in my area are charging little or nothing more than what they were in 2000. Some tuition fees are bound to rise as inflation occurs, but this is unavoidable. Here's the key idea, however: It is not the President's job, nor should it be the President's job, to regulate prices.

Why not prevent prices from going up? Because of what I mentioned earlier, a price ceiling doesn't work. It didn't work with oil in the 70's, it won't work with tuition now. If costs are going up (which they almost always will, again due to normal inflation), tuition must go up. Tuition might have gone up, but so have earnings. I know professor who teaches at the very same university he went to thirty years ago. At the time, his book cost just $10 for the class, but he was also only able to earn $1 an hour working. Today the book costs over $100 for his course, but college students can also get a job earning $10 or more an hour. For the most part, inflation moves everything up at a very similar rate (thus why a minimum wage will never accomplish much — when you raise that everything else goes up, thus never really increasing buying power, but that's another story…).

What we really should ask is how much buying power do we have now compared to four years ago before President Bush. The cost of living, according to reliable statistics, has been fairly stable for quite awhile. Sure, a pair of shoes that cost $19.99 in 1990 might go for $29.99 now — but you are also making more than you did in 1990.

Overall, our economy is very healthy and unemployment is at around 5.5%, the last I heard. This is a very good number to be at — you will never reach 0% unless you hire people to do nothing (like the Soviets did). There will always be unemployment as people look for new jobs, take of for a sabbatical or to spend time with family, etc. Maybe the economy isn't as good as it was in the 1990's, but I would point out that the recent decline started before President Bush gave up the title "Governor." Let me note that again, the recent decline started before President Bush gave up the title "Governor." The economic downturn occurred in 2000, while President Clinton was still in office.

What we have hear is a reverse of the effect of the 1990's. Presidents Reagen and Bush (the father) pursued various policies to strengthen the economy. In 1990 and 1991, there were some economic problems, but the economy was starting to improve by the time Bush lost. Thus we have a case that one Bush doesn't get credit for the economic improvements he did make and the other Bush gets blamed for economic problems he didn't make. But, I'm using the word "make" very loosely anyway, because the economic power of the president by himself is very dubious indeed.