The Volokh Conspiracy

Obama Perpetuates the Myth of Bush as Free-Marketeer

Ilya Somin • January 28, 2010 3:42 am

In the State of the Union, Obama continued to blame Bush and the Republicans for our current economic problems. This is understandable for two reasons. First,the GOP does deserve a good deal of blame, though my list of their misdeeds would probably look different from Obama’s. Second, pretty much any president in Obama’s position would do the same thing.

Much less defensible is Obama’s attempt to claim that the Republicans purused free market policies during the last eight years, and thereby caused the economic crisis:

From some on the right, I expect we’ll hear a different argument — that if we just make fewer investments in our people, extend tax cuts including those for the wealthier Americans, eliminate more regulations, maintain the status quo on health care, our deficits will go away. The problem is that’s what we did for eight years. That’s what helped us into this crisis. It’s what helped lead to these deficits. We can’t do it again.

In reality, of course, the Bush-era GOP greatly expanded government control of the economy, including major increases in spending, regulation, and federal “investment” in education. I discussed this at some length here, here, and here. Far from “maintain[ing] the status quo in health care,” Bush established the Medicare prescription drug benefit, the biggest new government program since the 1960s. Ironically, Obama referred to the prescription drug program and other Bush-era spending increases as contributing to the deficit earlier in this very same speech.

The Bush as free marketeer meme is an important prop in the Democrats’ case for massively expanding government control of the economy today. Logically, of course, it is possible to argue for such an expansion even if Bush did it too. Maybe he just didn’t go far enough, or didn’t calibrate his interventions as precisely as the Democrats plan to with theirs. From the standpoint of political rhetoric, however, it’s much easier for Obama to justify greatly expanded government if he can portray it as the opposite of his discredited predecessor’s policy. The gambit probably wouldn’t work if the public knew the facts about what Bush did. Obama, however, may be banking on widespread political ignorance, reinforced by the GOP’s image as the pro-free market party. He is far from the first politician to try to take advantage of ignorance. The Republicans have hardly been above doing the same thing when it suited their interests. But the fact that everyone does it doesn’t make it right.

Categories: Growth of Government, Political Ignorance

104 Comments

Nick says:

We were told in April that the president was unaware of the tea parties. Has he never heard of “compassionate conservatism” too?
January 28, 2010, 4:39 am
EH says:

I think it was just electioneering in what will likely turn out to be a tough year at the polls for Democrats. “The problems were caused by [tenet of the opposition].” A disarming tactic.
January 28, 2010, 4:40 am
Cameron says:

People don’t know about Herbert Hoover’s Federal Farm Board and the half billion dollars that cost. They don’t know about the Reconstruction Finance Corporation, which spent over three times as much. They’ve never read Herbert Hoover’s attacks on “traitorous hoarding” and “destructive competition” and in support of the inheritance tax, “one of the most economically and socially desirable—or even necessary of all taxes.” Hoover’s taxes on gasoline, tires, cars, radios, record players, electricity, malt, toiletries, furs, jewels, movie tickets, yachts, cameras, bank checks, bond transfers and long distance phone calls, all news to them. They heard a lot about the Glass-Steagall Act last year, but they don’t know who was president then. And if they remember the Smoot-Hawley tariff, they still say with a straight face that Herbert Hoover was laissez faire.
January 28, 2010, 7:28 am
K Dackson says:

This is just part of Dr. Utopia’s stratey.

1) Call Bush a “Free Marketer”.

2) Blame the economy on Bush.

3) How’s that Free Market thingie working for you?

4) I’m fighting against the Free Market thingie for you.

5) See, Socialism ain’t that bad after all.
January 28, 2010, 7:38 am
wm13 says:

If Prof. Somin’s list of what the Bush administration did wrong is different from President Obama’s, how can we have confidence in their conclusion that the Bush administration did something wrong? That is very flawed epistemology, which leads to incoherence in policy, when people at both extremes of the spectrum get together and say, “At least we both agree that the people in the middle are idiots.”
January 28, 2010, 8:22 am
A. Zarkov says:

FDR got re-elected in part by running against Hoover. The Democrats ran against Hoover for more than 50 years, and even John Kerry tried it in 2004. However Kerry didn’t realize that most people don’t know who Herbert Hoover was anymore, they thought he was talking about J. Edgar. Think I’m kidding? Then try this on-line history quiz. It’s easy. You should get 100% but 71% of the people who take this test fail it. Liberals score 49% and conservative score 48%.

Obama can’t portray Bush as a big government guy. He has to portray him as some kind free-marketeer because Obama wants to run off in the opposite direction. He doesn’t realize (like Bush) that the economic crisis has been caused by excessive debt build up as described by Hyman Minsky. Both Bush and Obama think more debt is the solution.
January 28, 2010, 8:51 am
ruuffles says:

This thread won’t break into the double digits.
January 28, 2010, 8:52 am
Allan Walstad says:

wm13 says:

If Prof. Somin’s list of what the Bush administration did wrong is different from President Obama’s, how can we have confidence in their conclusion that the Bush administration did something wrong? That is very flawed epistemology…

Actually, it’s not epistemology at all. It’s Somin expressing his opinion (which, for the most part, I happen to share). An opinion backed up by facts demonstrating that Bush was no free marketeer.

I will say, though, that since the Repubs do posture as being more for the market, it’s perfectly fair for Obama to agree. Politics is in so many ways like pro wrestling, isn’t it? All this posturing, these roles, this rather fake conflict involving, to be sure, impressive acrobatics (physical or rhetorical) and stagecraft designed to inflame the emotions.

Almost no pols actually, consistently, stand for liberty and free markets. Seems it’s not the nature of the game and those who play it. That’s one of the reasons why the scope of government power needs to be limited, as the Founders tried valiantly to do.
January 28, 2010, 8:57 am
Yankev says:

A. Zarkov: However Kerry didn’t realize that most people don’t know who Herbert Hoover was anymore, they thought he was talking about J. Edgar.

I knew a man, his brain was so small,
He couldnt think of nothing at all.
Hes not the same as you and me.
He doesnt dig poetry. hes so unhip that
When you say dylan, he thinks youre talking about dylan thomas,
Whoever he was.
The man aint got no culture,

Simon And Garfunkel, A Simple Desultory Phillipic
January 28, 2010, 9:22 am
corneille1640 says:

From some on the right, I expect we’ll hear a different argument — that if we just make fewer investments in our people, extend tax cuts including those for the wealthier Americans, eliminate more regulations, maintain the status quo on health care, our deficits will go away.

Mr Somin makes some good points, but was Obama wrong about extending “tax cuts including those for the wealthiest Americans”?
January 28, 2010, 9:23 am
ShelbyC says:

Heh. Dog bites man. Politician lies.
January 28, 2010, 9:25 am
Yankev says:

A. Zarkov: You should get 100% but 71% of the people who take this test fail it. Liberals score 49% and conservative score 48%.

