Want to know what will happen to Barack Obama if he loses to Mitt Romney on Nov. 6? Just look at what happened to George H.W. Bush after he lost to Bill Clinton in 1992.
You remember George H.W. Bush, right? You know, the other George Bush? The one who acted all wimp-like; who shattered his “read my lips” tax pledge; who presided over a recession; who could only muster a jobless recovery in response; who added more than a trillion dollars to the national debt; and who was finally, unceremoniously dumped by America after one lackluster term, making way (thank goodness) for President Clinton’s centrist blend of balanced budgets and business-friendly policies—a blend that was directly responsible, incidentally, for 116 consecutive months of economic growth, the longest stretch in U.S. history.
Yeah, that George H.W. Bush. Without a second term, Obama will end up like him.
There’s only one problem: that George H.W. Bush never really existed. We just remember him that way. In reality, Bush was responsible for cutting the deficit, lowering unemployment, and spurring much of economic growth that buoyed Clinton throughout 1990s. But even though these improvements began, slowly but surely, during Bush’s stint in the Oval Office, none of them fully took effect in time to ensure his reelection.
Right now, the president finds himself in much the same predicament. Obama spent his first few years in the White House tackling many of the hardest, dirtiest jobs on America’s economic to-do list. He prevented a global financial meltdown from metastasizing into a second Great Depression. He rescued a freefalling auto industry. He re-regulated a dangerously out-of-whack Wall Street. And he is poised to cement a long-term debt-reduction deal by the middle of 2013.
Individually, none of these accomplishments has been potent enough to erase the topline effects of the 2008 crash—high unemployment, growing debt—which is why Romney and Obama are tied in the polls. But examine the data, and you can see that the economic picture is beginning to brighten, much as it did at the end of Bush’s term. The question now is whether Obama will stay on and get the credit he deserves—or whether Romney will pull a Clinton and take over just in time to enjoy the fruit of his predecessor’s labors.
For Team Obama, the Bush example should be chilling. Like Obama, Bush inherited a costly Wall Street catastrophe—the savings and loan crisis of 1989—and was forced to spend a massive chunk of federal cash to keep it from spiraling out of control. Next came an economic downturn, in 1990, coupled with ballooning deficits. In response, Bush spent much of his second year in office cutting an historic debt deal with the Democrats, who controlled both houses of Congress; in September 1990, they agreed to slash spending by $324 billion over five years, raise revenues by $159 billion, and increase the top statutory income tax rate to 31 percent from 28 percent. Six months later, Bush’s recession officially ended. Election Day was still 19 months away.
This trajectory is broadly similar to Obama’s: big initial crisis; big government response; months of economic pain; the beginnings of a rebound. (NB: The Great Recession ended more than three years ago, in June 2009, and the economy has been growing, albeit sluggishly, ever since.) The final parallel, however, is less flattering. After taking decisive action to counter a crisis, both Obama and Bush then presided over so-called “jobless recoveries,” with Bush’s unemployment rate rising from 5.4 percent when he took office to 7.8 percent in June 1992, and Obama’s unemployment rate peaking at 10 percent in October 2009 and remaining above 8.9 percent for the next two years. By the time the autumn of 1992 rolled around, the “jobless recovery” storyline was set in stone, and Clinton took full advantage. Sure, the unemployment rate started falling months before the election (it slipped to 7.3 percent in October 1992). But Bush was already doomed.
And yet if Bush had won in 1992, he would be hailed as a much better president today—due solely to the momentum of his first term. During Clinton’s initial nine months in office—both Obama and Romney have argued that even a chief executive’s earliest policies don’t really take effect until about nine months in—unemployment fell from 7.3 percent to 6.7 percent. Over the next year and a half, the jobless rate continued to trace the same downward arc, finally stabilizing at a healthy 5.4 percent in February 1995. Given that this steady decline began in the summer of 1992, on Bush’s watch, it’s hard to argue that Clinton deserved credit, at least at that point, for anything other than not disrupting the job growth set in motion during his predecessor’s reign.
Likewise, most of the positive economic and fiscal developments that Clinton nurtured as president had their roots in Bush’s White House. The stock market roared under Bush, gaining nearly 60 percent in four years, and gas prices were plummeting by the end of his tenure. Meanwhile, as liberal columnist Jonathan Chait has written, Bush’s “1990 deficit reduction deal, which was denounced in apocalyptic terms by conservatives, did more to reduce the deficit”—and create the famous Clinton surpluses—“than Clinton’s [own] 1993 budget” (itself an extension of Bush’s 1990 bargain). In turn, Bush’s balanced fiscal strategy established a solid foundation for the economic boom of the 1990s. As Gus Faucher, director of macroeconomics at Moody’s Economy.com, has argued, “one reason we had strong growth in the 1990s is that Bush I and Clinton reduced the deficit (cut spending and raised taxes), [which] lowered long-term borrowing costs and made more capital available to the private sector.” In 1992, Bush’s last year in office, the economy grew every quarter, averaging 3.2 percent and reaching its highest mark in four years (3.8 percent) just as voters were giving him the boot.
Not that anyone outside of Kennebunkport seems to remember.
Which brings us back to Obama. The president’s current bind is remarkably Bush-like. Years of persistent joblessness are keeping Romney in contention and may very well propel him to victory. But the early signs of real economic liftoff—perhaps not on the scale of the 1990s tech boom, but real all the same—are pervasive. As my colleague Michael Tomasky recently noted, the unemployment rate just tumbled to 7.8 percent, “the lowest in four years… Weekly jobless claims in the week after the unemployment rate was announced were far lower than expected.” Consumer confidence is “at a five-year high… Housing starts in September surged to their fastest pace in four years, up 15 percent over August, far exceeding the experts’ predictions… The Federal Reserve is now seemingly committed to low interest rates and fiscal stimulus well into the future, and some Fed officials have even spoken (no!) of letting inflation get above 2 percent if that’s what it takes to bring unemployment down further. In its mid-October unemployment report, Gallup, which surveyed 30,000 households, found that the jobless rate was heading in that happy direction, indicating perhaps that the September number was not a fluke.” Our GDP isn’t growing fast enough yet—the rate just hit 2.0 percent—but it is now growing faster than expected, and faster in the U.S. than in other industrialized countries.
If a full-on recovery is, in fact, right around the corner—finally!—Obama must win reelection in two weeks to get credit for it. If he falls short, he’ll probably take his place next to Bush the Elder in the pantheon of presidents, somewhere down around number 22: not bad, but not good enough. Obama’s successor, meanwhile, will enjoy the same economic head start that Bush bestowed upon Clinton in 1992. Sure, Obama would still be responsible, at least in part, for a lot of the gains and growth that Romney might eventually claim as his own. But very few Americans would care—as Bush’s middling reputation confirms. To the victor, as they say, belong the spoils.