Wednesday, August 17, 2011

What Caused the Current Mess in the US?

From an MSN Money report:
Did George W. Bush cause this crisis?

Economist Nouriel Roubini says 5 factors helped turn the nation's economic surplus into a deficit during Bush's presidency.

By Kim Peterson on Mon, Aug 15, 2011 2:32 PM

One well-known economist says that former President George W. Bush is to blame for the current economic crisis.

Nouriel Roubini, a New York University professor nicknamed "Dr. Doom" for his dour views on the economy, says in this video that when President Obama came to power, he inherited a budget deficit of $1.2 trillion. When Bush came to power, the country had a surplus of $300 billion.

How did we get a $1.5 trillion change in our fiscal condition during Bush's time in office? Roubini lists five factors:

1. We cut taxes.

2. We spent $2 trillion on two unwinnable wars.

3. We doubled discretionary spending. Some conservatives originally aimed to "starve the beast" by cutting taxes in order to force future cuts in spending. But spending grew so out of control in Bush's term that no beast was starved, Roubini said. In fact, the beast was fed.

4. We added entitlement benefits like the Medicare drug benefit.

5. We entered the largest economic and financial crisis ever, which caused a huge increase in the deficit through the "recession deficit" and the cost of bailing out the banks and financial institutions.

You can hear more from Roubini in the following video, in which he talks about a high probability of recession in the next year or two.

"We destroyed our fiscal sustainability before [President Obama] came to power," Roubini said. "We had guns and butter and low taxes. It doesn't work. iI you want guns and butter, you should have high taxes during wars."


Obama "inherited a mess," Roubini added. "We're lucky that this Great Recession is not turning into another Great Depression."
That's a pretty fair assessment of the mess the US is now in. Sadly, Obama pretends that he "fixed" the problem with his puny stimulus in March 2009 and with the pathetically no-teeth financial reform law.

Obama is doing precious little to fix the mess, but Roubini is right in pointing out that Bush was the author of this mess. The Tea Party Republicans are fools to pretend that Obama created this mess.

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