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Reflections on the Bush Presidency

Political analyses tend to be exercises in confirmation bias, as shown by most treatments of the last two U.S. presidents, George W. Bush and Barack Obama. Now that they are both former presidents, hopefully we can look at their records a bit more dispassionately.

The fiscal performance of the Bush years are marred by then-record budget deficits following the balanced budget of the late Clinton administration (with no small amount of pressure from a Republican Congress). Bush made gratuitous cuts to the top marginal income tax rates, which were fiscally irresponsible and unnecessary. If we look at the actual fiscal history, however, these “tax cuts for the rich” were not the driving force of the deficits. From 2003 to 2007, total revenue actually increased, but the problem was that expenses from 2000 to 2007 nearly doubled. No one can seriously contend that the budget could or should have been balanced by increasing revenue, as if doubling taxes were viable.

A distinct issue is whether Bush’s profligate spending in any way caused the subsequent sharp recession. It is astounding that so many analysts, including the neo-Keynesian Paul Krugman who should know better, have blamed Bush’s fiscal policy for the recession, without offering a coherent mechanism by which this might occur. Nearly a century after Keynes’ revolutionary work, most people are still beholden to the view that a nation’s economy is to be run like a household, with expenses never to exceed revenues. Worse, they confuse the government’s budget (fiscal policy) with national prosperity (economic policy). A brief look at two historical examples should explode these myths.

By conventional Keynesian accounts, New Deal spending, followed by the massive expenses of WWII, with fiscal deficits of over 100% of GNP, brought the U.S. out of the Great Depression. Even if we do not accept this causality, it is incontrovertible that massive deficit spending is sometimes compatible with sustained economic growth. We also know that austerity measures during recessions can be disastrous, since this shrinks the money supply, creating a vicious cycle of contraction.

Reagan’s first term is generally considered successful by most economic measures, yet federal revenues increased only nominally from 1980 to 1984, and actually decreased in real dollars. Nonetheless, there was strong real GNP growth starting in 1982-83. Again, fiscal deficits are compatible with strong growth.

To sustain the thesis that Bush’s deficit spending somehow caused the recession of 2008, one needs to adopt the pre-Keynesian conservative myth that defict spending causes recessions. That liberals are willing to reverse their economic theories for the sake of condemning a conservative president is one of the stranger manifestations of confirmation bias.

As a counterexample, Spain, for all its pre-recession fiscal discipline, was hardest hit by the financial crisis. There is simply no correlation to be found between budget deficits and economic recessions.

Another supposed culprit is banking deregulation. This is blameworthy only in the trivial sense that if banks were forbidden from swapping derivatives, there could be no derivatives crisis. When we get more specific, however, the argument evaporates. For one thing, American critics of deregulation seem to forget that the financial crisis was a global phenomenon. Before they blame the repeal of the Glass-Steagall Act’s separation of commercial and investment banking, they should consider that most European countries had no such legal restriction in the first place. Further, financial deregulation had a bipartisan consensus, beginning with Clinton, Greenspan and a GOP Congress.

It may be safely said that the 2008 crash reflected a general overvaluation of assets and derivatives, much like the Dot com crash at the end of the Clinton years. Few would blame Clinton for the Dot com bubble, so why is Bush blamed for the housing bubble? In the latter case, the housing market has heavy government regulation and intervention, so government gets scrutinized when this market collapses.

It is common to blame subprime lending and predatory practices that led people into foreclosure. While these may be rightly deplored, they do not account for the fact that the houses themselves were overvalued, not just the creditworthiness of borrowers. Granted, easy lending is one factor driving up prices, but an asset bubble can occur even apart from borrowing. It has long been a myth that home ownership is a way to build wealth, when in fact residential real estate does no better than gold over the long term, so it is effectively a storehouse of wealth, not an engine of growth. The use of home ownership as a substitute for decentralization of real capital is not sustainable indefinitely. People cannot live off their homes, and will need income-generating capital in their retirement.

Regardless of what causes a housing bubble, there is little that government can do to stop it. You cannot freeze house sales, as you might freeze a stock exchange when there is a sudden drop. At best, you can improve lending practices going forward, but there is no remedy for the devaluation that must happen. This may sound liquidationist, except we are not dissolving companies, only recognizing that we cannot force people to pay more for an asset. Granted, some houses may be abandoned due to oversupply, but we can hardly force people to live in more than one home.

The remedy of Keynesian liberalism is to constantly stimulate demand. When you reach the point where the market does not meet demand (a crisis of oversupply), then the government should intervene with deficit spending and expanding the money supply, offering easy credit. What should be done when easy credit was part of the problem?

The last resort is to export inflation, relying on cheap labor from other countries to make products affordable to those with devalued assets. Yet even this game can only be played for so long, as the Chinese minimum wage has risen to over $1.50/hr. The race to the bottom must end, and as the populace of various nations rise up in revolt against global neoliberalism, perhaps someone will propose the real remedy of decentralizing capital, instead of shifting it between political and financial elites.

In the next post, we will examine the Obama legacy, as compared with that of Bush, finding some remarkable similarities.

Everything Is Impossible

Suppose I described a tree to someone who had never seen anything like it. I might say it was a giant creature with countless sprawling arms that never moved, and its body was full of intricate vessels that extracted water from the ground imperceptibly. Most fantastic of all, it had the power to transform light and air into its food, and grew to its great size without taking its bulk from the earth or any other solid thing. Nonetheless, its body was rigid, pound-for-pound stronger than steel, yet lighter than water.

