As you can see from my previous post, the Bush-McCain policies of the last 8 years have failed us.  But of course the Conservatives at the Wall Street Journal want to blame the Democrats and in particular they want to blame Obama.  I gave you a clear picture yesterday, but if you missed it, here is the post.  Yet, today I see the WSJ’s latest propaganda article: An Obamanomics Preview: Tax and spend, but not in that order.  How can the Conservative paper accuse Obama of tax and spend?  Bush of course was the crusader of spend and cut, which is the policy that drove us into massive debt.  What is the Bush-McCain answer to every bump in the road? Cut taxes.  And does it work?  According to the WSJ it does.  To the right is their accompanying graph.  Does anyone notice anything interesting in the graph?  I do.  The WSJ praises Bush’s tax cuts, but what happened after his tax cuts.  The first one, which I was supportive of way back when I had hope that Bush was a good president, caused the GDP to go negative the next quarter.  It recovered the quarter after that and stayed solid for about a year when it collapsed once again.  Then when the GDP had already recovered, Bush got another tax cut passed and the economy skyrocketed… for one quarter and then came back down to the growth it had begun before the passage of the bill.  And then of course the economy came to a halt once again and Bush’s answer was the first stimulus package, which, as far as where the graph stops, led to a better next quarter.  Now here’s the funny thing.  The Wall Street Journal is blaming Obama for the first stimulus package and is blaming Obamanomics for our problems.  What a joke.

Still here is what they say:

The nearby chart shows the arc of tax policy and economic growth across the Bush years. After the dot-com bust, President Bush compromised with Senate Democrats and delayed his marginal-rate income tax cuts in return for immediate tax rebates. The rebates goosed spending for a while but provided no increase in incentives to invest. Only after 2003, when the marginal-rate cuts took effect immediately, combined with cuts in dividend and capital gains rates, did robust growth return. The expansion was healthy until it was overtaken by the housing bust and even resisted recession into this year. Mr. Bush and Congress returned to the rebate formula in February, but a blip in second-quarter growth has now ended as the economy heads into recession. The Dow plunged again yesterday with a 514-point drop.

So it’s clear, when you interpret the information in order to prove your tax cuts work, the growth was a result of the tax cuts becoming law.  Of course that means ignoring the fact that the tax cuts in 2003 came into effect toward the end of a quarter that was already seeing positive growth, but that isn’t what the Wall Street Journal wants to focus on.  What they want to focus on is getting McCain elected and making their square peg fit the round hole.

What they don’t mention at all is something else that was going on around that same time.  In 2003, just a couple months before the tax cuts took effect and in the same quarter that the positive growth began, we entered into a war.  Since the Wall Street Journal has become as useful as toilet paper, I will do them the service of actually making an apples to apples comparison.  Now, I happen to agree that taxes should not be at 91% as they were during the entire two term presidency of Republican Dwight D. Eisenhower.  I agree with the call that JFK made for lower taxes.  I even go so far as to agree that the 70% tax rate under Nixon and Ford was not good.  I agree with Reagan that the first tax cut, the one that brought that top rate down to 50% was a good move, I even agree that 50% is too high.  Perhaps 38% or 39% is more appropriate.  After all, Reagan did not lower that top tax rate to 28% until after he was in his second term and was not running for re-election.  That is when he allowed his voodoo economics to go into full swing.  Now the fact that Reagan had the same answer as Bush, cut taxes, does not make Bush a Reagan Republican, but there is an interesting similarity between the two.  Reagan oversaw a crash in the markets.  Bush oversaw a crash in the markets.  Reagan oversaw a banking scandal.  Bush oversaw a banking scandal.  And both cut taxes, but that’s where the similarities end.  Reagan, I dare say, would not have given away 700 BILLION DOLLARS to the people who screwed up the economy.  By the way, does anyone else who reads the WSJ notice the complete and utter lack of complaint from them about that?  They don’t want Americans to get their money back in the form of a stimulus package, but they are fine with giving Wall Street all the money.  Then again, I guess it makes sense since they are the Wall Street Journal.  But let’s look at them apples.

[Note: I am writing this while researching it.  I have no idea what I will discover, but I will share the dates of war along with the following 8 fiscal quarters and the previous 8 fiscal quarters and will do the same with recent tax cuts/increases.  I will not be so nuanced as to distinguish from a "war" and a "conflict" as I don't care about such absurd distinctions.  To find the stats on growth, I will use the government's data.]

