Economists Say Bush 'Chucked' Free Market Principles Long Before Financial Crisis

By Matt Hadro | January 12, 2009 | 9:17pm EST

Treasury Secretary Henry Paulson (Associated Press)

( – A majority of free-market economists and advocates surveyed agree with President Bush’s self-assessment Monday that he “chucked aside” his “free-market principles” by backing the $700 billion Wall Street bailout advocated by Treasury Secretary Henry Paulson.
But they told the defection came about much, much earlier than the bailout, which occurred at the end of his term.
“I think Bush giving up his free market principles is like Paris Hilton giving up her privacy,” said David Boaz, executive vice president of the libertarian Cato Institute. “He had pretty well given up any free market principles he had a long time ago.”
During a news conference Monday, Bush told reporters that he disapproved of some of his own economic actions.  
“I readily concede that I chucked aside some of my free market principles when I was told by chief economic advisers that the situation we were facing could be worse than the Great Depression,” Bush said.
However, Wayne Crews of the Competitive Enterprise Institute told that Bush had strayed from free market theory continuously over his two presidential terms
“(I’m not) quite sure if President Bush would recognize free market principles if they were on fire and rollerblading naked through the White House,” Crews said.
Boaz pointed out that federal spending increased by over $1 trillion during the president’s eight years -- not including increased expenditures that will likely result from Bush’s Medicare Prescription Drug program and the bailouts of the banks and the auto companies.
“We had steel tariffs, we had nationalization of education, we had incredible growth of government under Bush,” said professor Don Boudreaux, chairman of the economics department at George Mason University. “He did keep taxes lower than the Democrats were clamoring for, but that alone is not sufficient to establish one as a free marketeer.”
Lawrence Reed, president of the Foundation for Economic Education, agreed.
“We got some tax cuts, but the total picture is that government is bigger today than when he [Bush] took office,” Reed told
Bush revealed during the news conference that his advisors told him that the situation the nation was facing “could be worse than the Great Depression.”
Virtually all of the free-market advocates say they are opposed to the Treasury’s recent intervention in the economy – Bush’s legacy.   
Boaz, who admitted that some respected free-marketeers do think the particular problems of the financial industry required intervention, nevertheless said Bush’s program won't help the economy.  
“We do have a serious crisis,” Boaz said, “but it’s largely caused by the federal government having created cheap money, which encourages people to borrow and invest in things that are not sustainable -- and once those bad investments are revealed, you’ve got to let them be liquidated.”
Economist Boudreaux said the nation’s credit market isn’t frozen to the degree that everyone thinks it is. People with good credit today can still obtain mortgages.
“I think it’s exaggerated,” Boudreaux said of the credit “crisis.”
“All this comparing of today to the 1930s is way, way premature,” he added.
Only one expert surveyed -- J.D. Foster, a senior fellow at The Heritage Foundation – assessed Bush’s free-marker legacy differently, citing tax cuts and maintaining security as bright spots in the two presidential terms.
“He pursued a largely free-market agenda throughout his presidency,” Foster told “[Bush] vigorously pursued opening up international trade, cutting taxes. Unfortunately all he did was slow the growth of the regulatory burden, rather than pull it back.”
But Bush also had to work with a “tough” Congress in that respect, Foster added.
Foster also defended the bailout of the financial industry.
“The markets got into very serious trouble, and they would have become much more distressed and dysfunctional, but for action by the federal government,” Foster added.
However, even Foster sided with other free-marketeers in saying Bush acted "unjustifiably" and had “made a mistake, simply put” by using Troubled Asset Relief Program (TARP) funds to bail out the auto industry.
Overall, free-market advocates found little optimism about Bush’s legacy or the long-term consequences of his economic policy.
“I don’t think his presidency will be fondly remembered or highly regarded, by historians or economists,” Reed remarked. “I think we’ll look back and see that he led the country and his party down a path that is unsustainable, in massive increases in spending and debt.”
“I think the changes that he has allowed to have happened are tectonic rather than incremental,” Crews said, adding that government grew significantly in size after 9/11, and grew around 20 percent in just the past few months.
“It’s a very unfortunate legacy,” he concluded. “And it could have been different.” 

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