The person being told this might be forgiven for taking this as a tall tale or myth, and the same is true for any natural object. Everything seems impossible or fantastic if we never experienced anything similar. If you saw nothing but cosmic dust, you might never imagine that there could be such a thing as a star. If you saw a barren planet, you might never guess that there could be such a thing as life. If you saw only bacteria, you might never deduce the possibility of more complex organisms. We are able to explain the complex in terms of the simple only after the fact. We have a poor record of determining in advance what is possible or impossible.

If all you knew was physics, you likely would not be able to derive much chemistry. Anything beyond the hydrogen atom is computationally problematic. The few unknown things we have been able to predict are mostly simple structureless entities like fundamental particles and black holes. Everything else comes as a surprise to us. No cosmologist or astronomer anticipated the existence of quasars or pulsars. As with most new things, we first observe them and then try to explain them.

After a long history of discovering things thought to be impossible, if they were ever imagined at all, we should realize how unreliable it is to claim that something is impossible simply because it is outside of our experience. Everything is impossible when abstracted from experience. It is only familiarity that makes these impossible things no longer fantastic.

Political Correctness as Ressentiment

Most of the so-called “social issues” in current events are expressed in a hypocritical language that conceals hatred behind supposed pity for the weak. This hatred sometimes reveals itself when journalists and other purveyors of mass culture bandy about the term “bigot” and other epithets to characterize anyone who fails to share their view of things, which is usually a selective egalitarianism. They have painted themselves into a corner, having constructed a naive morality where “love” is good and “hate” is evil, so they cannot admit themselves to having any real hatred toward any group, except with the odd justification that it is acceptable to hate hatred.

The key to understanding this so-called “political correctness” (though it is really more social than political) is Nietzsche’s concept of ressentiment (to be discussed at length in a future essay). The French term simply means “resentment,” a word that was not available in German, but Nietzsche gave it a more specific meaning. Ressentiment is the hatred of the weak toward the strong for being strong. This may be disguised by saying, “It is all right to be strong, but do not exercise force,” yet strength is nothing without its exercise. The weak demand that the strong should lay down their weapons and renounce all privileges, yet they hypocritically exert coercive force on would-be elites through the law, the state, etc.

In the present context, ressentiment especially manifests itself in discussions of race, gender, sexual orientation, and social class. Few would have the candor to say, “I hate rich white males,” but the reality of this belief is shown by repeatedly using such a type as an example of evil or bigotry, without fear of repercussion. The same who do not hesitate to complain that an organization “has too many men” or “is too white” would be denounced as “sexist” or “racist” if they complained of “too many women” or “too many blacks.”  Some whites and males have noted this double standard, and denounced it as “reverse discrimination,” while liberals laughingly deride these complaints, claiming it is absurd for them to pose as victims.

Both sides of the dispute miss the point, for they both presuppose the absurd logic of ressentiment, which actually makes being a victim a privileged position. Both sides are competing for the same worthless prize of being able to say, “I am weak, therefore I should have my way.”

We see this in other contexts as well. In discussions of history, it is pretended that the Europeans were evil for conquering the Americas and other parts of the world. Yet when has any of these supposedly victimized peoples failed to conquer when it was in their power to do so? The Native Americans repeatedly warred against each other, and the sub-Saharan Africans enslaved each other, to say nothing of Asian atrocities. They could claim no moral superiority, yet their descendants now do so on no other basis than having been the conquered rather than the conquerors. This is to say that their pretended moral superiority consists solely in their weakness.

I distinguish the pre-modern conquered peoples from their descendants, because the primary sources show no hint of ressentiment among the conquered. The conquered Aztecs gratefully embraced Christianity and integration under Spanish rule, as is attested by the literate among them. They resisted conquest manfully, but once defeated, they accepted their fate. While they still lamented some of the crimes committed by the conquistadores, they did not long for a return to independence. The North American Indians thought it unjust that they should be forced off the lands of their ancestors, but they saw nothing inherently wrong with war and conquest.

The lack of ressentiment among pre-modern people is confirmed by the candor with which they admit the technical, and sometimes even the spiritual, superiority of European civilization. Even those who prefer their old ways candidly acknowledge their differences, without any sense that any one owes them anything.  They were likewise plainspoken about skin color, as the Indians chose the term “red skins” to describe indigenous Americans when speaking in English or French. Their descendants, exposed to white liberal culture, have adopted modern squeamishness about calling attention to racial differences.

The term “bigot” originally meant someone who is sanctimonious, and ironically the term is now used with insufferable sanctimony. “Sexism” and “male chauvinism” were invented by feminists in 1968 to pathologize anyone who disagreed with their doctrines, and the other epithets likewise serve the purpose of excusing liberals from making actual arguments. They all presuppose the “slave morality” that is consequent to ressentiment, which is to make the strong ashamed for being strong, while others are entitled to privileges for the accident of having been born weak. Max Stirner ridiculed such liberal pretenses over a century ago, noting that to claim you deserve free schooling because poor parents begot you is just another birthright.

The way out of this morass is to boldly embrace the charges thrown at the strong, without apology or shame. Point out the hypocrisy of liberalism, which derides the assertion of individualized force or privilege, while embracing the far more formidable coercive power of the state. For all their supposed love of the weak, in the end they only believe might makes right. Thus they will constantly call for new votes on a “progressive” social issue until the vote goes their way, after which we are never to revisit the issue. They will reinterpret the law or even strike down the law if it opposes their favorite principles, after which we are supposed to blindly respect the “rule of law.” All of this, of course, is backed by physical and financial coercion against those who oppose. I do not complain of this, but neither should they complain when a stronger group does likewise to them.