That’s scary; I made educated guesses on one or two when memory failed, but none of the questions were that difficult. Most were a matter of simple logic or cursory familiarity with the U.S. Constitution.
January 28, 2010, 9:31 am
Owen H. says:

Because after all, Bush didn’t push for tax cuts, or to have them extended. And his Medicare afforts were so great. And obviously not doing anything at all on any other health care issue can’t be called “maintaining the status quo”.

Is anyone going to argue that extending tax cuts for the wealthiest and deregulation will in fact reduce the deficit?
January 28, 2010, 9:42 am
LN says:

How dare Obama the Radical Socialist Communist exxaggerate the difference between the two parties.
January 28, 2010, 9:45 am
Yankev says:

corneille1640: Mr Somin makes some good points, but was Obama wrong about extending “tax cuts including those for the wealthiest Americans”?

First, he does not mean the wealthy. Tax rates are based on income, not wealth. There is a huge difference between someone who is wealthy and someone who earns a high taxable income. Anyone who overlooks this distinction is suspending (at best) their critical thinking skills.

But let’s take him at his word. Are you saying that you favor tax cuts except for the wealthiest (i.e. highest earning, but never mind) Americans, who already pay a disproportionately large share of the country’s taxes, and who would continue to do so even after a tax cut? Some of us think that the tax cuts would result in those Americans investing more, spending more, or both, to the benefit of those of us who are not wealthy. We also think that in many cases Americans, wealthy or not, can make smarter choices about spending our money than the Congress can.

There’s a good reason why private enterprise has not built a 40 mph railroad to link Cincinnati (did I spell that right?), Columbus and Cleveland. But now the federal government will pay for one. And the train will get you from one terminal to other terminal in just over 1.5 times the time it would take to drive directly from your home to your destination. Then you still have to get to your destination from the terminal. When you return, you have to pay for parking your car and then get home from the home terminal. Any bets whether a round trip ticket for one (forget about parking and local transportation) will cost less than the tank of gas it would take to drive 4 or 5 people there? (I know, I am overlooking the cost of buying and maintaining the car, but those costs are relatively fixed.) And think of the added convenience of having no car to use at your destination city!

If you think that’s a wise use of taxpayer money, then excluding the wealthy (or high earners) from tax cuts might strike you as a good idea.

And I have a business proposition that may interest you that I received by email from the widow of a former high official in the Nigerian government.
January 28, 2010, 9:48 am
Sarcastro says:

Deregulation and tax cuts are totally socialist, since they fall short of dismantling the administrative state. Half a loaf is the same as no loaf at all!!!

Also, I always suspected Obama was a super villian. Now, thanks to K Dackson, I know his secret identity!
January 28, 2010, 9:50 am
LN says:

How dare Obama the Radical Communist exxaggerate the difference between the two parties?
January 28, 2010, 9:50 am
Owen H. says:

Yankev: First, he does not mean the wealthy. Tax rates are based on income, not wealth. There is a huge difference between someone who is wealthy and someone who earns a high taxable income. Anyone who overlooks this distinction is suspending (at best) their critical thinking skills.But let’s take him at his word. Are you saying that you favor tax cuts except for the wealthiest (i.e. highest earning, but never mind) Americans, who already pay a disproportionately large share of the country’s taxes, and who would continue to do so even after a tax cut? P>

I certainly do. I also disagree with your assessment on investment. The rich getting richer while the poor get poorer does not help anyone but the rich.
January 28, 2010, 9:53 am
Yankev says:

Owen H.: Is anyone going to argue that extending tax cuts for the wealthiest and deregulation will in fact reduce the deficit?

I used to fall for this sleight of hand too, until a column or too by Thomas Sowell reminded me of what should be obvious: Tax cuts — or tax rates — depend on one’s current revenue, not on one’s wealth. And for many of us, earnings increase as we get older, peaking in middle age as our careers succeed, and decreasing again as we reach retirement age. This is not the same as wealth. One can be a high earner and be insolvent, depending on one’s debts and expenses.

So long as we talk about “tax cuts for the wealthiest” we are falling for cheap and ignorant demagoguery that adds nothing to an intelligent discussion of economic or political policy.
January 28, 2010, 10:02 am
Sarcastro says:

[I see your point, Yankev, but it seems to me that
1) people know when Obama's talking about income when he says "make over 250,000 a year" in the same breath as he says "wealthiest"
2) the correlation between high income and wealth is sufficiently strong that some conflation does not end intelligent debate.]
January 28, 2010, 10:28 am
Guido the Mick says:

Owen H.: I certainly do. I also disagree with your assessment on investment. The rich getting richer while the poor get poorer does not help anyone but the rich.

You are making an assertion not based on fact. Please explain how the wealthy investing money makes the poor poorer. After all, do not investments usually involve sinking money into businesses, which hire people and create value (otherwise, how would they profit)? So, creating jobs somehow makes people poorer?
January 28, 2010, 10:55 am
yankee says:

In reality, of course, the Bush-era GOP greatly expanded government control of the economy, including major increases in spending, regulation, and federal “investment” in education.

I’ll grant you “spending.” Regulation is harder to assess since you need some way of quantifying whether the “new” regulations increased or reduced government control (e.g., if they loosened old requirements).

But education? The government already controls virtually the entire education system anyway, and the increases in federal loan subsidies that you cite hardly count as more government control in my book. NCLB would be a better cite, but even that just transferred control of education from state and local governments to the federal government, which is different government, not less government.
January 28, 2010, 10:56 am
lgm says:

Bush may not represent the free market principles you like, but he does represent Republican leadership. If we elect a Republican President to replace Obama, we will get policies much like Bush. Yes, in the sixties there were free market Republicans who believed in fiscal responsibility. There also were southern Dixiecrat Democrats who supported segregation. Times change. Your party preferences should change with the times.

There is a good case to be made that Bush policies did lead to our recession. Most economists think that. We had a real estate boom fueled by sub-prime lending (definition: sub-prime = below what Fannie and Freddie allow) that could have been prevented had regulators enforced consumer protection laws against predatory lending. (OK, many here disagree with laws like that.)
January 28, 2010, 11:03 am
LN says:

Right, Thomas Sowell is itching for a proper wealth tax. Oh wait no…
January 28, 2010, 11:03 am
corneille1640 says:

corneille1640: Mr Somin makes some good points, but was Obama wrong about extending “tax cuts including those for the wealthiest Americans”?

Are you saying that you favor tax cuts except for the wealthiest (i.e. highest earning, but never mind) Americans, who already pay a disproportionately large share of the country’s taxes, and who would continue to do so even after a tax cut?

Well, no. I was asking a question: namely, was Obama mis-portraying Bush’s policies in respect to tax cuts.

Good point about wealthy not necessarily meaning “high earning” (I wonder whether level of income might be one way–among many–to measure wealth, but never mind). Still, ouch!, sizzle, sizzle, on your charge that I suspend critical thinking skills.
January 28, 2010, 11:20 am
Chris Bell says:

Ilya,

I think that Obama’s comments can be interpreted in a more charitable way. It is true that GWB intervened in society in several ways, but in the financial system he pursued a largely de-regulatory policy. As I watched the speech, that’s certainly what I understood Obama to be talking about.

