I am a free market sort of guy who Joseph Stigltiz might brand a free market fundamentalist. Critics of the Bush administration believe that it was marked by massive deregulation of the economy, laissez faire run amok. Free markets did not run amok. The Bush administration frequently imposed its will on markets rather than let markets allocate resources spontaneously.
Arianna Huffington expresses the typical, but incorrect view that President Bush was an unbridled market enthusiast. Writing for the Huffington Post (Laissez Faire Capitalism Should Be As Dead As Soviet Communism, December 22, 2008) she opines,
It's time to drive the final nail into the coffin of laissez-faire capitalism by treating it like the discredited ideology it inarguably is...
In a comprehensive piece on what led to the mortgage crisis and the subsequent financial meltdown, the New York Times shows how the Bush administration's devotion to unregulated markets was a primary cause of our economy to ruin.
The link to the New York Times article (White House Philosophy Stoked Mortgage Bonfire, December 21, 2008) was in Huffington's article. The substance of the article does not support the view that the Bush administration favored markets. Its premise is that
Eight years after arriving in Washington vowing to spread the dream of homeownership, Mr. Bush is leaving office, as he himself said recently, “faced with the prospect of a global meltdown” with roots in the housing sector he so ardently championed.
A pro market, laissez faire administration might try to remove government restrictions on building in some parts of the country, but would not vow to "spread the dream of home ownership." That is a decision that individuals make through markets. The authors write that,
He pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent — and with the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards.
Pushing hard to expand home ownership is not "hands-off." Housing policies that encourage or impose lax lending standards are a type of bad over regulation in which the government's goal to extend home ownership takes presidence over the lender's goal to make a good loan. They then write,
The president also leaned on mortgage brokers and lenders to devise their own innovations. “Corporate America,” he said, “has a responsibility to work to make America a compassionate place.”
And corporate America, eyeing a lucrative market, delivered in ways Mr. Bush might not have expected, with a proliferation of too-good-to-be-true teaser rates and interest-only loans that were sold to investors in a loosely regulated environment.
I would not absolve mortgage brokers of as much guilt as the authors, but to the extent that President Bush "leaned" on mortgage brokers, he was regulating the industry.
Finally, they claimed that President Bush deregulated the banking industry by removing state authority over national banks. They miss the main point. The Bush administration was replacing one set of regulations for another; those that advanced their agenda.
Nick Gillespie, in an oped piece for the Wall Street Journal (Bush Was a Big-Government Disaster, January 24, 2009), exposes the Bush administration's regulator zeal. Please not that Gillespie gives objective measures about government's growth, and does not make unsubstantiated claims. Certainly, one could question his measures and subsequent conclusions, but at least he provides evidence, and the evidence supports his claim.
The most basic Bush numbers are damning. If increases in government spending matter, then Mr. Bush is worse than any president in recent history. During his first four years in office -- a period during which his party controlled Congress -- he added a whopping $345 billion (in constant dollars) to the federal budget. The only other presidential term that comes close? Mr. Bush's second term. As of November 2008, he had added at least an additional $287 billion on top of that (and the months since then will add significantly to the bill). To put that in perspective, consider that the spendthrift LBJ added a mere $223 billion in total additional outlays in his one full term.
If spending under Mr. Bush was a disaster, regulation was even worse. The number of pages in the Federal Registry is a rough proxy for the swollen expanse of the regulatory state. In 2001, some 64,438 pages of regulations were added to it. In 2007, more than 78,000 new pages were added. Worse still, argues the Mercatus Center economist Veronique de Rugy, Mr. Bush is the unparalleled master of "economically significant regulations" that cost the economy more than $100 million a year. Since 2001, he jacked that number by more than 70%. Since June 2008 alone, he introduced more than 100 economically significant regulations.
Laissez faire capitalism may or may not work, but it was not tried during the Bush administration.
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Perhaps I am mistaken, but I was under the impression that the housing and mortgage crisis, which eventually lead to the economic collapse that we are now faced with, are the direct decendents of the Fannie Mae/Freddie Mac progams of the Bill Clinton administration.
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