Foreign Affairs

Some in Europe Wrongly Blame Bush for the U.S. Debt Crisis

If online comments and e-mails from friends are any indication, the overwhelming feeling about the American debt crisis here in Europe is that if Obama is now in a position of having to raise the debt ceiling or face default, the crisis can only be traced back to George W. Bush.
 
People across the pond are, in part, blaming Bush’s post-9/11 era military funding—yet somehow the phrase “overstretched Greek army” doesn’t exist to explain how that country managed to economically implode.
 
While there’s little economic return in the limited act of paying for a soldier to travel to Afghanistan or Iraq and using the finest technological equipment to shoot a terrorist in the face, there can be great economic return on the overall outcome of war.  World War II cost more than $900 billion in 1945 (a third more than the most expensive post-9/11 year, at just less than $650 billion in 2010), yet the surge in military spending led to an economic boom.  The Marshall Plan to rebuild Europe increased America’s presence and economic/trade opportunities in the region.  Increased presence of military bases caused trade to build up around them.  Likewise, after a period of Carter-era military neglect and economic stagnation, the Reagan era saw a Cold War military buildup and an increase in economic growth.
 
Who can argue that the fall of the Berlin Wall wasn’t beneficial for American business and trade?  Wars are only bad for the economy if the person in charge has no idea how to parlay it into opportunity.  Bush had a historical sense of what military action in the Middle East would mean.  As he explained in an interview earlier this year, his father pointed out to him the conversion of the Japanese from enemy to ally—a shift that was catalyzed by war.  It’s not hard to believe that Bush could envision the “long game,” but tougher to imagine the current White House occupant seeing around his Nobel Peace Prize for Being a Cool Bro to the lasting peace, prosperity and stability achieved through military victory.
 
Industry builds up around military efforts.  Someone has to make the drones, the guns and the missiles.  It’s probably not the most politically correct thing to admit, but there’s much more of a long-term financial return involved in a terrorist being blown up than there is in blowing stimulus funds to pay someone to plug a pothole in a road.
 
The Chinese have said recently that America can’t expect to keep up its international defense and security spending, at about 20% of the annual budget, all while they keep increasing theirs.  How convenient for them!  Perhaps we should have also taken Gorbachev’s advice on defense spending during the Cold War.  Maybe America should pull back and just let the Chinese take over the market for high-tech defense-product development and exports entirely?
 
Europeans also fault Bush for deregulating Wall Street—another myth.  If anything, deregulation can be traced back to Clinton and Carter.  Clinton’s Financial Services Modernization Act allowed previously separated investment and commercial banks to finally merge with each other in a giant deregulatory orgy.  It was Texan Republican Phil Gramm and other Republicans who tried during the Clinton era to scrap Jimmy Carter’s Community Reinvestment Act of 1977, which forced banks to give loans to people based on important criteria such as skin color rather than silly things like the ability to make payments.
 
Some say that Bush had a whole eight years to scrap the Carter-Clinton programs.  Sure, and just imagine what the reaction would have been had he tried to take the mortgages and lines of credit right out of the hands of minorities in the interest of imposing fiscal responsibility.
 
Bush did try to increase regulation of the financial sector through the Sarbanes-Oxley law, increasing financial reporting and auditing, but he can hardly be blamed for the fact that people were set on gorging themselves on the full benefit of the Clinton-Carter, debt-friendly provisions.
 
For those who argue that Obama is merely a victim of being in the wrong place at the wrong time when the till ran empty, it might be easier to believe that if he’d remove his hands from it for even a second and stop crying for refills.

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  • Tarik Dean

    LMAO…I like how you turn the Financial Services Modernization Act into the Clinton legislation. Last time I checked it was proposed by 3 Texas republicans.

    The roots off the financial crisis are in the financialization of the economy in the early 80′s, the change in corporate governance when MSV was adopted which has structurally changed how the US economy functions. Far too much speculation and fake wealth created via bogus financial “innovations”.

    How long did you think making profits out of thin air and off the back of the real economy was going to last? All the while capital spending is being reduced which has lead to a decrease in productive capacity.