Taking ‘stock’ of Bush’s record

January 2, 2006

In February 2004, Labor Secretary Elaine Chao was on CNN defending the Bush administration’s economic policies. When Judy Woodruff noted the president’s poor record on job creation, Chao suggested there’s only one number that matters.

Woodruff: I want to cite the one economic analyst with Credit Suisse First Boston. He said, these are his words, quote, “very disappointing; we’re not getting the jobs to replace the stimulus in the economy which will fade once the first quarter ends.” Another economist said, “It’s the weakest job-creation rate relative to economic growth on record.”

Chao: Well, the stock market is, after all, the final arbiter.

In retrospect, Chao may have wanted to pick a different standard of measurement, because if the stock market is “the final arbiter,” Bush has some explaining to do. The Dow ended 2005 lower than when it started 12 months ago.

In fact, while it was the 0.6% decline for the year that generated headlines, most seem to have overlooked the fact that on the day Bush was sworn into office in January 2001, the Dow Jones stood at 10,732.46. As of now, it’s at 10,717.50.

In other words, after five years of Bush’s presidency and a series of budget-busting tax cuts, the stock market has a cumulative gain of negative 15 points.

Under Reagan, the Dow went up 148%. Under Clinton, it grew 187%. After five years, Bush isn’t quite breaking even.

Sure, Republican administrations have consistently under-performed Democratic administrations on stock market growth, but who would have guessed that nearly five years after Bush took office, the Dow wouldn’t have grown at all?

But Bush inherited a recession, don’t ya know? So we count from the lowest point of the stock market. Or at least that’s what they will say.

All I know is that my portfolio includes a lot of international assets.

  • The only thing the Bush Administration has done well is line the pockets of the ultra rich with loads of cash. His infamous words “You are my base.” is his legacy in that his only purpose is to shower the “Have Mores” with more money at great cost to the country. Nicely done.

  • Remember, too, that the stock market bubble
    burst on Clinton’s watch, during the first half
    of the year 2000. The Dow had surged above
    11,500, and the NASDAQ above 5000 before
    that happened. We’re not measuring Bush
    from those highs.

    It’s surprising how anemic stock market
    performance has been over the Bush years.
    Presidents don’t have a great effect on the
    business cycle, but it is disappointing that
    when Bush spends so much time touting
    his economic achievements that the media
    doesn’t follow up with the facts. A good example
    is in job creation – you seldom see mentioned
    that it takes 150,000 new jobs a month just
    to keep up with the growth in the labor market.
    And what kinds of jobs are being created?

    You don’t see a lot of emphasis on spiraling
    wealth of the rich, and stagnant incomes of
    the middle class, either. And it certainly isn’t
    cited as a major problem in America, which
    it obviously is.

    Why does everyone suck up to this president?
    It baffles me.

  • Don’t forget Nasdaq:

    01/19/2001 – close = 2,770.38
    12/30/2005 – close = 2,209.03

    Yep, that’s 561.35 points down under W’s reign or -20.26% if you prefer.

    W is bad for science and technology and not just in the classroom.

  • “It’s the weakest job-creation rate relative to economic growth on record.”
    Under Reagan, the Dow went up 148%. Under Clinton, it grew 187%. After five years, Bush isn’t quite breaking even.

    I am also amazed at the growth during the Reagan and Clinton Admin. It is a shame that Bush didn’t learn from them. . .how they had that growth during their 9-11 terrorist attacks. Will wonders ever cease!
    L B

  • The hollowing-out of the US economy is one of the hallmarks of the Bush administration: loss of industry, stagnant wages, dis-investment in infrastructure (a “bridge to nowhere” in Alaska is not real infrastructure), growth in the federal deficit, continued addiction to fossil fuels (and global and ocean warming are now real – witness the hurricane damage in Florida and Louisiana – and forget this 20 year cycle nonsense) instead of development of clean alternatives…

    If you live on the coasts and have access to capital and sophisticated financial instruments (and your house has appreciated in value) you probably think you’re doing great…and that’s why the Beltway punditocracy applauds the Bush economy (and, of course, the DC area has low unemployment as goverment has grown during Bush’s War on Terror)…

    Locally tho, and away from the coasts it’s a different story…why should the Dow (and, after all, it’s an INDUSTRIAL average) make any progress???

  • I don’t have a problem with the stock market holding steady. The rest of the economy needs time to catch up. According to http://stockmarkettrivia.com/ :

    The DJIA first closed over 100 in 1906. It passed 1,000 in 1972. To grow 9x in 66 years requires a 3.55% annual growth.

    The DJIA closed over 10,000 in 1999. What previously took 66 years, this time took 27 years, giving 8.9% annual growth. Well, OK, it was during the tech bubble, which was about to pop.