In other words, I don’t think Obama is saying that No Child Left Behind caused the financial crisis.

None of your examples of Bush’s interventions deal with the markets, Wall Street, mortgages, etc.
January 28, 2010, 11:22 am
Allan Walstad says:

Those with highest incomes already pay a disproportionate share of the total revenue. One of the problems with this is that you get a situation where people can simply vote themselves as much as they want of other people’s money. I don’t think that’s healthy. The more effort people put into politically dividing up what others have produced, the less productive society is likely to be.

The idea of increasing government revenue by lowering taxes on the successful is just the flip side of the obvious fact that beyond some point, if you are going to have very high marginal tax rates, there just isn’t the incentinve to earn more–i.e., to work more, to invest more, to build more. Just where the line is, is a fair question of course. But if the correlation between individual productiveness and income is far from perfect, it’s not zero either. Tax it, and you get less of it.
January 28, 2010, 11:31 am
Allan Walstad says:

Ah yes, once more as to what or who caused the financial crisis. I’m with the Austrians, most notably Bob Higgs, who see the Federal Reserve as the culprit in so many bubble/bust episodes. The Fed pushed interest rates way down, which gave the incentive to make (and take out) any and all possible loans. So houses seem more affordable. So there’s more demand. Which pushes up prices. So if you buy a house your net worth keeps going up and up, and even if you can’t make the payments when the teaser rates go back up, you can sell the house for a profit. Eventually, when the bubble bursts, it comes crashing down, with wide ramifications. The housing bubble/bust was a classic case of Austrian business cycle theory. And don’t you know, neither party is talking about doing away with the Fed.
January 28, 2010, 11:38 am
K Dackson says:

corneille1640: Mr Somin makes some good points, but was Obama wrong about extending “tax cuts including those for the wealthiest Americans”?

Try asking a poor person for your next job.
January 28, 2010, 11:46 am
Mike says:

Obama did bring up the Prescription Drug Benefit derogatively – as a POOR GOVERNMENT PROGRAM THAT WASN’T PAID FOR. Watch it again Ilya.
January 28, 2010, 11:46 am
corneille1640 says:

corneille1640: Mr Somin makes some good points, but was Obama wrong about extending “tax cuts including those for the wealthiest Americans”?

Try asking a poor person for your next job.

I guess I owe you (and Yankev) an apology because my question was poorly worded. I should have said “was Obama wrong about Bush and the Republicans extending ‘tax cuts including those for the wealthiest Americans’?”

I’m too ignorant (perhaps it shows!) of the many in’s and out’s of tax policy to know precisely what effect a given tax at a given income rate would have. So even though I do have an opinion, I’m not entering that aspect of the debate, except to say that it’s probably not as simple as a nine-word slogan would suggest.
January 28, 2010, 12:02 pm
SeaDrive says:

First, he does not mean the wealthy. Tax rates are based on income, not wealth. There is a huge difference between someone who is wealthy and someone who earns a high taxable income.

Yeah, I bet there are more people with high income and no assets than there are people with huge assets and low income. But somehow, I don’t feel sorry for them having to pay their way.

One of the problems with this is that you get a situation where people can simply vote themselves as much as they want of other people’s money. I don’t think that’s healthy.

Do you think it’s healthy when it’s corporate management voting themselves the stockholder’s money?
January 28, 2010, 12:08 pm
Widmerpool says:

ruuffles says:
This thread won’t break into the double digits.

Even a stopped clock is right twice a day–I suppose your comment is the equivalent of breaking the hands off the clock.
January 28, 2010, 12:09 pm
Dennis says:

Am I wrong to believe that our bubble was created by incremental deconstruction of mortgage eligibility requirements that began with the Community Reinvestment Act back in the Carter Administration, in collusion with both parties (a chicken and a mortgage in every pot) as our whole culture shifted leftward, left and especially right…. and the whole problem accelerated by the invention of “exotic financial instruments” the helped us to hide the problem along the way.

I understand why the Left would want to conceal this fact. But why don’t we hear this from the right end of the spectrum? Are the Republicans hiding their culpability in helping to create and cultivate this sad situation?

Or is my version of events wrong in some way?
January 28, 2010, 12:12 pm
orca says:

From yesterdays Wall Street Journal/NBC poll:

Who do you blame for the problems facing America?

Republicans – 48%
Democrats – 41%
President Obama – 27%
(Can choose more than one answer)

Looks like whatever Obama is doing is working for him.
January 28, 2010, 12:21 pm
Zain says:

“Second, pretty much any president in Obama’s position would do the same thing.”
Don’t recall Bush ever blaming Clinton for Al-Qaeda or Reagan blaming Carter for the economic mess he inherited. Seems to me that at least those two had broad square shoulders as opposed to the slope shouldered present occupant of the White House. ALL responsibility just slides right off President Obama’s shoulders. Is’nt it past time he matured into a MAN.
January 28, 2010, 12:25 pm
Charlie B says:

File under President Obama having his cake and eating it – While it is true that Medicare D was enacted on President Bush’s watch, the Democrats complained at the time that it wasn’t as comprehensive (expensive) as they thought it should be.
January 28, 2010, 12:29 pm
RPT says:

Dennis: Yes you are wrong. The CRA loans were a very small part of the problem. The vast majority of the loans were made outside that program. No doc loans are not a CRA creation or mandate. And, Bush pressed for expanded home ownership. “Extoci financiall instruments” were not created the “the Left”, whoever you mean or define as “the Left”.

Factual questions:

1. Wasn’t there a surplus when Bush took office?

2. Did the tax cuts generate deficits?

3. Weren’t the Iraq/Afhganistan wars funded off budget and create further deficits?

4. Didn’t Medicare Part D cause further deficits?

This is pretty silly because it an argument that R’s can never be responsible for anything they actually do if they say the right things. Like presenting Newt Gingrich as a spokesman for traditional marriage. The argument appears to be that R’s who ran as “free market conservatives” are not to be held accountable for anything that happened during their tenure because they are not really “FMC”. Therefore, R’s should be put back in office because this time they will act like FMC’s. If things go badly, it will only be because they didn’t govern as FMC’s therefore they should be put back in control. If deficits increase it will be because the D’s did it, no matter when or how it happened. As McCain said last night, Obama has created a $12 trillion deficit during his one term in office. This is complete freedom from accountability.
January 28, 2010, 12:35 pm
Allan Walstad says:

Dennis:

Am I wrong to believe that our bubble was created by incremental deconstruction of mortgage eligibility requirements that began with the Community Reinvestment Act back in the Carter Administration…

The CRA was around for a good while before the bubble, and apparently the bubble involved lots of mortgages that would not have been the fault of the CRA. The bubble of rising house prices comes in after the Fed floods the market with “liquidity,” so it’s more likely the prime culprit.

