Compare Obama vs Bush on Economic Policies and the Debt

Was Bush or Obama Best for the Economy?

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. Here's a comparison of the critical elements of their economic policies.

Defense

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

Bush launched the Iraq and Afghanistan wars in response to the 9/11 terrorist attacks.  The War on Terror cost more than $1.5 trillion over its lifetime.

Obama cut back both wars. He relied instead on military intelligence and technology to get Osama bin Laden. Regardless of the strategies used, America's involvement in the Middle East may never end. For more, see Sunni-Shia Split.

Recession-Fighting

Bush and Obama used expansionary fiscal policy to combat recessions by stimulating economic growth

Bush used tax cuts to fight the 2001 recession. He designed the first tax rebate, EGTRRA, to jumpstart consumer spending. Checks were mailed to households in August 2001. In 2004, he launched the JGTRRA tax cuts. They helped businesses recover from the 2001 recession. Tax cuts aren't the most effective way to create jobs. For more, see Unemployment Solutions.

In 2005, Bush 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 percent in Q4 2005. He then added $33 billion to the FY 2006 budget to help with cleanup.

Bush left it up to the Federal Reserve to address the 2007 banking crisis with monetary policy. After Lehman Brothers collapsed in 2008, he agreed to Treasury Secretary Hank Paulson's  TARP bailout.

 

Obama passed the $787 billion Economic Stimulus Act. It directly created jobs in education and infrastructure. That ended the recession in the third quarter 2009. Obama used the TARP funds to subsidize homeowners stuck with upside-down mortgages. 

Health Care

Both Presidents took action to address rising health care costs. The cost of Medicare and Medicaid threatened to eat the budget alive. Even worse, the number #1 cause of bankruptcy is health care 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. 

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. 

In 2010, Obama pushed through Affordable Care Act. Its goal is to reduce health care costs. The benefits it provides was realized after 2014.

  Obamacare closed the donut hole. More important, it provides health insurance for everyone. That cuts health care costs by allowing more people to afford preventive health care. They treat their illnesses before they become catastrophic. That means they rely less on expensive emergency room care. It was paid for with a variety of taxes. For more, see Cost of Obamacare. (Source: "Report of the Trustees," Health and Human Services, 2009.)

Trade

Both Presidents advocated more free trade agreements.

Bush completed the Central American-Dominican Republic Free Trade Agreement (CAFTA) in 2005. He also signed bilateral agreements with Australia (2005), Bahrain (2006), Chile (2004), Jordan (2001), Morocco (2004), Oman (2006), and Singapore (2004).

Obama successfully negotiated the Trans-Pacific Partnership. He is still negotiating the Transatlantic Trade and Investment Partnership. Congress awarded him Fast Track Trade Promotion Authority in June 2015.  But it's unlikely either agreement will come up for a Congressional vote by the end of Obama's term. Obama did have success with bilateral agreements in South Korea (2012), Colombia (2011), Panama (2011), and Peru (2009). For more, see Bilateral Trade Agreements.

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

Regulations

Bush passed the 2005 Bankruptcy Prevention Act. That made it difficult for people to declare bankruptcy. As a result, they relied on home equity loans instead. After the Act passed, mortgage defaults rose 14 percent per year. That worsened the subprime mortgage crisis. (Source, "Did the Bankruptcy Reform Act Cause Mortgage Delinquency to Rise?" National Bureau of Economic Research, March 2010.)

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. 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.

Deficit and Debt

Both Presidents ran up record-setting budget deficits. Bush's deficits were $3.293 trillion, an increase of 57 percent. Obama's deficits were $6.616 trillion, also 57 percent increase.

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. President Bush's last budget, for FY 2009, started out with a $407 billion deficit. Congress approved $350 billion to fund TARP, but only $151 billion was spent in FY 2009. After Obama had taken office, Congress added the Economic Stimulus Plan to end the recession. That added $253 billion in FY 2009. Revenue came in almost $600 billion lower than expected. As a result, the FY 2009 budget deficit was $1.4 trillion--the largest in U.S. history.

Obama's FY 2010 budget deficit was $1.294 trillion. The FY 2011 Budget deficit topped that, at $1.3 trillion. It was delayed by the Republican House until a mere $38 billion was trimmed in March 2011.  As the economy improved, each year's deficit got lower.  For more, see Deficit by President

As a result, the U.S. debt rose the most during their terms. That's because each year's budget deficit adds to the debt. Increases in the Social Security Trust Fund are counted as off-budget.revenue. That lowers each year's deficit. But those increases don't reduce the debt. That means a President's contribution to the debt will be higher than all his deficits combined. (Source: Michael R. Pakko, "Deficit, Debts and Trust Funds," Economic Synopses, St. Louis Federal Reserve, August 2006.)  

As a result, Bush added $5.8 trillion to the debt, while Obama added $7.9 trillion by the end of FY 2016. For more, see Debt by President and How Much Did Obama Add to the Debt?

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