Blogroll
- Atlantic Review
- Austin Bay
- Belmont Club
- Community of Democracies
- Council on Foreign Relations
- Counterterrorism
- Defense Daily
- Democracy Around The World
- Democracy Project
- Freedom House
- House Committee on Foreign Affairs
- Intelligence Dump
- Michael Totten
- Political Update
- Power Line
- Senate Foreign Relations Committee
- Strategy Page
- Tech Central Station
- World Affairs Council
Homework is Due at the Beginning of Class
Archives
Top Posts
- The Legacy of Brad Keil: A Tragic Death but a Triumphant Life by Gregory Hilton
- The Wisdom of Jane Pontarelli by Gregory Hilton
- The Strange Views of Libertarian Founder Murray Rothbard by Gregory Hilton
- BOOK REVIEW: "Nothing for the Nation: Who Got What Out of Iraq" (2008) by former Congressman John Hostettler (R-IN)
- The Timeless Message of F. Scott Fitzgerald's "The Great Gatsby" by Gregory Hilton
- MOVIE REVIEW: “Star 80” (1983) and “Death of a Centerfold” (1981) by Gregory Hilton
- Tattoos and Evening Gowns by Gregory Hilton
- Another Bad Idea From Ron Paul: Letters of Marque and Reprisal by Gregory Hilton
Major Issues
- 2010 Election
- 2012 Election
- 2012 Presidential Election
- Abortion
- Abraham Lincoln
- ACLU
- Afghanistan
- Alabama
- Alaska
- Andrew Jackson
- Andrew Johnson
- Arctic Sea Ice
- Arizona
- Arkansas
- Auto Industry
- Barack Obama
- Bill Clinton
- Bipartisan
- Book Reviews
- Budget
- California
- Calvin Coolidge
- Cap and Trade
- Charity
- Civil Rights
- Colorado
- Connecticut
- Conservatives
- Conspiracy Theories
- Debates
- Deficit Reduction
- Delaware
- Democrats
- Dwight Eisenhower
- Economic Policy
- Education Policy
- Energy Security
- Enhanced Interrogation
- Environmental Security
- Florida
- Foreign Policy
- Franklin D. Roosevelt
- Franklin Pierce
- Gay Marriage
- George H. W. Bush
- George W. Bush
- George Washington
- Georgia
- Global Warming
- Harry Truman
- Health Policy
- Herbert Hoover
- Housing
- Illinois
- Immigration
- Indiana
- Iowa
- Iran
- Iraq
- Isolationism
- James K. Polk
- James Madison
- James Monroe
- Jimmy Carter
- John Adams
- John F. Kennedy
- John Quincy Adams
- John Tyler
- Kansas
- Kentucky
- Liberals
- Libertarian and Constitution Parties
- Louisiana
- Lyndon Johnson
- Maine
- Maritime Industry
- Martin Van Buren
- Maryland
- Massachusetts
- Michigan
- Mike Huckabee
- Millennials
- Minnesota
- Missile and Bomber Gap
- Mississippi
- Missouri
- Mitt Romney
- Montana
- Movie Reviews
- National Security
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Notable People
- Nuclear Power
- Ohio
- Oregon
- Parenting
- Patriot Act
- Pennsylvania
- Popular Culture
- Religion
- Republican RINO's
- Republicans
- Rhode Island
- Richard Nixon
- Ron Paul
- Ronald Reagan
- Rutherford B. Hayes
- Sarah Palin
- Social Issues
- Social Security
- South Carolina
- State Politics
- TARP
- Taxes
- Tea Party
- Tennessee
- Texas
- Thomas Jefferson
- Trade
- Transportation
- Trivia Questions
- U.S. Politics
- U.S. Presidents
- Uncategorized
- United Nations
- Urban Problems
- Utah
- Vermont
- Virginia
- Washington
- Weapons of Mass Destruction
- Welfare Reform
- West Virginia
- William Howard Taft
- Wisconsin
- Woodrow Wilson
- World War II
- Zachary Taylor
Blog Stats
- 335,236 hits
The Bush Deficit, the Clinton Surplus and TARP by Gregory Hilton
For eight years many liberals complained about the Bush deficit and praised the Clinton surplus. They had an excellent point, but overlooked many key factors. Bush created a Medicare drug entitlement which will cost an estimated $800 billion in its first decade. He increased federal education spending 58% faster than inflation. He was also the first President to spend 3% of GDP on federal anti-poverty programs. For some reason the left wing is no longer talking about the deficit.