I understand why the Left would want to conceal this fact. But why don’t we hear this from the right end of the spectrum? Are the Republicans hiding their culpability in helping to create and cultivate this sad situation?

I can’t speak for the right, being a libertarian. But it is pretty much standard in politics that pols seek to hide their culpability for what goes wrong just as they try to take credit for what goes right.
January 28, 2010, 12:37 pm
rj says:

Another post in which Ilya Somin blames the American public for being too ignorant to vote like he does.

When liberals do it, it’s elitism. When libertarians do it, it’s political philosophy.
January 28, 2010, 12:40 pm
orca says:

Zain: “Second, pretty much any president in Obama’s position would do the same thing.”
Don’t recall Bush ever blaming Clinton for Al-Qaeda

George W. Bush speech back in August of 2005:
“‘The terrorists looked at our response after the hostage crisis in Iran, the bombings of the Marine barracks in Lebanon, the first World Trade Center attack, the killing of American soldiers in Somalia, the destruction of two U.S. embassies in Africa, and the attack on the USS Cole,’ said Bush. ‘They concluded that free societies lacked the courage and character to defend themselves against a determined enemy.’”

You probably forgot that speech because he made it while New Orleans was drowning, Zain.

Another tidbit from yesterday’s WSJ/NBC poll:
“Not enough has been done to regulate Wall Street firms and the banking industry.”
Agree – 74%
Disagree – 22%
January 28, 2010, 12:41 pm
RPT says:

Zain: “Second, pretty much any president in Obama’s position would do the same thing.”
Don’t recall Bush ever blaming Clinton for Al-Qaeda or Reagan blaming Carter for the economic mess he inherited.Seems to me that at least those two had broad square shoulders as opposed to the slope shouldered present occupant of the White House.ALL responsibility just slides right off President Obama’s shoulders.Is’nt it past time he matured into a MAN.

Zain:

You need to rent the movie the campaign film “Road to 9/11″, the thesis of which is that Clinton was responsbile for Al Qaeda and 9/11.
January 28, 2010, 12:44 pm
Allan Walstad says:

The argument appears to be that R’s who ran as “free market conservatives” are not to be held accountable for anything that happened during their tenure because they are not really “FMC”. Therefore, R’s should be put back in office because this time they will act like FMC’s.

RPT, whatever “the” argument may be, my argument is that Repubs tend to posture as pro-market far more than they govern that way, and it is their own interventionism that causes some problems for which they should be held accountable. I would like to see the Repubs make substantial gains in this fall’s elections in order to reach a gridlock situation in which government expansion is limited by the fact that Repubs and Dems can’t agree on direction. The last 6 years of Clinton’s presidency were pretty good precisely for that reason, in my opinion.
January 28, 2010, 12:45 pm
markH says:

Zain: “Second, pretty much any president in Obama’s position would do the same thing.”
Don’t recall Bush ever blaming Clinton for Al-Qaeda or Reagan blaming Carter for the economic mess he inherited.Seems to me that at least those two had broad square shoulders as opposed to the slope shouldered present occupant of the White House.ALL responsibility just slides right off President Obama’s shoulders.Is’nt it past time he matured into a MAN.

Read Reagan’s first state of the union address. Those shoulders weren’t nearly as broad and square as you recall.
January 28, 2010, 12:45 pm
zuch says:

A. Zarkov: Then try this on-line history quiz.

A bit of a libertarian slant, wouldn’t you say? I put on my “Ayn Rand Rulz!” hat and got all but #33 correct. I think their answer: “tax per person equals government spending per person” is wrong: Only if you insert “average” in front of both is this true. Some of their other “correct” answers are debatable if you don’t subscribe fully to libertarian dogma….

Cheers,
January 28, 2010, 12:49 pm
Dennis says:

Pardon me if I seem to persist in folly, but let me reassert my point to see if I can get a better rebuttal:

-Like a fire, there needs to be a point of ignition and a method of acceleration. My wife and I bought our house back in ’91 under a relaxation of the mortgage requirements and we were able to put 10% down instead of the usual 20%. The CRA was the point of ignition and the sentiment spread out from there to other mortgage programs. Just before the bubble burst, I remember talking to friends who had little or no savings, who told me that they could have arranged a mortgage from a simple phone call, which is to say that since ’91, the mortgage requirements crumbled to zero.

-The path to hell and good intentions included the right/Republicans since they thought that it was best for people on the margins of society to become home owners and develop the habits of responsibility that come with it. The Left and the Dems saw discrimination against the have-nots and wanted to correct this. Over time, both were too deep to pull the fire alarm.

-The acceleration was enabled by the strange toleration of financial instruments that were so complex that no one could understand them. Bad assets were hidden and liability was spread as a means of distributing the problem to the world at large… as if this could have mitigated the problem of sub-standard loan agreements over enough time so that people in general might be folded into a responsible land owning class of citizenry.

I am sincere when I ask you to show me how I am wrong in this set of ideas.
January 28, 2010, 1:14 pm
LarryA says:

From some on the right, I expect we’ll hear a different argument — that if we just make fewer investments in our people, extend tax cuts including those for the wealthier Americans, eliminate more regulations, maintain the status quo on health care, our deficits will go away. The problem is that’s what we did for eight years. That’s what helped us into this crisis. It’s what helped lead to these deficits. We can’t do it again.

Rule of Thumb: If a bill has more than three hundred pages, it doesn’t “deregulate.”

corneille1640: Mr Somin makes some good points, but was Obama wrong about extending “tax cuts including those for the wealthiest Americans”?

Given the record so far, for Obama “wealthiest Americans”=”anyone not on welfare and not in a union.”

Owen H.: The rich getting richer while the poor get poorer does not help anyone but the rich.

But, as actually happens here, the rich get richer and the poor get richer, what does that do for you? Tour China, Haiti or Cuba sometime and see what “poor” really means.
January 28, 2010, 1:21 pm
Elliot says:

“Am I wrong to believe that our bubble was created by incremental deconstruction of mortgage eligibility requirements that began with the Community Reinvestment Act back in the Carter Administration,…”

You are correct it was a necessary condition, but it was not a sufficient condition. There were a numnber of conditions that were necesary, but not individually sufficient. Taken together as an aggregate they were both necessary and sufficient.

The game now is pretending some single condition is both necessary and sufficient. Government, Main Street, Wall Street, Fannie, Freddie, Federal Reserve, regulators, community acivists, etc all individually created necessary but not sufficient conditions. So, now they all now try to hide their responsibility by pointing at someone else.
January 28, 2010, 1:22 pm
LN says:

Just before the bubble burst, I remember talking to friends who had little or no savings, who told me that they could have arranged a mortgage from a simple phone call, which is to say that since ’91, the mortgage requirements crumbled to zero.

What exactly does this have to do with the CRA?

