Republicans Must Provide Clear Economic Outlook
April 4, 2013
The economic collapse of 2007-2009 has frequently been blamed on President Bush and his Republican economic policies, a fact that Republicans must address to restore American faith in conservative economics. The president has less control over the economy than many Americans believe and Republicans need to provide a fresh outlook on the benefits of conservative economics while explaining the Great Recession in terms of the free market, says James Capretta, a visiting fellow at the American Enterprise Institute.
- During the 2008 election, President Obama created a narrative that painted the economic policies of President Bush and the cozy relationship between greedy Wall Street bankers and a Republican administration as the culprit of the fiscal crisis.
- In the 2012 election, President Obama echoed his belief that Bush's policies had created a terrible economic crisis that he inherited and that electing Romney would return America to those failed policies.
- The approach that Obama adopted in each election swayed a public fearful of continued economic turmoil.
Democrats claimed that Bush-era fiscal and tax policy, two wars and Bush-era Medicare drug benefits were the cause of the recession. However, there is no evidence that this is true.
- The crash was caused by Government-Sponsored Enterprises (GSEs) like Fannie Mae and Freddie Mac that encouraged risky lending to reach home ownership goals.
- The reality of financial collapse is far more difficult, involving underwriting standards, credit ratings agencies and Wall Street traders, but the claim that conservative economics triggered the collapse is utterly false.
- President Bush is partly to blame for the bursting bubble, but President Obama's Keynesian macroeconomic policies have magnified the damage and stifled the recovery.
Obama's stimulus bills provided a temporary surge in funding but the after-effect of the stimulus bills is more public debt, which stifles growth and creates long-lasting liabilities.
- If Republicans are to once again find themselves in the White House, they must confront the idea that Republicans created our current problems by pointing out that countries with heavier regulation and more liberal tax policies were hit the hardest by the recession.
- They must also explain the long-term outlook of free market economics that involves eliminating the GSEs, refusing to guarantee private firms and more oversight of credit agencies and mortgage-risk underwriting.
- Another wise policy is to slowly adopt spending cuts to improve the economy over the long-run since massive spending cuts in the near-term future will harm the recovery.
Source: James Capretta, "Recasting Conservative Economics," National Affairs, Spring 2013.
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