Korean War

The Korean War began for all intents and purposes on June 25, 1950.  So we need to look at the Fiscal Years FY50/51 and FY51/52.  Back then the fiscal year began in July and ran through the next June.  So as it happens, this is what the fiscal growth during the Korean War looked like.

Now I am not a political hack or a politically faithful robot, so I will give you some context, here is what the previous two years looked like.

You should note, though if you are a Conservative you will think I am lying, but I did know what it would be before I wrote that I would post this.  And it will be the same for each of these apples.

Vietnam War

For all intents and purposes the War in Vietnam really got going for the US when we deployed combat troops in 1965 following the Gulf of Tonkin Resolution of August 10, 1964.  So let us look starting in the third quarter of 1964 (i.e. January 1965) and follow it through the next eight quarters and then let’s see a comparison.

And, as promised, here are the preceding eight fiscal quarters.

The differences are not as drastic as they were during the Korean War, but one should noted  that in the eight quarters that accompanied the escalation in Vietnam three were double digit growth.  In the previous eight quarters zero were double digit.

Gulf War

The Gulf War is a terrible comparison, I admit.  It lasted about a month.  In reality it began on January 16, 1991, though the events that led to the war began the previous August.  As I write this, I have not looked up the relevant numbers, but I expect that we will discover the growth was more limited than in the previous extended wars and that the Iraq War will also have such growth as previous wars.  That is my hypothesis.  [Note that the Quarters will be different because of fiscal year changes back in the 1970s.]

The numbers above are not nearly as drastic as the previous wars, but how do they compare to the previous eight quarters?

Not a huge difference, though one should note that in the eight quarters leading up to the war: two Quarters were negative, one Quarter was neutral and only one Quarter was above 3 percent.  Following the war: zero Quarters were negative or neutral and four Quarters (in other words, half the time frame) was above 3 percent growth.

Iraq War

I think we all know that the War in Iraq began on March 20th, 2003.  That happens to be at the end of the 2nd Fiscal Quarter of 2003.  So we will begin by looking at the third quarter, which lines up quite nicely with the Wall Street Journal’s graph at the top of this post.

One will note that once again this is not extreme growth.  However, we once again need to compare it to the eight quarters preceding the war.

Again, we can note that after the war began there were zero Quarters of negative growth (of course negative growth isn’t really growth) and five out of eight Quarters had 3 percent or higher growth.  In fact, the quarter that immediately followed the invasion was more than double the growth of the previous quarter (which was in its waning days when the war began).  By contrast, the previous eight Quarters saw one quarter of negative growth and one quarter of growth greater than 3 percent.

When you look apples to apples you soon discover that the Wall Street Journal is once again wrong about what caused the growth.  It was not tax cuts.  Tax cuts and the stimulus package seem to have little effect.  They go up in a burst of flames.  I favor a new stimulus package not because I think it will help the economy, but because it will help average Americans survive this terrible economy.  And as long as these politicians are going to give handouts to Wall Street, we the people should be helped out as well.

Still, the Wall Street Journal and their GOP cronies are peddling the false assertion that Bush’s tax cuts have helped the economy and Obama’s tax cuts for the middle class and tax hike on the wealthy, would “hurt” the economy.  Today, the Wall Street Journal makes these arguments in three different Op-Ed pieces: the one I linked to above, one by Karl Rove and one by a McCain adviser.  Curiously, this is the same paper that cries, like many whining Conservatives do, that the media is too liberal and don’t give voice to the Conservatives.  Perhaps they should be so noble as to be honest about their Conservative propaganda.

Next, here is a comparison of the tax changes of the last 30 years along with the results to the GDP.

Reagan cut taxes in 1981.  This is what happened as a result.

The previous eight quarters looked like this.

I am not saying that Reagan’s tax cuts caused the four Quarters of recessionary “growth,” but he did inherit two Quarters of growth greater than 7 percent.

Reagan, not to be outdone by Reagan, decided that he too needed to cut taxes when he won re-election.  he cut taxes in 1987 and again in 1988.  Since there is obvious overlap there, let’s take a look at 12 quarters before and after the 1987 cuts.

As you can see there was a decent amount of growth.  Seven out of twelve Quarters were greater than 3 percent and zero were negative.  What was it like before Reagan cut taxes, back when that other guy, Reagan, had such high taxes?

It’s a little surprising I suppose, but the economy was growing just fine and there were zero Quarters of negative growth and Nine out of twelve Quarter of growth greater than 3 percent.  Doesn’t look like there is any evidence for either side.  I suppose Conservatives will argue that the cuts were necessary to keep the engine going.  After all, they only have one solution, cut taxes, but since there is a limit to how much you can cut, that solution will eventually run out of steam.