If your city passes a rent-control law artificially lowering market rents, will it become easier or harder for you to rent an apartment?
January 28, 2010, 1:23 pm
Vehical Driver says:

You know that when your argument is “But, the other guys do it too”, you are failing.

The fact is, the U.S. government is a behemoth that is no longer sustainable. We can’t afford the socialist entitlements, imperialist military, or pork barrel politics we have now. Nor, can it pretend to enforce the millions of regulations on the books, let alone create and enforce new regulations (ignoring, of course, the negative effects those ineffective regulations have on economic activity). We can’t afford it even with a tax increase, because the revenue from that tax increase would never be anywhere near our liabilities, even ignoring the Laffer curve or anything like that.

Our government is at the breaking point, both the Democrats and Republicans are responsible, and the only choice we have is to either start making difficult and unpopular cuts to government, or to wait until the U.S. collapses like the Soviet Union (i.e. reality makes the cuts for us).

Obama is proposing a massive expansion to government on all fronts… massive new military spending… massive new social spending… as well as a slew of regulations that will likely harm the economy even more. This *WILL* fail. It doesn’t matter if Obama wins the next election, it doesn’t matter if the Democrats control congress, and it doesn’t matter if all our problems are 100% the fault of Republicans.

Arguing whose fault it is, or what political party is worse, who said what and when, wont change the objective, irrefutable truth: Obama’s policies will accelerate the collapse of the United States.
January 28, 2010, 1:34 pm
John says:

Obama is nuts. He attacks free market principles in his first SOTU speech? This guy is erasing any doubt about being a socialist on national television. I think we’re gonna see Democrats start trying to put a lot of distance between themselves and him.
January 28, 2010, 1:37 pm
Mark Field says:

Try asking a poor person for your next job.

Try asking a rich one to pick up your trash.

Don’t recall Bush ever blaming Clinton for Al-Qaeda or Reagan blaming Carter for the economic mess he inherited.

As already noted, Reagan blamed Carter at length for the “economic mess” he inherited. Link.
January 28, 2010, 1:39 pm
ShelbyC says:

zuch: A bit of a libertarian slant, wouldn’t you say? I put on my “Ayn Rand Rulz!” hat and got all but #33 correct.

What questions would you have answered differently bare-headed?
January 28, 2010, 1:46 pm
wooga says:

wm13: If Prof. Somin’s list of what the Bush administration did wrong is different from President Obama’s, how can we have confidence in their conclusion that the Bush administration did something wrong?That is very flawed epistemology, which leads to incoherence in policy, when people at both extremes of the spectrum get together and say, “At least we both agree that the people in the middle are idiots.”

Side A says “We should build a bridge across this ravine.”
Side B says “We should NOT build a bridge across this ravine.”
Side C says “Let’s compromise, and build a bridge half way across the ravine.”

Both Side A and Side B – the opposite extremes – are logically correct in condemning Side C as idiots. In the real world context, this is the exact set up for the debate on the Iraq war and “The Stimulus”. “Big enough to create a mess, but not big enough to solve the problem” is a good way to look at both the original “light footprint” plan for the original Iraq invasion, and the “not quite big enough for Krugman” Obama stimulus plan.

How you call this “very flawed epistemology” I don’t understand. Compromise is often the worst of both worlds.
January 28, 2010, 1:49 pm
David Schwartz says:

From some on the right, I expect we’ll hear a different argument — that if we just make fewer investments in our people, extend tax cuts including those for the wealthier Americans, eliminate more regulations, maintain the status quo on health care, our deficits will go away. The problem is that’s what we did for eight years. That’s what helped us into this crisis. It’s what helped lead to these deficits. We can’t do it again.

I thought this was the most deceptive statement in the SoTU address. It’s two wars and a financial crisis that caused these deficits, and that has nothing whatsoever to do with tax cuts and health care.

And of the policy decisions of the past eight years that contributed to the financial crisis that contributed to the deficits, the core failure was bank mortgages that went bad. We all know why that happened, and it has nothing to do with tax breaks, deregulation, or health care. (It has to do with deciding home ownership is so important that it doesn’t matter much how you got it.)
January 28, 2010, 1:55 pm
Steve says:

LN won this thread at 9:50 a.m. Everyone else is just here for the after-party.
January 28, 2010, 2:15 pm
Fat Man says:

Just for the record, Bush’s tax cuts for the rich resulted in the highest income brackets paying more taxes, and a higher proportion of the total tax revenue, than before.

It is true that the highest rates were decreased, but that is not the most important part of the story.
January 28, 2010, 2:16 pm
Thucydides says:

lgm: Bush may not represent the free market principles you like, but he does represent Republican leadership. If we elect a Republican President to replace Obama, we will get policies much like Bush. Yes, in the sixties there were free market Republicans who believed in fiscal responsibility. There also were southern Dixiecrat Democrats who supported segregation. Times change. Your party preferences should change with the times.There is a good case to be made that Bush policies did lead to our recession. Most economists think that. We had a real estate boom fueled by sub-prime lending (definition: sub-prime = below what Fannie and Freddie allow) that could have been prevented had regulators enforced consumer protection laws against predatory lending. (OK, many here disagree with laws like that.)

It wasn’t “predatory lending by the banks”, but the Community Reinvestment Act (CRA) which forced banks to provide loans (under penalty of law) to patently unqualified borrowers; and the Federal Government covering Fannie Mae and Freddie Mac and implying that taxpayers would cover any losses. Once again, regulatory failure is the cause but the free market is handed the blame.
January 28, 2010, 2:29 pm
sputnik says:

R.Ailes is a brilliant man, to keep so many people misinformed and thinking they know the truth is on a par with great achievements of Pravda , Molotov and the Central North Korean News paper.

As far as the blame for the crisis:

There’s plenty of blame to go around, and it doesn’t fasten only on one party or even mainly on what Washington did or didn’t do. As The Economist magazine noted recently, the problem is one of “layered irresponsibility … with hard-working homeowners and billionaire villains each playing a role.” Here’s a partial list of those alleged to be at fault:

* The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.

* Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.

* Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.

* Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.

* The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.

* Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.

* Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.

* Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.

* The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.

* An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.

* Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.

The U.S. economy is enormously complicated. Screwing it up takes a great deal of cooperation. Claiming that a single piece of legislation was responsible for (or could have averted) the crisis is just political grandstanding. We have no advice to offer on how best to solve the financial crisis. But these sorts of partisan caricatures can only make the task more difficult.

–by Joe Miller and Brooks Jackson
http://www.factcheck.org/elections-2008/who_caused_the_economic_crisis.html
January 28, 2010, 2:46 pm
Brian K says:

David Schwartz: I thought this was the most deceptive statement in the SoTU address. It’s two wars and a financial crisis that caused these deficits, and that has nothing whatsoever to do with tax cuts and health care.

is the standard conservative argument that medicare and social security are bankrupting america? or are limbaugh, beck, mccain, palin, bush, etc. suddenly not conservatives anymore?

and it is hard to argue with a straight face that cutting revenue (ie taxes) without cutting spending, as bush did, won’t lead to deficits.
January 28, 2010, 2:46 pm
EMB says:

Aside from the wealthiest vs highest earning distinction (which, given that most of the people in question have annual income greater than the net worth of the average American is not all that outrageous), I see nothing especially inaccurate about the quoted text.

