I do not blame President Bush or his party for the Great Recession that occurred on his watch. Yes, there were things he should have done that might have prevented the situation from getting as bad as it did, and there were things he did do that made the situation somewhat worse than it needed to be. When crunch time came in the latter half of 2008, when things really started to fall apart in dramatic fashion, he and his Cabinet responded competently if not perfectly, even if they had to repeatedly strongarm fellow Republicans in Congress to do the smart and necessary thing.
But ladies and gentlemen, we were headed for a fall regardless of what government did, and the fault was our own, as a people and as a culture. We as Americans started believing our own press releases, as the saying goes, and we stopped doing the things that got us where we were. I blame Bush for a lot of things — I still believe he will go down as one of the worst presidents in our history — but I cannot honestly blame him for that.
What inspires that bit of a rant? Take a look at this graph, borrowed from Barry Ritholz’ Big Picture blog.
Ritholz uses the chart to suggest that former Federal Reserve Board Chairman Alan Greenspan got a little too free and easy with the credit, allowing the real-estate bubble and credit crisis to develop. There’s some truth to that — when the financial history of this mess is written, it will not be kind to “The Maestro.”
But really, look at that chart and ask yourself whether that could be sustained. And again, while Greenspan and the Fed could have moderated some of that spending spree, this was bigger than one man or one agency. (Also note how large that gap between consumer spending and cash income remains even now.)
It’s also interesting to compare the above chart to a similar illustration below charting the rise of our national debt over the same time frame. Notice any similarities?
I’d suggest that the two phenomenon — one consumer spending, one federal debt — share a common source, a belief that as Americans the rules of financial gravity didn’t apply to us. Yeah, that’s what we were being told by many of our leaders, but we as a people chose to believe them because it sure sounded good, didn’t it?
I’d further argue that anybody who thinks we’re going back to our recent heydays is deluding himself, because as these charts demonstrate, those heydays were as false as Bernie Madoff’s financial statements.