    I know it isn’t a constant growth, and this “analysis” is totally bogus, but here’s my point: Much of the growth during the 90’s was a gamble, based on a “wow!” factor more than reality. After the bubble burst, people realized the stock prices did not reflect real value. The true economy that people live is catching up to the stock market.

  • I’m a bit behind with this comment, and I plead ignorance in nearly all matters of economics, but:

    Why is the Secretary of Labor claiming that the stock market is the final arbiter of success? Seems to me her job title has the word LABOR in it.

    Is there any level of job losses that would cause her to change her view on this?

  • Lancia,

    Please. You’re right, Reagan and Clinton didn’t have to suffer a 9/11 style attack.

    But Reagan did have to preside over a REAL recession coming into office, not to mention the largest stock market collapse since 1929. Or weren’t you alive in 1987? By the way, it only took two years for the market to get back to where it was before the crash. http://djindexes.com/mdsidx/index.cfm?event=showavgDecades&decade=1980

    Clinton on the other hand, only had to contend with the 1993 WTC bombing and the 1995 bombing of the Murrah Federal Building in Oklamhoma City.

    How do you explain it?

  • Dear Gridlock,
    You started out ok, but you lost me when you asked if I was alive in 1987. . .was that sarcastic or just ignorant.
    At least I wasn’t born yesterday!
    Maybe if Clinton did something about the first WTC attack we might not have had to deal with what we have now.
    And no I don’t belive that Iraq and Sadam were responsible for 9-11, but would have bet money on them to be in line for the next attack on USA.
    Happy New Year

  • Lancia,

    Sorry. 1987 was a little sarcastic.

    About the first WTC attack. I think the Clinton admin and the FBI did do something. They arrested the mullah responsible for the attack and prosecuted him, where he still sits in jail to this day.

    Maybe if after 9/11 Bush would have focused on Afghanistan, Bin Laden and our border security you wouldn’t have to be defending his economic policy, which suffers due to the deficits mad possible by this war and his tax cuts.

    I personally would have put money on Iran to attack us before Iraq, but that’s just a difference in opinion…

    In the meantime, do you feel safer now?? Or, like Bush, do you think it’s still possible for us to be hit again?

    Terrorism is less of a threat to this country than foreign countries with armies. And last I looked, only a few had the ability to launch direct attacks against us. China is a bigger threat than Iraq was and North Korea is a bigger threat than Al-Qaeda is. But let’s all live in fear and convert the country into a police state because someone might walk into a shopping mall and blow themselves up. There will always be threats to America, but as Americans we shouldn’t give up our freedoms, liberties and laws for ‘safety’.

  • Gridlock,
    Thank you for your apology.

    You have made very good points and I guess if I didn’t lose family in the WTC, (running into the building not out), or the mother of my son’s friend who happened to be working at the Pentagon, I just might feel different. . .but I don’t because it touched me personally.
    The odds of knowing two people who died during that terrorist attack are higher then I would have ever thought. Terrorism IS a reality to me not something that “might” just happen. . . it did.

    Yes I do feel safer but will never feel safe. I guess from your answer you don’t agree with Bush that we can be attacked again!?! If Bush is wrong about being attacked again. . .I could live fine with being wrong.

    Yes Clinton put a mullah in prison. . . but why didn’t he destroy bin Laden when he could have. . . because he lacked the intestinal fortitude and what would it have done to his poll numbers. . .he dropped the ball!
    What about the Cole? What about the Khobar Towers? What about the embassies in Nairobi, Tanzania, Kenya and Dar es Salaam? What about the butcher job in did with the CIA? He did a lot of talking, and not much more.

    I have voted in every election since 1974. I am an independent, and voted both Democrat and Republican and disagreed with every administration on something. And SURPRISE, I also agreed with policies from a POTUS I didn’t even vote for. That is more then I can say about many in this country now who blame Bush for EVERYTHING. I am not happy with all Bush has done, (heck, I love my husband but we do disagree), our borders are swinging doors, and yes the economy, the tax cuts etc., but it is easy to dismiss the devastation that 9-11 caused the economy.

    Today I would put my money on Iran also. . . long before China or North Korea, and your point is valid, those countries do have the armies, but it is much easier for a country or foreign group (Taliban) to support a terrorist faction to come and do the job.

    As an American. . .”some” changes in the laws for the safety of my country protects my freedom & liberty. As a woman, I would never have been able to vote without the “changing” of some ‘laws”, not “all” laws! Do you think that our fore-“framers” (can’t say fore-fathers anymore), were happy about the abolition of slavery at the time. What. . .against the law to own people. . .imagine that! Well if someone here is communicating with a terrorist, I say tap away!