He’s not saying in this passage Bush was “pro-free-market” in general, just that Bush supported certain policies (tax cuts for high-income Americans and deregulation) that Obama believes are ineffective.

The only thing I can see that may well be inaccurate there is the “make fewer investments in our people” claim, to which No Child Left Behind probably qualifies as a counterexample.
January 28, 2010, 2:50 pm
DerHahn says:

orca says:

George W. Bush speech back in August of 2005:
“‘The terrorists looked at our response after the hostage crisis in Iran, the bombings of the Marine barracks in Lebanon, the first World Trade Center attack, the killing of American soldiers in Somalia,…

Carter was president when the hostages were taken in Iran. The Marine barracks bombing in Lebanon occured under Regan. GHWB ordered troops into Somalia.

RPT says:
You need to rent the movie the campaign film “Road to 9/11″, the thesis of which is that Clinton was responsbile for Al Qaeda and 9/11.

Did George W Bush appear in, produce, direct, or sponsor that movie?
January 28, 2010, 2:53 pm
Steve says:

GHWB ordered troops into Somalia.

But Bush was not talking about who ordered troops into Somalia. He was blaming 9/11 on Clinton’s response to the killing of our soldiers in Somalia. That was a really weak effort at spin.

And of course, you simply omitted the conclusion of the sentence, which referenced the embassy attacks and the USS Cole bombing, both of which occurred under Clinton.
January 28, 2010, 3:01 pm
Vader says:

I dunno, Zuch. I just scored 100%, and I’m hardly a pure libertarian.
January 28, 2010, 3:47 pm
zuch says:

Steve: But Bush was not talking about who ordered troops into Somalia. He was blaming 9/11 on Clinton’s response to the killing of our soldiers in Somalia.

Which was to acquiesce to Republican Congressional demands that he pull the troops out….

Cheers,
January 28, 2010, 3:48 pm
zuch says:

DerHahn: Did George W Bush appear in, produce, direct, or sponsor that movie?

Did he actually “appear in, produce, direct, or sponsor” any of the actual actions of his maladministration?

Cheers,
January 28, 2010, 4:26 pm
falafalafocus says:

DerHahn: Did George W Bush appear in, produce, direct, or sponsor that movie?

zuch: Did he actually “appear in, produce, direct, or sponsor” any of the actual actions of his maladministration?Cheers,

Translation of zuch: “no.”

Cheers,
January 28, 2010, 4:41 pm
Bleh says:

zuch: A bit of a libertarian slant, wouldn’t you say? I put on my “Ayn Rand Rulz!” hat and got all but #33 correct. I think their answer: “tax per person equals government spending per person” is wrong: Only if you insert “average” in front of both is this true. Some of their other “correct” answers are debatable if you don’t subscribe fully to libertarian dogma….Cheers,

Haha! I did the same thing (Ayn Rand hat), got the same score, and thought the same thing about the last questions. Us damned liberals all think alike.
January 28, 2010, 4:42 pm
RPT says:

zuch:
Did he actually “appear in, produce, direct, or sponsor” any of the actual actions of his maladministration?Cheers,

It was actually called “The Path To 9/11″. “The Road” was a separate book. GWB was not in the movie; that, figuratively speaking, was the point. He has always had others to do the dirty work.

The film was a precursor to the current Liz Cheney-Giuliani, et al campaign that 9/11 did not happen while GWB was president. It was produced and directed (David Cunningham of the “Family”) by partisans, widely criticized for its historical misstatements, and was the subject of an after the fact promotional film produced by Citizens United which asserted that its dvd distibution (but not live network broadcast as part of the 2006 election campaign) was blocked by the Clintons.
January 28, 2010, 4:45 pm
Bleh says:

ShelbyC: What questions would you have answered differently bare-headed?

None of the questions would have been answered differently wearing another hat. It’s the way that the questions were asked (and the choice of questions asked) and the options provided as answers that contained the Libertarian spin. Just because an answer is technically right, doesn’t mean it’s the only possible answer.
January 28, 2010, 4:59 pm
leo marvin says:

wm13: If Prof. Somin’s list of what the Bush administration did wrong is different from President Obama’s, how can we have confidence in their conclusion that the Bush administration did something wrong?That is very flawed epistemology, which leads to incoherence in policy, when people at both extremes of the spectrum get together and say, “At least we both agree that the people in the middle are idiots.”

Like opposition to the health care bill.
January 28, 2010, 5:04 pm
zuch says:

Bleh: Just because an answer is technically right, doesn’t mean it’s the only possible answer.

I did appreciate the question where the “correct answer” to beating off a recession was for the gummint to increase spending….

Cheers,
January 28, 2010, 5:18 pm
Michael Ejercito says:

Cameron: People don’t know about Herbert Hoover’s Federal Farm Board and the half billion dollars that cost. They don’t know about the Reconstruction Finance Corporation, which spent over three times as much. They’ve never read Herbert Hoover’s attacks on “traitorous hoarding” and “destructive competition” and in support of the inheritance tax, “one of the most economically and socially desirable—or even necessary of all taxes.” Hoover’s taxes on gasoline, tires, cars, radios, record players, electricity, malt, toiletries, furs, jewels, movie tickets, yachts, cameras, bank checks, bond transfers and long distance phone calls, all news to them. They heard a lot about the Glass-Steagall Act last year, but they don’t know who was president then. And if they remember the Smoot-Hawley tariff, they still say with a straight face that Herbert Hoover was laissez faire.

What is it with people not knowing these things?
January 28, 2010, 5:20 pm
Bleh says:

zuch: I did appreciate the question where the “correct answer” to beating off a recession was for the gummint to increase spending….Cheers,

That was a favorite of mine too.

I suppose I should have mentioned that one or two of the questions were so subjective as to not necessarily have a right answer. That’s mainly where the Ayn Rand hat came in handy.
January 28, 2010, 5:21 pm
Michael Ejercito says:

Yankev: There’s a good reason why private enterprise has not built a 40 mph railroad to link Cincinnati (did I spell that right?), Columbus and Cleveland. But now the federal government will pay for one. And the train will get you from one terminal to other terminal in just over 1.5 times the time it would take to drive directly from your home to your destination. Then you still have to get to your destination from the terminal. When you return, you have to pay for parking your car and then get home from the home terminal. Any bets whether a round trip ticket for one (forget about parking and local transportation) will cost less than the tank of gas it would take to drive 4 or 5 people there? (I know, I am overlooking the cost of buying and maintaining the car, but those costs are relatively fixed.) And think of the added convenience of having no car to use at your destination city!

