Clinton’s claim that the Bush tax cuts played ‘a large part’ in sparking 2008 recession

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Glenn Kessler:

Several readers have asked us about this comment, especially Clinton’s assertion that the George W. Bush tax cuts played a significant role in creating “a perfect storm” that led to the 2008 Great Recession. Clinton also cited a lack of regulation (“took their eyes off of Wall Street”) and a failure to invest in the middle class.

It’s difficult to summarize vast economic changes in a single sentence — and economists will forever argue on root causes of the crash. But Clinton’s effort to pin much of the blame on Bush’s tax cuts is rhetorical poppycock.

Let’s explore.

The Facts

People may have legitimate disagreements on the combination of factors that led to the crisis. But there was a U.S. government commission, the Financial Crisis Inquiry Commission, that in 2011 issued a 663-page report that carefully dissected the reasons for the crisis. The commission was chaired by former California state treasurer Phil Angelides, a big fundraiser for the Clinton campaign.

The findings were not without controversy – four Republican members dissented – but nowhere in the report is there any mention of or blame assigned to the Bush tax cuts. The key summary said:

“While the vulnerabilities that created the potential for crisis were years in the making, it was the collapse of the housing bubble — fueled by low interest rates, easy and available credit, scant regulation, and toxic mortgages — that was the spark that ignited a string of events, which led to a full-blown crisis in the fall of 2008. Trillions of dollars in risky mortgages had become embedded throughout the financial system, as mortgage-related securities were packaged, repackaged, and sold to investors around the world. When the bubble burst, hundreds of billions of dollars in losses in mortgages and mortgage-related securities shook markets as well as financial institutions that had significant exposures to those mortgages and had borrowed heavily against them. This happened not just in the United States but around the world. The losses were magnified by derivatives such as synthetic securities.”

The report went on to assign blame to failures in financial regulation and oversight, failures of corporate governance and risk management and a combination of excessive borrowing and risky investments. That comes close to Clinton’s reference to regulators taking an eye off Wall Street, but again, it has nothing to with Bush’s tax cuts.

A campaign official said Clinton “sees their [the Bush administration’s] failure to properly regulate Wall Street as an immediate trigger of the financial crisis.” (Note: the commission report specifically cited “the Federal Reserve’s pivotal failure to stem the flow of toxic mortgages, which it could have done by setting prudent mortgage-lending standards.” The Fed is an independent agency, although the report also criticized various Bush administration financial-services regulators.)

The official then offered a defense for also assigning blame to the tax cuts. He said that “the Bush tax cuts significantly aggravated the trends of rising income inequality and stagnating wages for the middle class.” He added that “by turning the surpluses we saw under President Clinton into significant deficits, the Bush tax cuts (and other fiscal policies of the Bush administration) put us in a much weaker fiscal position to combat the crisis.”

But there are several problems with this explanation. Income inequality started surging in the mid-1980s and, except for a brief pause, continued through the Bill Clinton and Bush administrations. Moreover, President Obama largely accepted the Bush tax cuts, with the exception in 2012 of an increase on taxpayers earning more than $400,000.

Democratic dogma holds that the budget surpluses projected at the end of President Clinton’s term were wiped out by Bush’s tax cuts, but that’s wrong. The surpluses disappeared mainly because of increased spending (36.5 percent) and forecasting errors by the Congressional Budget Office (28 percent); the tax cuts accounted for just 24 percent of the missing surplus.

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Hillary and Barack need life in prison their both war crinimals and if the NobelCommity ever awards her with a peace prize they deserve life in prison as well

Note that, though a totally inaccurate statement, the Washington Post can only give Hillary three Pinocchio’s. I guess she’s just kind of a liar.

The Bush tax cuts spurred the economy and increased revenues by $786 billion.

http://www.forbes.com/sites/beltway/2012/02/22/after-bush-tax-cuts-payments-by-wealthy-actually-increased/#4732cc285570

Now, of course, when the economy tanks, revenues drop and the tax cuts hurt. However, the economy would NOT have tanked had it not been for the Community Reinvestment Act, which forced lenders to go against their nature and lend to people who could not repay the loans and government meddling which created dangerous devices to make it appear people who could not afford a mortgage COULD afford one.

The left worries more about the rhetoric of punishing the wealthy than enabling an economy that will benefit everyone.