As the American economy plunges deeper into crisis, the conservative chattering classes are hoping for a replay of their 2001 blame game. Having successfully perpetuated the myth that President Bush "inherited a recession" from Bill Clinton, right-wing mouthpieces from Rush Limbaugh to Fred Barnes began blaming Barack Obama for the Bush recession literally within hours of his election. But as a quick glance at the data shows, across virtually economic indicator from GDP, unemployment and consumer confidence to home prices, foreclosures and manufacturing output, ownership for this mushrooming economic calamity squarely belongs to George W. Bush.
Gross Domestic Product. U.S. GDP shrank by 0.3% in the third quarter (July through September), a decline which followed the downward revision of the Q2 number from 3.3% to 2.8%. But while "recession" is traditionally defined as two consecutive quarters of GDP contraction (which is almost certain to occur), the quarterly Survey of Professional Forecasters by the Federal Reserve Bank of Philadelphia concluded that the United States entered a recession in April.
Recession at the State and Local Level. While there is debate as to whether or not the United States has technically slipped into a recession, at the state and local level there is no doubt at all. According to Moody's Economy, by the end of September 30 states were in recession, up from just five in March. 19 more states were deemed "at risk." (Only Sarah Palin's petro-state of Alaska was forecast to experience economic growth.) 276 of 380 metropolitan areas measured by Moody's had also sunk into recession. Combined with the downward spiral of home prices, these regional economic contractions are having a devastating impact on state and local tax revenue - and government services.
Unemployment. In October, the American economy shed 240,000 jobs, catapulting the losses for the year to 1.2 million. At 6.5%, the unemployment rate hit a 14-year high. The percentage of the adult population now working dropped to 61.8%, its lowest level in 15 years. The Philadelphia Fed survey forecast 222,000 more lost jobs per month through the end of the year. With some analysts now predicting unemployment will hit 8% by the middle of 2009, President Bush's reversal on extending jobless benefits could not come a moment too soon.
Jobless Claims. Of course, the corollary to skyrocketing unemployment is an explosion of new jobless claims. The Labor Department today released figures showing new unemployment claims jumped to 542,000 last week, a 16-year high. First-time jobless claims have now remained above the 400,000 for 17 straight weeks.
Consumer Confidence. Given those dismal numbers, it's no surprise that consumer confidence nose-dived in October to its lowest level on record. Even with steep declines in gas prices, consumer confidence dropped 23 points to 38.0, its worst performance since the Conference Board began the survey in 1967.
Consumer Spending. Consumer spending, long the engine of American economic growth, is also in a tailspin. It dropped 0.3% in September and at annual rate of 3.1% for the third quarter, its worst performance since 1980. And outlays for big-ticket items such as cars plunged by 2.9%. With disposable income growing only by a tenth of one percent, Americans for the second month plowed more money into savings.
Home Prices. The news from the collapsing housing market, the sector that triggered the economic crisis, remains dark. Earlier this week, the National Association of Realtors calculated that median home prices in the third quarter plunged by 7.7% compared to the same time frame in 2007. Almost 80% of the metro areas (120 out of 152) measured experienced declines. New numbers from the Commerce Department reflected that weakness; new housing starts and permits fell to the lowest annual rates since 1960 and 1959, respectively.
Home Foreclosures. While Congress and the Treasury Department debate whether and how to help American homeowners on the brink of foreclosure, the crisis only deepens. In the third quarter, 766,000 homeowners received a foreclosure notice, a staggering 71% increase from the same period in 2007. Overall, nearly a fifth of American homeowners - 7.5 million of them - may now be "under water" on their mortgages, with levels in Nevada (47.8%), Michigan (38.6%), Arizona (29.2%), Florida (29.2%) and California (27.4%) all topping 25%
Manufacturing. While the woes of the auto industry dominate the headlines this week, the American manufacturing sector overall is in deep trouble. As the Washington Post reported, in October "the Institute for Supply Management's index of conditions in the manufacturing sector is at its lowest level since the nation was in a recession in September 1982." Ian Shepherdson, chief U.S. economist for High Frequency Economics, called the figures "hideous" and noted "when you see a number like this, it's very alarming."
Stock Market. Of course, the highest profile economic failure of George W. Bush, America's first MBA President, has been on Wall Street. This week, the Dow dropped below 8,000, its lowest level in six years and nowhere near the 10,588 when Bush took office. In all, over $6 trillion was erased from U.S. equities just this year. Alas, history has proven once again that Wall Street and the economy overall simply do better under Democratic presidents.
Consumer Prices. In the current crisis, even seeming good news is bad news. Led by dismal home prices and plummeting oil and gas costs (which may dip below $2 a gallon), the Consumer Price Index dropped 1.0% in October. That decline this week sparked fears among some economists and on Wall Street that the United States could face the prospect of deflation. While still seen as unlikely, a chronic drop in prices at a time of low interest rates could limit the ability of the federal government to spur economic activity.
Health Care. The downward spiral of the Bush economy is also producing dire consequences for Americans' health care. Patients and providers alike are feeling the pinch. A survey by the Kaiser Family Foundation found that one in three Americans had had trouble paying medical bills in the past year. Half had someone in their family skip bills or forego medical care. For the first time in a decade, orders for prescription medications are down (albeit by 1%). Hospitals, too, are suffering. New data this week from the American Hospital Association showed decreases in both admissions and elective procedures as well as a spike in the number of patients who can't pay for care.
Hunger. With the decline of the American economy has come another, quietly growing crisis: hunger. Even before the steep downturn in September, the U.S. Department of Agriculture estimated that the number of children who went hungry in 2007 - almost 700,000 - jumped by 50% over the previous year. Overall, 12.2 of Americans - 36.2 million people - don't "have the money or assistance to get enough food to maintain active, healthy lives."
Leading Economic Indicators. The grim data for jobless claims, manufacturing and personal income combined to produce a steeper than expected drop-off in the Conference Board's index of Leading Economic Indicators. Designed to predict economic activity six to nine months out, the LEI fell 0.8% in October, its third decline in the past four months.
President-elect Barack Obama is almost certainly right in describing the economy he will inherit from George W. Bush as facing "an unprecedented crisis, or at least something that we have not seen since the Great Depression." Bank of America CEO Kenneth Lewis expects no turnaround until at the least the middle of 2009. The Philadelphia Fed's survey estimated the recession would last 14 months. But whatever the duration of the American economic downturn, there can be no question as to its paternity.
This is George W. Bush's recession.
(This piece is crossposted at Perrspectives.)