What is so great about public transportation (save for getting around places like New York City, where parking lot and garage owners charge usurers rates)?

lgm: e had a real estate boom fueled by sub-prime lending (definition: sub-prime = below what Fannie and Freddie allow) that could have been prevented had regulators enforced consumer protection laws against predatory lending. (OK, many here disagree with laws like that.)

How would the collapse of the real estate market affect other sectors, like airlines, fast food, and media?

zuch: Which was to acquiesce to Republican Congressional demands that he pull the troops out….
Cheers,

So then Clinton was powerless against the minority party in Congress?

zuch: Did he actually “appear in, produce, direct, or sponsor” any of the actual actions of his maladministration?
Cheers,

The movie was not part of his so-called maladministration.

RPT: GWB was not in the movie; that, figuratively speaking, was the point. He has always had others to do the dirty work.

Just blame independent actions on President Bush.
January 28, 2010, 5:37 pm
eyesay says:

LarryA wrote,

“Rule of Thumb: If a bill has more than three hundred pages, it doesn’t “deregulate.”

[Citation needed]

Given the record so far, for Obama “wealthiest Americans”=”anyone not on welfare and not in a union.”

Ahem, given what Obama said repeatedly before and after winning the 2008 election, for Obama “wealthiest Americans” = those with annual incomes above $250,000.00.
January 28, 2010, 5:47 pm
AlanDownunder says:

Fair point Ilya. Libertarians want to get rid of socialist hen houses while Bush-style republicans just want to put foxes in charge of them.
January 28, 2010, 5:52 pm
RPT says:

AlanDownunder: Fair point Ilya. Libertarians want to get rid of socialist hen houses while Bush-style republicans just want to put foxes in charge of them.

This comment wins the “fewest words + most substance” award.
January 28, 2010, 6:13 pm
Michael Ejercito says:

AlanDownunder: Fair point Ilya. Libertarians want to get rid of socialist hen houses while Bush-style republicans just want to put foxes in charge of them.

For what do we need the hens?
January 28, 2010, 6:20 pm
RPT says:

Michael Ejercito:
For what do we need the hens?

Don’t they lay the golden eggs, or is that the geese?
January 28, 2010, 6:34 pm
Deezrightwingnutz says:

As long as people are highlighting important distinctions, like those between wealth and income, I’d like to make another. Inputs are not outputs. We want as little input (jobs/capital) as possible and as much output (stuff/experiences/quality, etc.) as possible.

People always talk about how we need to create jobs, because low unemployment often coincides with high economic growth. But really, we want as FEW jobs as possible. If this seems counter-intuitive, just think about your household economy. Are you happy when you have a list of stuff to do a mile long on a Saturday afternoon? No, you (or your s.o.) just want the output (the clean garage, the manicured lawn, etc.).

The only plausible argument I can think of for more jobs increasing wealth is if idle hands are truly the devils workshop. Personally, I’d love for humanity to discover the hidden widget fast-growing widget forest, and for all human desires to be satisfied, and for unemployment to climb to 100%.
January 28, 2010, 7:40 pm
Daily Right 1/28/10: SOTU Edition « The Quantum Conservative says:

[...] *Obama Perpetuates the Myth of Bush as Free-Marketeer, by Ilya Somin. [...]
January 28, 2010, 7:54 pm
David Schwartz says:

Brian K:
is the standard conservative argument that medicare and social security are bankrupting america? or are limbaugh, beck, mccain, palin, bush, etc. suddenly not conservatives anymore?

Long term, sure. But that problem didn’t suddenly blow up in the past 8 years.

and it is hard to argue with a straight face that cutting revenue (ie taxes) without cutting spending, as bush did, won’t lead to deficits.

Cutting tax *rates* doesn’t necessarily cut tax *revenue* (and rarely does so significantly). Unless, of course, the economy blows up, in which case the revenues drop no matter what you do the rates.
January 28, 2010, 8:04 pm
eyesay says:

Cutting tax *rates* doesn’t necessarily cut tax *revenue* (and rarely does so significantly).

That’s a Laff.
January 28, 2010, 11:22 pm
Sarcastro says:

[Interesting theory, Deezrightwingnutz. But I don't think it's in keeping with some of the less rational aspects of human nature.

Jobs make people feel part of society. Anecdotally the unemployed, even the idle rich, don't seem too happy. This includes myself when in the time between the bar exam and starting my associateship.

Finally, people will always accumulate, even when they have more than enough. The input is in some way independent of the value of the output.]
January 28, 2010, 11:39 pm
Connecticut Lawyer says:

In hindsight, it’s obvious that the asset bubble was caused by two factors: very low interest rates, which drove financial intermediaries to look for higher earning but safe assets, and a relaxation of down payment requirements for mortgages. If Mr. Obama wants to implement smart regulations that will prevent future similar asset bubbles, he’ll seek rules requiring 15% down payments on all home mortgages (20% in non-recourse states like California). From what I’ve read, the default rate on mortgages correlates inversely with the size of the down payment; this effect far outweighs whether the loan was prime or subprime, whether it was properly documented or a “liar” loan, whether it was a “diversity” loan or a regular loan. If he doesn’t ask for this kind of regulation, then he’s not serious and just playing politics.
January 29, 2010, 12:00 am
Ricardo says:

David Schwartz: Cutting tax *rates* doesn’t necessarily cut tax *revenue* (and rarely does so significantly).

Which is not relevant. If the government does absolutely nothing tax revenue will naturally increase as the economy grows. It stands to reason that a small tax cut will probably not cut tax revenue in dollar terms. You’re attacking a straw man. What matters is whether revenue would have been higher had the government not enacted the tax cut.
January 29, 2010, 12:57 am
LarryA says:

eyesay: Ahem, given what Obama said repeatedly before and after winning the 2008 election, for Obama “wealthiest Americans” = those with annual incomes above $250,000.00.

Obama said a lot of things. His record says different.
January 29, 2010, 2:11 am
uberVU - social comments says:

Social comments and analytics for this post…

This post was mentioned on Twitter by pinkboi: http://tinyurl.com/y8cdyak Bush Was a Free Marketer?…
January 29, 2010, 2:43 am
CrisisMaven says:

Well, both didn’t understand the concept of free markets. Let’s see what the administration does with this beast: Of Mortgage Brokers, ARMs, Attrition and Marathons
January 29, 2010, 3:26 am
Martin L. Shoemaker says:

Zarkov,

Thank you for that test. It’s tough, but fair. Usually I expect a test like this to be ludicrously easy, or else so esoteric and advanced that only a specialist could pass it. This had decent questions one should probably have seen in high school, but enough of them across a wide enough range of history and economics and politics to raise the challenge level considerably.

I got 94% (31 out of 33). I would have got 100%, but:

1. I misread question 33. As I read it, there was no right answer.

2. They should have asked question 30, “Which of the following fiscal policy combinations would a KEYNESIAN government most likely follow to stimulate economic activity when the economy is in a severe recession?” I answered with the policy I thought more likely to work, not what policy the government would be more likely to follow.

