- The Washington Times - Saturday, June 2, 2007

The juxtaposition of the growth of the U.S. economy and the increase in its national debt has afflicted the Bush administration since it entered office following a substantial decline in the national debt in 2000 and before the onset of an imminent recession.

Recent developments for both growth and debt, as well as their respective outlooks, should generate serious concerns. On the growth front, the Bush economy recently passed an unpleasant milestone. On the debt front, an even more inauspicious moment beckons in September.

On Thursday, the Commerce Department downwardly revised economic growth during the first quarter from 1.3 percent to 0.6 percent. As a result, the average compounded annual growth rate during the first six years and three months of the Bush administration fell below 2.5 percent. With the economy having grown by less than 2 percent during the past year and by a mere 1.5 percent since September, it is clear that the relatively disappointing average growth rate of 2.5 percent exceeds more recent activity.

How relatively disappointing is 2.5 percent? During the last five years of the Clinton administration, the average growth rate of the economy exceeded 4 percent. To understand the dramatic deceleration in economic growth between the last five years of the Clinton presidency and the first 6.25 years of the Bush administration, consider this analogy: After driving five hours and averaging 65 miles per hour, a motorist must slow his speed to an average of 40 miles per hour for the next 6.25 hours. In proportional terms, moreover, the U.S. economy actually expanded more during the last four years (1997-2000) of the Clinton administration (16.7 percent) than it expanded during the first 6.25 years of the Bush administration (16.6 percent).

To be sure, the Bush administration inherited a recession, which began in March 2001 and ended in November 2001. But that eight-month recession was so mild that economic growth during all of 2001 was still positive. During the Bush expansion, which began after the recession ended in 2001’s fourth quarter, economic growth has averaged only 2.9 percent. The White House, however, likes to date the expansion’s beginning to the second quarter of 2003, when the president signed that year’s tax cut. Over the last four years ending in March (the cherry-picked nirvana period of the Bush expansion), the economy has expanded at an average annual rate of 3.3 percent. Throughout the eight years of the Clinton administration, average annual economic growth exceeded 3.6 percent.

The liberal-oriented Center on Budget and Policy Priorities (CBPP) periodically issues a data-laden report that compares the current economic expansion with previous post-World War II recoveries. The CBPP’s most recent update, issued in January, compares 10 postwar recoveries, including the current one, through 19 quarters following a recession’s trough. This 19-quarter period accounts for the Bush expansion through the third quarter of last year; during that time growth averaged 3.1 percent per year. Thus, the CBPP’s 19-quarter period excludes the two most recent quarters, when annualized growth has decelerated to 1.5 percent. The CBPP review found that economic growth had averaged 4.2 percent per year during the 19 quarters following the nine postwar recessions that preceded the 2001 downturn. (Worth noting is that for several of these earlier expansions, the economy had reverted to recession within the 19-quarter period, dragging down the average growth rate.)

The unmistakable conclusion from CBPP’s extensive data-crunching is that the Bush expansion, including the White House’s cherry-picked version, has not only failed to measure up against the Clinton years. By a statistically significant amount, the Bush expansion has fallen well short of the average of all other postwar expansions.

Considering the explosion in the U.S. gross federal debt (popularly known as the national debt) during the Bush era, the period’s relatively lackluster average annual growth rate (below 2.5 percent) suggests that there has been very little bang for the buck. Debt has soared, but the economy has clearly not followed the same trajectory.

When Mr. Clinton entered office, he inherited a $292 billion budget deficit from fiscal 1992, which was the principal factor contributing to the $400 billion rise in the national debt that budget year. In January 1993, the national debt was $4.2 trillion. Under the Clinton regime, the budget balance improved eight years in a row, culminating in a budget surplus of $236 billion in fiscal 2000. The national debt at the end of calendar 2000 was 5.7 trillion, having actually fallen by $114 billion during 2000.

By the end of March 2007, the national debt had exceeded $8.8 trillion, having increased by $3.1 trillion (55 percent) since Mr. Bush entered office. The administration projects the debt will be more than $9 trillion when fiscal 2007 ends on Sept. 30. After inheriting a sizable budget surplus that contributed to a decline of more than $100 billion in the national debt during calendar 2000, Mr. Bush has presided over an economy that has raised the national debt by an average of $500 billion per year since he entered office.

After blowing through the $9 trillion debt ceiling by September, America’s national debt will soar by at least $2.5 trillion more (or $500 billion per year) over the next five years, according to Mr. Bush’s 2008 budget. We say “at least” because the budget’s disingenuous treatment of the alternative minimum tax in the 2008-12 budget blueprint results in an almost certain understatement of more than $400 billion in additional debt over that period.

Bottom line for the Bush administration: Much less growth, much more debt.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide