If the Bush agenda were going to score high marks anywhere, you’d think it would be at the University of Chicago, long known for its conservative bent on economics.
But when the Tribune turned toward Hyde Park for a year-end assessment of the president’s fiscal management, the graders weren’t inclined to cut Bush much slack.
The last time we did something like this–right before the 2004 presidential election–Bush got much higher marks. But after lots of unchecked spending and stalled momentum on big issues like Social Security, this year’s panel of three prominent economists with ties to the University of Chicago’s Graduate School of Business turned out to be fairly tough critics.
That’s partly because we recruited graders from across the political spectrum. Edward Snyder, dean of Chicago’s business school, leans right but has a strong independent streak. The same could be said of former Reagan economic adviser Michael Mussa, a onetime U. of C. Graduate School of Business professor and chief economist for the International Monetary Fund, who is now a senior fellow at the Institute of International Economics.
Hailing from the left is economics professor Austan Goolsbee, an avowed Democrat and an informal adviser to the Kerry campaign in last year’s election.
While conservative economists like Mussa and Snyder say the president’s tax cuts and stimulus package helped lay the foundation for the current economic expansion, they tend to join Goolsbee in lamenting that the administration’s lack of spending discipline is mortgaging the nation’s future.
It’s hard to escape the fact that the rich have gotten richer during the Bush years while the poor have gotten poorer. Millions lack health insurance. Entitlements like Social Security and Medicare remain ticking fiscal time bombs.
This may explain the deep sense of unease over the economy, despite the widely held view among economists nationally that 2006 is shaping up as another year of solid growth. While many economists believe that rising interest rates, fat fuel bills and slowing housing prices will crimp consumer spending next year, they are equally confident that businesses will start spending the mountains of cash they have hoarded since the 2001 recession.
Despite the meltdowns in the airline and auto industries, U.S. corporate profit margins are as high as they’ve ever been, according to Economy.com. It’s only a matter of time, many prognosticators say, before executives open the investment spigot, taking up where consumers leave off.
But is that going to cut the deficit to a more manageable level? And will it rescue Social Security or help pay for the president’s prescription drug plan? Not without some big changes. And that’s got even Bush supporters longing for the kind of leadership that can drive solutions to such thorny problems.
“When you grade students you grade what’s on the paper,” Mussa said. “It’s not whether you really like the student. I’m not prepared to ignore the obvious facts.”
– – –
REPORT CARD
Name: George W. Bush
Level: President, United States
Grading period: January-December 2005
%% SUBJECT: GRADES:
GOOLSBEE SNYDER MUSSA
TAXES B+/C- A- B-
SPENDING D C D
JOB CREATION B- B C+
DEFICIT F B- C+
SOCIAL SECURITY Inc. A+/F B-
HEALTH CARE C- B- C+
TRADE A- A A-
ENERGY C- C C
POVERT Y D B- C
DISASTER RECOVERY F C/Inc. B
%% GRADERS:
Austan Goolsbee
Robert P. Gwinn Professor of Economics at the University of Chicago Graduate School of Business
Edward Snyder
Dean, University of Chicago Graduate School of Business and George Pratt Shultz Professor of Economics
Michael Mussa
Senior Fellow, Institute for International Economics
COMMENTS FOR: TAXES
GOOLSBEE (B+/C-): A Dr. Jekyl/Mr. Hyde grade on taxes. As Dr. Jekyl, Bush organized a bipar tisan panel of experts partly to tackle the obscenely complex Alternative Minimum Tax. Then Mr. Hyde reappeared and abandoned the effort in favor of another big tax cut to aid his major donors. How long can they keep doing this?
SNYDER (A-): Early tax cuts paid off “big time” in a growing and vibrant U.S. economy. But he misses an A for failing to take on the stealth Alternative Minimum Tax that is now hitting millions of families who make $60,000 or more. All taxes should be indexed.
MUSSA (B-): Well-structured and well-timed tax cuts in the first term helped the economy. But lack of spending discipline and the rising cost of caring for the aged mean the cuts are unsustainable in the long term.
COMMENTS FOR: SPENDING
GOOLSBEE (D): For all his talk about fighting the tax-andspenders in Washington, Bush has wound up the biggest spender of all. The transportation bill was a national joke, and when you add the new prescription drug entitlement, you’ve got a train wreck waiting to happen.
SNYDER (C): When the issue of rebuilding the gulf arose, Bush said we’d pay for it by reducing government waste. If true, who’s responsible for the waste? Bush and the Republicans have been in charge for a long time.
MUSSA (D): Lack of discipline leading to rapid increases in federal spending is a major policy failure. Recent efforts to improve discipline have been weak.
COMMENTS FOR: JOB CREATION
GOOLSBEE (B-): The good news: A growing economy is creating jobs. The bad news: Job growth pales compared to previous recoveries and the positions being created pay low wages. Relative to corporate profits, total worker compensation hasn’t been this low in almost 40 years.
SNYDER (B): Governments and politicians don’t create jobs. Bush deserves credit for recognizing this and for doing no harm. But human capital is crucial to long-term growth, and we need better policies to encourage investment in our people.
MUSSA (C+): Job growth has picked up since 2003, partly because of the Bush stimulus package. But the fact is, job creation has been relatively weak during the Bush years.
COMMENTS FOR: DEFICIT
GOOLSBEE (F): By the time he leaves office, Bush may have accumulated more debt than all previous presidents combined–minus his father. This administration’s single biggest economic policy will be to dramatically shift the burden of our spending onto our kids.
SNYDER (B-): Total debt is less than 40 percent of annual GDP, which compares well to other countries. If the U.S. were a household, we’d be fine carrying that kind of debt. The problem is we also have huge, unfunded liabilities like Medicaid and Social Security. Bush hasn’t made progress on these.
MUSSA (C+): Most of the first-term rise in the deficit was necessary and desirable. But while the deficit has fallen for two years running, we now need more rapid progress than is implied by Bush tax and spending policies.
COMMENTS FOR: SOCIAL SECURITY
GOOLSBEE (Incomplete): Bush bailed out before the fight on this one. By the end, even he admitted his private account plan wouldn’t erase the coming Social Security deficit. He gets credit for raising the issue, which is more than the Democrats can say. But without a plan to pay for reform we’re still at ground zero.
SNYDER (A+/F): Bush is the only politician who’s taken on Social Security’s fundamental flaw: that we tax low- and middle-income wage earners at ridiculously high rates. He gets an A+ for proposing optional personal accounts. But he failed to combat the left-wing demagoguery that put the proposal in a toxic deep freeze.
MUSSA (B-): Bush courageously emphasized the longer-term insolvency of Social Security, but his private accounts proposal does nothing to resolve this and is going nowhere.
COMMENTS FOR: HEALTH CARE
GOOLSBEE (C-): Millions more are without insurance, and the rash of bankruptcies could eventually erase benefits for thousands more. The prescription drug benefit might help if it weren’t so confusing. Bush has also threatened the long-term outlook for health research by politicizing stem cells and crimping federal funding of science.
SNYDER (B-): Government should aid people who have significant medical problems and let most people pay for their own routine care. Bush has correctly resisted national health insurance. But while his drug benefit program has some reasonable insurance features, its across-the-board benefits don’t make sense.
MUSSA (C+): The new Medicare prescription drug benefit meets an important need, but passage without a means to pay for it was highly irresponsible.
COMMENTS FOR: TRADE
GOOLSBEE (A-): Bush has significantly improved since his steel tariff fiasco. Recent WTO negotiations showed he’s willing to join a worldwide de-escalation of export subsidies. Still wrangling with Canada over lumber, though, in violation of WTO rulings.
SNYDER (A): Solid since the misstep with steel tariffs in his first term. The U.S. will prosper and win with free trade because the U.S. economy is best when it comes to “creative destruction.” We are highly productive, we cut our losses, we reallocate our resources efficiently, capitalize on our strengths, and we do it again and again.
MUSSA (A-): Negotiating authority secured, some smaller trade agreements approved, mistakes like steel tariffs and the Byrd Amendment corrected and some progress on global trade agreements. But success of major initiatives likely to be modest.
COMMENTS FOR: ENERGY
GOOLSBEE (C-): Do they really think drilling in the Arctic Wildlife Refuge is an energy policy? Even forgetting wildlife, it’s a small and expensive place to drill. The answer is clearly cheaper alternative energy sources, yet Bush and Cheney can’t seem to find the nerve to distance themselves from their old friends in the “bidness.”
SNYDER (C): Bush is only focused on the supply side. Demand needs attention, too. Although it is probably a non-starter politically, the U.S. needs to boost taxes on all carbon-based fuels to both encourage conservation and protect the environment.
MUSSA (C): Despite Republican political control, little positive accomplished so far. Most, but not all, policy mistakes avoided. Virtual denial of global warming problem is stupid.
COMMENTS FOR: POVERTY
GOOLSBEE (D): Ironically, Clinton proved in the 1990s the old Reagan mantra that growth was the best way to reduce poverty. Yet under Bush, we’ve had economic recovery and worsening poverty. The situation won’t be helped by further tax cuts for the richest 1 percent and cuts in student loans, food stamps and Medicare.
SNYDER (B-): Bush hasn’t done anything harmful but he hasn’t articulated a clear anti-poverty policy, either. We need a safety net and compassion for those who can’t work their way out of poverty. But we also need to invest in education, crime prevention and infrastructure.
MUSSA (C): U.S. poverty rate is up, while the rich grow richer. Bush policies aren’t at fault but they have done little positive to address U.S. poverty problems. Approach to Third World poverty issues unusually constructive by U.S. standards.
COMMENTS FOR: DISASTER RECOVERY
GOOLSBEE (F): Reminds me of the old story about Chicago GSB professor and Nobel Laureate George Stigler. A student gets a disappointing test score back and says “Isn’t there any way you can change my grade?” “No,” Stigler answers, “F is the lowest grade I can give.”
SNYDER (C/Incomplete): Political heat drove Bush to foolishly commit the U.S. government and taxpayers to re-building New Orleans to its old glory. We need to offer short-term relocation help, rebuild the levees, forget the low-lying areas, and then get out of the way. But Bush may be able to shift course and get it right.
MUSSA (B): Response to 9/11 outstanding. Katrina response a substantive and public relations disaster. Preparation for possible bird flu pandemic–a far greater potential disaster–useful and reasonable.
———-
This is the fourth in a series of articles looking at what lies ahead for various industries next year.
To see President Bush’s grades from last year, go to chicagotribune.com. In addition to the categories in this report card, the experts last year also looked at the president’s record on outsourcing and the minimum wage.
