The Liberal talking point that “it was Bush’s tax cuts” that caused the ‘great recession’ – which of course is a lie that Hillary (being a liar) loves to regurgitate
Election 2016: During Monday’s presidential debate, Hillary Clinton weighed in on the 2008 financial crisis, blaming “tax cuts” during the Bush years and implying that deregulation was also to blame. It’s another example of the whoppers Hillary Clinton and other Democrats tell about the recession they caused.
If a gold medal were awarded for chutzpah, Hillary Clinton would surely be a multiple winner by now.
“Well, let’s stop for a second and remember where we were eight years ago,” Clinton said. “We had the worst financial crisis, the Great Recession, the worst since the 1930s. That was in large part because of tax policies that slashed taxes on the wealthy, failed to invest in the middle class, took their eyes off Wall Street, and created a perfect storm.”
To be as kind as possible, the idea that “tax policies” — including the 2003 tax cuts — were the root cause of the financial panic is an idea espoused by no one we’re aware of in the economics profession. It was those tax cuts that in fact revived the economy, which had begun failing in the waning months of the Clinton administration.
From 2003 to 2007, the tax cuts helped push real GDP up 15.2%, or more than 3% a year. And, as Avik Roy notes in a recent Forbes piece, “the wealthy actually contributed more in taxes after the ‘cuts’ went into effect.” In 2003, the top 1% in incomes paid $256 billion in taxes. In 2007, they paid $471 billion.
The “failed to invest in the middle class” line is even better, since it is entirely devoid of meaning. Seems we had nearly $8 trillion in added government “investment,” as our soaring national debt now shows, thanks to President Obama, Hillary and the rest of the profligate party she now leads.
Did that go to the middle class? Sure doesn’t look like it.
But what’s most interesting about Hillary’s remark is it ignores the actual responsibility that she and her husband, former President Bill Clinton, bear for creating the financial crisis. It’s hypocrisy that the Clinton Democrats, who created the housing bubble in the 1990s and 2000s with their policies, now have spun a false tale of Wall Street greed, crazy deregulation, and tax cuts as the causes of the crisis.
Here’s the real story, in brief: In 1995, using the powers of the presidency, Bill Clinton turned the 1977 Community Reinvestment Act into an aggressive program that basically forced banks to lend money to “underserved” communities. That meant those with low incomes who couldn’t necessarily repay a loan.
Meanwhile, his Department of Housing and Urban Development got involved in a big way.
Jack Cashill, writing for the American Thinker, notes: “HUD, which Congress had made the regulator of Fannie Mae and Freddie Mac in 1992, began to pressure these agencies to set numerical goals for affordable housing, even if that meant buying subprime mortgages. The media cheered the agencies on.”
Under HUD Secretary Andrew Cuomo, the agency became particularly aggressive, in 2000 making a goal of over $1 trillion in new loans to low-income minority households. Fannie Mae and Freddie Mac were told to make at least half of their loans to low- and moderate-income borrowers, mainly minorities.
Banks suddenly found that regulators had the power to refuse their branch expansions or reject a merger if they weren’t making enough loans to otherwise unqualified minority borrowers. So they played along. They made the loans, and Freddie and Fannie bought the loans right back. It was like a game of musical chairs, and the Fed kept the game going in the early 2000s by cutting interest rates.
Every time Republicans in Congress or President Bush talked about reforming housing programs, Democrats like Rep. Barney Frank of Massachusetts and Sen. Chris Dodd of Connecticut threw fits, threatening to gum up Congress and implying that GOP lawmakers were racists. The Republicans backed off.
From 1997 to 2007, with the Fed slashing interest rates and flooding the banking system with liquidity, home lending soared. Banks abandoned long-standing lending standards to avoid being punished by regulators or singled out by newly empowered “community groups” such as ACORN as anti-minority.
“As a result of these policies,” wrote Peter J. Wallison, a member of the Financial Crisis Inquiry Commission, in a scathing dissent from the group’s official findings, “by the middle of 2007, there were approximately 27 million subprime and Alt-A mortgages in the U.S. financial system — half of all mortgages outstanding — with an aggregate value of over $4.5 trillion.” And by 2008, Fannie and Freddie had on their books more than three-quarters of all U.S. subprime and Alt-A loans made.
When the Fed began raising interest rates to slow inflation, and put a brake on soaring housing prices, many of the loans made to low-income black and Hispanic borrowers predictably fell into delinquency or default — leaving mortgage lenders, Fannie and Freddie, and Wall Street with enormous losses.
The ensuing Great Recession, as Hillary helpfully pointed out Monday night, did indeed cost 9 million people their jobs and wiped out $13 trillion in household wealth — an unparalleled financial disaster.
But let’s be very clear here: Tax cuts had nothing to do with this whatsoever. Nor did the minor tinkering to the 1930s-era Glass-Steagall law in 1999, which was implicated in none of the major Wall Street insolvencies or subsequent bailouts during the crisis. It’s another die-hard Democratic myth, intended to absolve themselves of blame for the crisis. And the economy-killing Dodd-Frank financial regulations passed in 2010 were based on these Democratic myths — which is why we’re now having the worst economic expansion in modern history.
The truth is this: Bill Clinton, working with congressional Democrats in the 1990s, empowered a massive, well-funded bureaucracy to regulate and punish those in the private sector that didn’t go along with Clinton’s plans to lend vast sums of money to people who could never pay the money back.
And when it all went sideways in 2007, they pointed fingers at everyone but themselves. They’re still doing it.
Hillary Clinton knows well what happened in the 1990s while she was First Lady. She was a major supporter of these programs and, as touted at the time, a virtual “co-president.” To now suggest others and “tax cuts” are to blame is just another intentional lie. Maybe the media can fact-check that.