The above graph does include spending on Iraq and Afghanistan during the Bush years. While Bush did fund the wars through emergency supplementals (not the regular budget process), that spending did not simply vanish. It is of course included in the numbers above.
The Bush deficit declined significantly until early September of 2008 when the global economic crisis began. Bush responded with TARP (the toxic asset recovery program). This was done because $550 billion was pulled out of our financial and investment systems in ONE hour on September 18, 2008. The situation was dire and there was no longer a firewall between the banks and the stock market. There was $40 trillion in outstanding Credit Default Swaps, and most of it turned out to be worthless. That’s more than the GDP of the entire United States for three years.
The Bush administration worked diligently to keep the American economy going. Many conservatives and libertarians were disappointed by TARP. They believed we should leave the economy alone and it would fix itself. The conservative magazine National Review did not agree and supported TARP as a necessary evil. The House Progressive Caucus was opposed but their prediction that it would fail, has not proven true.
TARP was necessary to save the economy from collapse. Letting the banks fail was not the right thing to do and it would have led to a Great Depression. TARP and all of the other government efforts in the fall of 2008 did unfreeze the credit markets. Every single credit indicator (LIBOR, TED spread, A2/P2 spread, intra-bank lending, etc) shows that the markets have significantly unfrozen. The major banks have now passed their stress tests, and they are able to raise capital through the public markets. The American economy survived without a depression. There was no wholesale meltdown of the U.S. banking system. The big banks did not fail.
The taxpayers could still lose $12 to $20 billion on the money given to AIG. That is disappointing, but it is big improvement from a few months ago. AIG received $182 billion from the Federal Reserve and the Treasury.
Many thought the taxpayers were going to get stuck for over $100 billion, but AIG has been rapidly selling assets and the loss will be far less than what was once believed. The real outrage is that AIG lost $98 billion in 2008 but that did not stop them from paying large bonuses after they received the balout money.
President Obama went well beyond TARP with his $787 stimulus in February of 2009. The Stimulus bill includes tax cuts but they are not the type that spur the economy. The economic model of the stimulus bill assumes every $1 of government spending increases the economy by $1.60. By that logic, debt-ridden, big-government countries like Italy, France and Germany should be wealthier than America. Not one House Republican voted for the final stimulus package, which is remarkable.
The moderates did not support it because it was too big, too porky, and hardly stimulative at all. It also wiped out many of Bill Clinton’s excellent welfare reform laws. We did see deficit reduction and economic growth in the late 1990’s.
Bill Clinton and a Republican Congress worked together. They agreed to restore a lower tax rate on capital gains and virtually eliminate capital gains taxes on owner-occupied housing. The galloping economy then reduced the deficit by a record level.
Another major factor was the “peace dividend” after the Cold War. Clinton however did not erase the debt. The national debt went up every single year. The Clinton surplus is also debatable. He took a vast amount of money out of Social Security in order to cover his budgets and give the appearance of reducing debt.
This entry was posted in Bill Clinton, Deficit Reduction, George W. Bush, TARP. Bookmark the permalink.
Thank you for writing this article. I’m sorry I am only seeing it now…more than a year after the fact.
Two things:
The $5.5 Billion was pulled from our money markets in one hour on 9-11, not 9-18.
It is PRESIDENT Bush and the usurper, Obama.
Thanks again for the great job you have done on documenting TARP and the economic crisis.
Pingback: Why would anyone continue to claim the iraqi war was a failure? - Page 15 - US Message Board - Political Discussion Forum
Pingback: LIBS: The Iraqi war was in GWB deficit, again, the Iraqi war was in GWB deficits - US Message Board - Political Discussion Forum
Pingback: Why more government spending - US Message Board - Political Discussion Forum
Pingback: I agree with Rush, Obama is in trouble - Page 11 - US Message Board - Political Discussion Forum
Pingback: Liberals lets get something straight about debt - US Message Board - Political Discussion Forum
Pingback: Liberals lets get something straight about debt | Wawfree.com 100% free
Pingback: POLL: Cain, Romney and Perry all beat Obama - Page 4 - US Message Board - Political Discussion Forum