Bush and Trump were equally to blame - InvestingChannel

Bush and Trump were equally to blame

Bush was president when we plunged into the Great Recession, and Trump presided over the recent slump. Should they be blamed? I’m not sure, although I suspect that in both cases the president played only a very modest role in causing the recession.

On the other hand, I believe that voters were much more likely to blame Bush than Trump, and that’s one reason why the GOP lost so badly in 2008.

You might argue that polls show Trump losing just as badly as McCain, but those same polls show that Trump gets fairly high marks for the economy. Voters blame him for other things—mostly the lackadaisical response to Covid-19.

Let’s start with a few obvious points. Both recessions were global, and both were considerably worse in Europe. That doesn’t exactly point to a scenario where the US president is to blame. I suppose that Europe’s recessions could be the ripple effect of a US instigated shock, but ripples are almost always smaller than the original shock, not bigger.

The most likely explanation for the recent recession is that almost all countries were hit by the global Covid shock. You can say Trump didn’t do his part, didn’t encourage testing, masks, social distancing, etc., and I’d agree. But there’s not much evidence that a better president would have prevented a severe recession in 2020. I do blame Trump for not doing his part; I just don’t believe it would have been decisive.

The most likely explanation of the Great Recession is that a real estate slump lowered the natural rate of interest, and central banks such as the Fed and ECB did not lower the policy rate fast enough, effectively tightening policy. You could argue that Bush should have appointed someone better to lead the Fed, but his appointee did far better that Trichet at the ECB. (I favored Bush appointing Bernanke.) So it’s simply not realistic to presume that Bush played a major role in the recession.

Others point to “deregulation” such as the repeal of Glass-Steagall, but banking was never deregulated and the Glass-Steagall repeal had little impact.

Others (on the right) point to government efforts to put as many people into houses as possible, and Bush does share some of the blame here, but lots of others were involved in that effort. And that played only a minor role in the recession.

Given the fact that the public votes with limited information, it’s reasonable for them to blame leaders when things go bad, even if leaders only are responsible for 3% of outcomes. How else can voters encourage leaders to do their best?

I’d say it’s rational for voters to view Trump positively on economics (a view I don’t fully share–I’m more neutral) and negatively on Covid. And it was rational for voters to blame the GOP for the recession in 2008, despite the fact that it was mostly bad luck. And that’s despite the fact that I happen to view these two presidents as equally responsible for the two recessions. The point is that the public needs to hold presidents accountable for the modest role they play, or the democratic system cannot work. And the public works with limited information.

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