How Do Obama and Bush Compare on Their Economic Policies?

The Surprising Similarities Between Presidents Bush and Obama

Barack Obama
Presidents Bush and Obama (Credit: Brendan Smialowski/Getty Images).

George W. Bush (Republican) was the 43rd U.S. President, and his two terms were from 2001-2009. Barack Obama (Democrat) is the 44th President, whose two terms are from 2009-2017.

Similarities

First, both Presidents spent more on defense than any Administration since WWII. Few people are aware that Obama spent more than Bush on defense, roughly $700 billion a year vs. $500 billion.For more, see Military Budget.

Second, both Bush and Obama used expansionary fiscal policy to combat recessions by stimulating economic growth. As a result, the U.S. debt rose the most during their terms. When measured this way, Bush added $5.8 trillion, while Obama added $7 trillion by the end of FY 2014. For more, see Debt by President and How Much Did Obama Really Add to the Debt?

The third similarity is that both Presidents took action to address rising healthcare costs.  The fourth is that they both advocated more free trade agreements.

Differences

First, Bush launched two boots-on-the-ground wars in Iraq and Afghanistan in response to the 9/11 terrorist attack. Obama promised to end both wars. He used a surgical operation, that relied more on military intelligence and technology, to get Osama bin Laden. However, regardless of the strategies used, America's involvement in the Middle East may never end. For more, see Sunni-Shia Split.

Second, Bush aggravated the Subprime Mortgage Crisis when he passed the 2005 Bankruptcy Prevention Act. It made it difficult for people to declare bankruptcy, so they took money out of their home equity instead. After the Act passed, mortgage defaults rose 14% per year.

People did not go bankrupt because of consumer spending.

The number #1 cause of bankruptcy is healthcare costs. That's true even for those with insurance. That's because many policies at the time had annual and lifetime limits that were exceeded by chronic illness. (Source, NBER, Did Bankruptcy Reform Act Cause Mortgage Delinquency to Rise? March 2010)

To address the 2008 financial crisis, Bush approved the TARP bailout, which spent $350 billion to keep the U.S. financial system from collapse. Obama didn't have to worry about collapse. He used TARP funds to subsidize homeowners stuck with upside-down mortgages. 

Obama passed the Economic Stimulus Act, which directly created jobs in education and infrastructure. That ended the recession in the third quarter of 2009. Bush used tax cuts to fight the 2001 recession. These aren't as effective in creating jobs. For more, see Unemployment Solutions.

Third, to address rising healthcare costs, Bush created the Medicare Part D prescription drug program. It helped seniors with prescription drug costs up to a point, known as the "donut hole." This program was not funded with tax increases.

As a result, it added $550 billion to the debt. 

Obama passed the Affordable Care Act, which closed the donut hole. It also provides health insurance for everyone, allowing many people to get preventive healthcare and ultimately cut health costs over time. It was paid for with a variety of taxes. For more, see Cost of Obamacare.(Source: Health and Human Services, Report of the Trustees, 2009)

Fourth, Bush had much better success with negotiating and getting approval for major trade agreements. The Central American-Dominican Republic Free Trade Agreement (CAFTA) was completed during his term (2005). He also signed bilateral agreements with Australia (2005), Bahrain (2006), Chile (2004), Jordan (2001), and Morocco (2004), Oman (2006), and Singapore (2004).

Obama is negotiating the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership. However, without Fast Track Trade Promotion Authority, it is unlikely either one will reach the final stages of negotiation, and definitely won't be passed by Congress. Obama did have success with bilateral agreements in South Korea (2012), Colombia (2011), Panama (2011), and Peru (2009). For more, see Bilateral Trade Agreements.

In Depth: Obama Economic Policies

Obama outlined his economic policies in the 2008 Presidential election campaign. Once elected, he named former Federal Reserve Chairman Paul Volcker, who advocated tougher financial restrictions, to head his Economic Advisory Panel. He then launched the $787 billion Economic Stimulus Act, which returned the economy to positive GDP growth by the third quarter 2009.

In 2010, Obama pushed through Obamacare. Its goal is to reduce healthcare costs. The benefits it provides will be realized over the next several years

The Dodd-Frank Wall Street Reform Act makes another financial crisis less likely. It regulated non-bank financial companies, like hedge funds, and the most complicated derivatives, like credit default swaps. It regulates credit, debit, and prepaid cards and ended payday loans with the Consumer Financial Protection Agency.

Obama supported passage of free trade agreements as part of the American Jobs Act. But he hasn't yet fulfilled his campaign promise to review all trade agreements to make sure they didn't cause job losses. 

In Depth: Bush Economic Policies

To address the 2001 recession, President Bush launched tax cuts. The first tax rebate, EGTRRA, was designed to jumpstart consumer spending. Checks were mailed to households in August 2001. After the 9/11 attacks, Bush focused on the War on Terror, which cost at least $1.5 trillion over its lifetime.

In 2004, Bush proposed the JGTRRA tax cuts to help businesses recover from the lingering effects of the 2001 recession, which the 9/11 attacks aggravated. In 2005, he missed an opportunity to react quickly to Hurricane Katrina. Some estimates said it cost $200 billion in damage. As a result, GDP fell to 1.5% in Q4 2005. He then added $33 billion in the FY 2006 budget to help with cleanup.

President Bush left it up to the Federal Reserve to address the banking crisis with monetary policy. Only after Lehman Brothers collapsed did he agree to Treasury Secretary Hank Paulson's recommendation to stop financial panic with the $700 billion bailout bill.

Obama and Bush Both Created Huge Budget Deficits

Both Presidents ran up record-setting budget deficits. Obama's FY 2012 Budget had a $1.09 trillion deficit, even though the recession was over. The FY 2011 Budget deficit was $1.3 trillion. It was delayed by the Republican House until a mere $38 billion was trimmed in March 2011. Obama's first budget in FY 2010 was also $1.3 trillion.

President Bush's last budget, for FY 2009, started out with a $500 billion deficit. However, it grew to $1.4 trillion after TARP and the Economic Stimulus Plan were added to it. The plan was budgeted for the first three fiscal years: $185 billion in FY 2009, $400 billion in FY 2010 and $135 billion in FY 2011.

The Bush FY 2008 Budget was the last budget untouched by recession-fighting. Even so, it ran a (then shockingly high) $458 billion deficit to fund the War on Terror. That was after borrowing $678 billion from the Social Security Trust Fund. That type of raiding is standard operating procedure since the Federal government can borrow from itself at will.  For more, see Deficit by President

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