    I am in my late 40’s with my Masters in Nursing and 24 years of ER experience. I am well educated and I’m not a lemming. . .but I would vote for the candidate of ANY party with the strongest commitment to the war on terrorism.

    Lancia

  • Balderdash. The incoming president has 0% ownership for the economy on inauguration. He doesn’t have 100% the day after. Executive orders have extremely limited effects. Legislation, especially regarding tax policy, take months to pass and most don’t go into effect for months after that. Figure an 18-24 month delay between Nov election and the date of more than 70% responsibility for the economy. (As much as the president alone can be credited with blame or credit anyway). Which is why we always blame and give credit to the wrong people. Just because people’s impression and campaign rhetoric start counting at Nov election or January inauguration doesn’t mean that serious analysts have to. The Carter economy is 1978-1982, Reagan is 1982-1990, Bush 41 is 1990-1994, Clinton is 1994-2002, and Bush is 2002-2006 (2010). Who’s up and who’s down looks quite different once that adjustment has been made.

  • Lancia,

    Thanks for such a well thought out and honest post. I am sorry for your losses during the 9/11 attacks. It was a truly horrific event and to this day I feel horrible for everyone who lost a loved one. And while I think 9/11 did cause some harm to the economy, I believe more harm was caused by the fear that followed than by the attack itself.

    And I agree that changes in law can be beneficial…I did not mean to imply that we should never change the law. And I do not have any problem with the government using wiretaps to intercept communications between terrorists. However, I do take issue with Bush’s sidestepping of existing law here in this country. I think it is pretty obvious that Bush, Cheney and others in the admin are stretching the powers of the presidency and using the war on terrorism as an excuse.

    I too, feel safer but not safe, but not because we have “taken the war to the enemy”. I do feel safer because we have increased the security measures in our airports. And while its easy to look back and say that Clinton should have taken out Bin laden when he had the chance, or that Bush should have paid more attention to his daily briefings regarding Bin laden, I believe that even had OBL been taken out, some crazy Islamic/Arabic fundametalists elsewhere would have carried out a terrorist attack on this country in some way, shape or form. If Bush really wanted to wage war on terror, he would have kept our troops out of Iraq and focused on fighting this war they way it should have been fought…covertly and aimed at Al Qaeda and other fundamentalist terror groups.

    While I believe the USA needs to be strong on terrorism, I think there are different ways for us to go about it. Terrorist acts are a symptom and not the disease. We need to help moderate muslims to promote a more peaceful version of Islam, we need to help middle Eastern countries expand opportunities for their own people. Unfortunately, there will always be fundamentalists out there who will promote the destruction of America, but we as Americans should not let them destroy our values and way of life from within, in an attempt to keep us ‘safe’. And above all we should not be drawn into a ‘holy war’ that will pit Christians vs. Muslims in the all out destruction of one over the other.

  • Assistant Village Idiot–

    I agree that the President, alone, has very little (or perhaps no) effect on stock market returns or the economy. However, it was Elaine Chao that insinuated that the “stock market is the final arbiter”, even though the stock market does not measure labor force participation.

    As for your contention that the “Carter economy is 1978-1982, etc. etc.” and that it would somehow make a difference in the “who’s up or who’s down category”, it doesn’t appear to do so except in Carter’s case, who would go from slightly down to slightly up and Bush Jr, who would go from slightly down to slightly up. Every other president between Carter and W would have been up using either time frame suggested.

    I personally believe that the stock market is more affected by interest rates and interest rate expectations first and foremost, followed by fiscal policy and tax policy expectations.

  • Let me correct that somewhat. With a one year delay, which I feel is justified, Carter is down considerably. Two years gives him a bit more, especially if you are measuring from the market which tends to be a leading rather than lagging indicator. Clinton is up over his time, but much less so, and W moves from flat to considerably up. The Dow went down as far as 7500 early inhis first term. If we extend to two years, W still rises, but not as much.

    My basic point is that where you draw the cutoff line for any measure– market, inflation, unemployment, growth, deficit — is not at inauguration day. Within that context, I am not trying to claim that every Rupublican administration gets an A+ and Democrats a D, because the numbers don’t support that. Remotely.

  • Asst. Village Idiot –

    I am glad you were able to manipulate the data to get the outcome you desired. As an economics major, I heard more than one of my Econometrics profs state that, “If you torture the data long enough, it will tell you anything.”

    As you stated, the market is a leading indicator, not a lagging one. A leading indicator of economic activity, not a lagging indicator of presidential policies. In fact, if you look at the research, the market does considerably better during Democratic presidencies than during Republican ones.
    http://www.personal.anderson.ucla.edu/pedro.santa-clara/Politics.pdf

    However, there is no definitive conclusion as to why. My guess is that it is purely coincidental and has more to do with business cycles than anything else.

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