That really is an excellent test. Thanks!
January 29, 2010, 4:14 am
Michael Ejercito says:

Sarcastro: Jobs make people feel part of society. Anecdotally the unemployed, even the idle rich, don’t seem too happy. This includes myself when in the time between the bar exam and starting my associateship.

So if we hired people to sweep streets or dig ditches…
January 29, 2010, 10:02 am
Sarcastro says:

[In my opinion (and I repeat, that this is ridiculously anecdotal), make work is marginally better than no work, Michael Ejercito, but actually fulfilling work is the best of all, if you can get it.]
January 29, 2010, 10:12 am
Sarcastro says:

[And yes, some government jobs can be fulfilling. Or so I've been told]
January 29, 2010, 10:15 am
CJColucci says:

It is true that in caling out Bush as an example of the failure of free-marketeers, Obama was guilty of what Churchill once called a “terminological inexactitude.” But it wasn’t unfair.
It is true that neither Bush, nor any Republican or actually-existing conservative of consequence, is a small-government, free-marketeer. Both parties are willing, indeed eager, to use the power of government to hand out goodies to their respective constituencies and rig the rules to prevent their special friends from suffering too much in the economic struggle. The only real difference between the parties actually contending for power today is which rules get rigged and why, and who gets the goodies. I, for one, am perfectly happy to see a straightforward bare-knuckle fight contested on those explicit grounds, with the same rules for everyone.
But that’s not how we do things. One side has gotten away with flying under the false colors of free markets and small, unintrusive government, gaining a significant advantage among the many voters rhetorically, if not operationally, attached to such notions, and painting their opponents as radicals, socialists, big-government busybodies, and the like. It’s just fair game not only to shoot at the soldiers marching under the banner, but to take pot-shots at the flag itself.
January 29, 2010, 11:28 am
Tweets that mention The Volokh Conspiracy » Blog Archive » Obama Perpetuates the Myth of Bush as Free-Marketeer -- Topsy.com says:

[...] This post was mentioned on Twitter by Becky Chandler, Seth Goldin, jbzepol, Jared Kitzrow, pinkboi and others. pinkboi said: http://tinyurl.com/y8cdyak Bush Was a Free Marketer? [...]
January 29, 2010, 6:17 pm
PQuincy says:

“There is a huge difference between someone who is wealthy and someone who earns a high taxable income.”

Call me naive, but I suspect the intersection of these two sets is remarkably high! Yankev things that my surmise means I’m suspending my “critical thinking skills,” but I’m happy to let the empirical data speak on that.
January 29, 2010, 11:16 pm
PQuincy says:

“Please explain how the wealthy investing money makes the poor poorer. After all, do not investments usually involve sinking money into businesses, which hire people and create value (otherwise, how would they profit)?”

You’re assuming an economy without rents. Radical (in the sense of “to the root”) free-marketeers like to do this, but anyone with an interest in political economy (which includes all sorts beyond ‘socialists’ and ‘Marxists’) recognizes that a substantial part of all economic activity for the last 3-4000 years has revolved around rents, not investment. Nowadays, the best rents are not on land, but on regulatory capture or legislative capture. And rents do not lead to the hiring of people and the creation of value, as the last 10 years (and more) demonstrate with sufficient clarity.
January 29, 2010, 11:21 pm
PQuincy says:

Zain says: “Don’t recall Bush ever blaming Clinton for Al-Qaeda or Reagan blaming Carter for the economic mess he inherited.”

Apparently you weren’t listening!
January 29, 2010, 11:24 pm
PQuincy says:

“It’s two wars and a financial crisis that caused these deficits, and that has nothing whatsoever to do with tax cuts and health care.”

Except that tax cuts reduce revenue. No matter what else, they reduce revenue. And if revenue is reduced, then either expenditures must drop or there will be a deficit. (I think we can safely dismiss as risible the assertion that the US, with considerably lower marginal tax rates than any other major developed economy in the world, is so far up the Laffer curve that tax cuts increase revenue).

And except that future health care costs (aka Medicare) are the most rapidly growing proportion of the federal budget. (Not, notably, retirement income, aka Social Security, that is a much much smaller proportion of future unfunded liabilities).

So, yes, if you take reality off the table, then it was two wars and fiscal crisis that created 7 years of growing deficits before the fiscal crisis happened.
January 29, 2010, 11:32 pm
Harry Eagar says:

Well, he said he wanted to free the markets from onerous government interference, and, eg, turn over to them everybody’s savings; after which we would all live on the Big Rock Candy Mountain and never have to work all day.

He didn’t do that for every single market, but he pretty much accomplished it for the one that turned out to count.

And the Big Rock Candy Mountain fell on people’s heads. They would be right to be unforgiving about that.

Alan Greenspan wrote a 700-page book explaining how markets self-regulate, so you don’t have to have public oversight. Each investor, he said, would practice counterparty surveillance, and so everything would be just right.

It is amusing to watch libertarians rewrite history, but I was there, and I remember different.
January 30, 2010, 7:36 am
Michael Ejercito says:

Harry Eagar: Well, he said he wanted to free the markets from onerous government interference, and, eg, turn over to them everybody’s savings; after which we would all live on the Big Rock Candy Mountain and never have to work all day.He didn’t do that for every single market, but he pretty much accomplished it for the one that turned out to count.And the Big Rock Candy Mountain fell on people’s heads.

Did anyone every claim that the free market was supposed to guarantee profits?

Should profits for businesses be guaranteed? And why should we care if industries collapse? I mean, did not the carriage industry collapse? Did not the typewriter industry collapse? Why is it different if the financial industry collapses? Is the state supposed to prevent the collapse of any industry?
January 30, 2010, 12:54 pm
Harry Eagar says:

You probably don’t need any more carriages, and perhaps no more typewriters. But you might want a financial system.

I’m sure you want airlines, and since deregulation (under Carter, deregulation is an equal opportunity stupidity), the airline business has collapsed.

Anyhow, Bush made a two-prong suggestion: leave the financial markets to their own decisions, and suspend government-managed pensions and turn all the money over to the financial markets. Now do you still think the collapse of the financial sector doesn’t matter?
January 30, 2010, 8:00 pm
Michael Ejercito says:

Harry Eagar: I’m sure you want airlines, and since deregulation (under Carter, deregulation is an equal opportunity stupidity), the airline business has collapsed.

If the airline industry collapses because people who use the service are not willing to pay enough to cover the costs, then let it collapse. There are other methods of transportation.

Of course, since airports are still operating, the airline business did not collapse.
January 30, 2010, 8:57 pm

Obama Perpetuates the Myth of Bush as Free-Marketeer

104 Comments

Nick says:

EH says:

Cameron says:

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wm13 says:

A. Zarkov says:

ruuffles says:

Allan Walstad says:

Yankev says:

corneille1640 says:

ShelbyC says:

Yankev says:

Owen H. says:

LN says:

Yankev says:

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LN says:

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Yankev says:

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LN says:

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Allan Walstad says:

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