In campaign speeches and on his Web site, John Kerry tells us
that President Bush has "the worst economic record since the Hoover
Herbert Hoover, of course, presided over the start of the Great Depression in 1929. There have been eight post-1945 recessions. How many do you suppose were worse than the 2001 recession? All of them.
In fact, the Commerce Department's newest GDP data reveal that the downturn wasn't a textbook recession, since no two quarters of contraction were consecutive. That's because the downturn Bush inherited was stopped in its tracks before 300 days passed, with red-hot growth rates and low unemployment.
The most severe post-World War II recession is not even a serious question among economists. It was Ronald Reagan's. The double 1980-82 contraction involved six quarters of shrinking economic output, largely as a result of a successful but painful assault on inflation by Paul Volcker's Federal Reserve. The inflationary storm those men faced was nourished by policies during the 1960s and 1970s that aimed to control aggregate demand.
Was Reagan or Volcker to blame for the worst recession since Hoover? No more than aspirin is to blame for a hangover. The point is not which president or economic philosophy is at fault, but that business cycles happen. Americans judge a president not by the natural downturns that occur on his watch, but how he responds.
Whether Kerry likes it or not, the U.S. economy has expanded for 11 straight quarters since 2001, and payroll jobs have expanded for 11 straight months. By any measure, the Hoover comparison is absurd, as a closer look reveals:
- Inflation. When prices rise, everyone's buying power erodes. That's not an issue today when average real hourly earnings for working Americans are 2 percent higher than three years ago. Compare that to the 1.95 percent loss in real earnings three years after the 1990-91 recession began. The worst experience was when annualized inflation peaked at 18.6 percent in January 1980, during Jimmy Carter's final year as president.
- Productivity. Over the last half-century, only three episodes of shrinking productivity occurred, and the mild recession of recent years was not one of them. Remarkably, American productivity growth has been a full percentage point above trend for nearly a decade, and actually accelerated during the Bush presidency.
- Employment. Hoover's economy lost 6.4 million jobs in four years. Most were lost during his last years in office, when Democrats controlled Congress. By comparison, payrolls jobs are down 1.14 million since Bush took office, but total employment is up by 1.31 million. Most importantly, the rate of unemployment is 5.5 percent today, compared to 24.9 percent during Hoover's last year.
Those are the facts, but what are the lessons? History reminds
us that presidents cannot control the economic winds. But they can
change the direction of the sails.
What were Hoover's policy responses to the Great Depression? He persuaded Congress to raise the top income tax rate from 25 percent to 63 percent. Hoover also signed the Smoot-Hawley tariff, a 40 percent tax on imports. But aren't higher taxes on the rich and protectionism against outsourcing Kerry's signature issues? Every time outsourcing is mentioned in this campaign, voters should recognize Hoover's fingerprints on the Kerry economic agenda.
There are valid criticisms of the Bush team, but by denying reality, Kerry is missing his opportunity and cheapening the current economic debate. America would be better served by a sincere debate over free trade, hitting at Republican inconsistency on steel, sugar and immigration. Democrats should be attacking the rising complexity of income taxes, and the corporate interest loopholes, instead of engaging in inane class warfare.
"Gentlemen, you have come 60 days too late," Hoover told banking officials visiting the White House in June 1930. "The depression is over." This time around, the depression never happened. If Kerry's theme of personal integrity is more than a slogan, he will face up to the strength of our economy and develop an honest economic agenda.
Kane is a research fellow in the Center for Data Analysis at The Heritage Foundation. He is a veteran Air Force intelligence officer, and former San Diego software entrepreneur.
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