But let’s not forget that H. W. Bush came in and raised taxes… well, he raised it on just the upper class in order to give the upper middle class a tax cut since the upper class was paying less than the upper middle class and the same as the poor.  You will draw what conclusions you will, but here is the relevant data.

And this is what the economy was like before he raised the taxes on the wealthy and lowered it on the upper middle class.

What an interesting discovery.  When Bush raised taxes on the rich and cut taxes on the upper middle class, the economy grew at a rate greater than 3 percent in four of the next eight Quarters.  Before he did that, the country was in a recession.  It had shrunk two Quarters in a row, was neutral the Quarter before that and grew at a measly 1 percent before that.  Only one Quarter out of the previous eight had growth above 3 percent.  Well now, I wonder what happened when that Democrat Clinton got into office and raised taxes on the rich again.

In 1993 Clinton raised the taxes on those in the top two brackets (one of which was a new bracket), but kept the taxes the same for those in the middle and lower classes.  The following is what happened to the GDP as a result.

Well, there were no negative Quarters and four out of eight (again, that’s half) had growth of greater than 3 percent.  What was it like before he raised taxes like an evil elf?

Hm.  No difference to speak of.  Again, zero negative Quarters and half were over 3 percent.

But now this brings us to President George W. Bush, whose tax policies McCain wants to continue and who the Wall Street Journal gets on its knees for.  Bush strolled in from Texas, hung up his ten gallon hat and lowered the taxes on everyone.  Bush is a tax cutting maverick, much like McCain.  He didn’t just cut it for the rich.  He cut taxes for everyone.  He did this over the first three years of his presidency.  Therefore, we need to look at 16 Quarters, rather than 8.  Here is what happened after the maverick, Bush, cut taxes.

As you can see, there was only one negative Quarter and Six out of Sixteen were 3 percent or higher.  In simple math that means he has a rate of 3/8 plus 3% growth.  How does that compare to the previous 16 Quarters under those terrible Clinton taxes?

Now, as you can see, there were two negative Quarters and Nine Quarters over 3 percent.  That means that over half of the 16 Quarters preceding Bush’s cut had growth over 3 percent.  No doubt, Bush can claim the Six Quarter of over 3 percent growth that occurred on his watch, but if one looks at all the data, one discovers that FIVE OUT OF SIX of Bush’s plus 3% GDP Quarters were immediately following the invasion of Iraq.  The positive growth numbers are far less likely a result of his tax cuts than a result of his war.  If the Wall Street Journal was honest, they would admit that they want war, because it is “good for business” and they want tax cuts because it is good for businessmen.

One last note, under Clinton’s 32 Quarters as Executive, we experienced 21 Quarters of 3% or higher growth and only 3 Quarters of negative growth.  In other words, we had 7 times as many 3% or higher Quarters of growth than we had negative Quarters.  Roughly two-thirds of the time Clinton was in office with those terrible taxes on the rich, we had high growth.  Compare that to the Bush years and you see that out of the 29 Quarters that we know of to this point, Bush has overseen 10 Quarters of greater than 3 percent growth.  That is roughly one-third of the time that Bush has been in office.  He has also overseen two Quarters of negative growth and we haven’t seen what his last two Quarters in office will look like, though I think we’ve had a preview. [Note that if you only count the first 29 Quarters of Clinton's time in office his number of negative GDP Quarters is reduced to one.]

So the Wall Street Journal is guilty of the typical Conservative politics of fitting the evidence to the desired outcome rather than allowing the outcome to arise from the evidence.  They are as guilty as those damned Marxists in Venezuela when it come to twisting statistics to reinforce an ideology.  To the politically Faithful, that’s just fine, but to a non-partisan, like me, it is a load of manure that is spread to fertilize a crop of distortions that when harvested will simply feed the pious sheep who would rather see the country enter a Depression for the sake of ideology than to have policies shaped by reality.  Sorry, boys, I’m a Realist and I defined Realism as “an Idealism tempered by reality.”

One last thought…

McCain today is trying to distance himself from Bush, but no amount of spin can change the fact that his economic policies are the same as Bush’s and the McCain-Bush policies do not work.

Here's my guess. If the economy goes up, Obama's rating will too. If the economy goes down, so will Obama's rating. Now let's watch it right here. It may not happen immediately, but it will usually follow.

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