Who's economy was/is better? Was it the economy of President George W Bush (January 2001-January 2009) or President Barrack Obama (January 2009 to Present [September 2012])?...
The Global Economic Collapse
The financial collapse that happened right before the election of President Obama in 2008 was cataclysmic. The world economy literally imploded in tandem with the USA's economy. This needs to be considered when analyzing the economies of both US presidents (Bush and Obama), because it had (and still has) huge ramifications.
For most of George W Bush's eight year run as America's 43rd President, the economy was actually quite good (even too good), but it ended with one of the biggest (if not THE biggest) financial and economic collapses in modern history. This was in large part thanks to what is often described as an economic bubble of unrealistic prosperity and "boom" (jobs, business expansion, heavy investment, easy money through loans, etc.). The economy was on fire but burning much hotter than it probably should have. And when that economy started to contract, the gigantic holes that had formed in the global economy shredded into a million pieces.
At the beginning of 2007, Bush's 7th year as President, warning signs were starting to go off and the word "Recession" was starting to get batted around. An Economic Recession is when the economy is shrinking and/or stagnating for many months in a row instead of growing. That means employment, investment, manufacturing, bank loans and lots of other things dry up or drop. Though employment was amazingly good right through until the actual collapse, other signs like disappearing manufacturing jobs, a shrinking overall work force, rising debt loads (both in governments and households), and a weakening GDP (national Gross Domestic Production) hinted at potential disaster to come.
The economic Armageddon struck in September and October 2008, causing the greatest financial collapse in US and world markets since The Great Depression of the 1930s. A month later Obama was elected as the 44th President of the United States and took office January 2009 amidst the bottoming out of the US and global economies, which continued for a number of months beyond.
The Global Financial Crises from 2007 to 2012 (on going) has huge ripples that continue to be heavily felt all across the world, especially in the United States which was one of the hardest nations hit.
Important Considerations
It is essential to always keep in mind that George W Bush was President for 8 years during an economic boom whereas Barrack Obama has been President of the US for only 4 years in the midst of the Global Financial Crises. The importance of these two very different time periods cannot be overstated!
Who Caused The Collapse?
There are many fingers to point and almost as many people to point them at if someone wants to play the "blame game".
Generally, it was the banks and investment groups that were the heart and soul of the financial collapse. They created and rode a housing bubble based on horribly shaky investments and terrible reasoning. The whole idea was that the easier it was for everyone to get loans so they could buy houses and live large, the better the economy would be, and it was a win-win for everyone. So banks were handing out huge loans to absolutely EVERYONE who came asking, even advertising and "spreading the word" that ANYONE could get an easy low-rate mortgage for a new house and more with NO down-payment. These "great deals" were flying off the shelves as people snatched them up and dug themselves gigantic debt, many of which had little or no ability to pay the debts back. I mean, there were banks handing out house mortgages to the chronically unemployed! Of COURSE they couldn't pay it back!
Unfortunately it was hard to see just how bad it was getting because of how the banks were trading all these bad (sub-prime) mortgages and investments back and forth between each other to make even more money off of them. The banks and investors basically masked the depth and size of the problem through fancy accounting tricks. But when the booming economy started to contract and slow down, the off the wall projections of big growth evaporated and reality struck hard. As jobs started to bleed away and as it came time to pay up the monthly bills which included all these easy sub-prime loans, people simply could not pay.
"No problem!" thought the banks. They had thought this through beforehand. It's partly why they gave out the loans in the first place! Just kick the loafers out and sell the house and property. We'll make the loan back and more because housing and land prices are always going up anyway. True for the most part, until there's millions upon millions of houses and businesses up for sale at rock bottom "sell it right away" prices... And what happens when millions and millions of home owners aren't paying their mortgage bills for extended periods of time? The banks foreclose and take back all those houses... And ALL those houses go up for sale at the same time because all those bad loans were made right around the same time... Greedy banks, say hello to a bad case of supply and demand.
Sale prices tanked because the market was over saturated. There were WAY too many houses suddenly up for sale and no where near enough people to buy them. So the housing market completely imploded with the value of land and new houses dropping as much as 50% or more in many places. This means that the banks were overloaded with houses and businesses that they had paid out big money for, but that couldn't possibly return their investment. If they'd handed out a $300,000 loan for a house, the house was now worth half that! Where did all the money disappear to? It never really existed in the first place! It was "invisible" money based on severely overly valued debt (all over the place, but especially the housing market).
The easy answer to who caused the collapse is that the banks and investors (the Wall Street types) caused it. They dramatically over-invested, envisioning big things in a dream world that did not exist. They created an economic bubble (an empty air-filled dream) and it popped.
How Did The Banks Not Get Caught!?
How did they get away with it!? Now THAT is the root of the problem. Liberals (Democrats) will tell you that it was George Bush's fault for allowing it to get so out of hand in the first place. He was President. His advisers should have seen it coming and he should have stopped it before it ever got so bad. Unfortunately, a lot of people were quite blinded by the booming economy, and banking tricks hid the "empty" massive debt load very well. You'll note, however, that countries that DID NOT join in the "free easy money" lending spree by and large survived the economic collapse amazingly well (Canada, for example). Basically, it all came down to regulation. Governments that clamped down on what banks and financial institutions could do when it came to debt and lending fared well while the countries that didn't better regulate the banks fared badly.
So it's the government's fault!... Partly, yes. It's the banks (and investors) faults for doing all this when they really should have known better, but it's "the system's" fault (the government and the lack of financial smarts by every day people) that allowed them to get away with it in the first place. Then it WAS George Bush's fault!... Partly, but not entirely.
For the United States, where the bulk of all this originated, BOTH government parties are to blame! The Republicans are big on capitalism run wild to be free and do what it likes (de-regulation and all that). "The free market will keep things in check." It obviously didn't. Democrats were to blame because they were big on the "everyone needs a house and access to easy money" push. They had it in their heads that debt money is almost always better than no money, so they pushed for banks to lend, lend, lend! The Democrats were in control of Congress as of January 2007 and went on a huge spending spree as well as de-regulated what little restrictions there were on bank loans and trading so that poor people could own a nice home too. BOTH parties screwed up big time!
Yes, The Democrats Too!
Am I being unfair to the Democrats? After all, Bush was a Republican President! Didn't he and the Republicans have all the power to enact legislation to stop the banks from doing this?
The US government is set up with two major legislative branches, an executive branch, and the judicial branch. The Legislative Branch (Congress) consists of The House of Representatives and The Senate. The Executive Branch is made up of the "ruling party", the political party that won the last federal election and have their President in power. This means that the Republicans ran the Executive Branch of the US government during Bush's 2 terms. Congress, however, is made up of DIFFERENT elected officials, and it has the power to veto (over-ride) the Executive Branch if it can get a 2/3rds majority vote on a bill (law, government expenses, etc.). This is exactly what happened at the end of 2006. The Democrats gained a big majority in Congress and because of this, they heavily controlled what the overall government could do with regards to federal money and the economy. So it's no lie that both political parties were heavily involved in the financial collapse one way or another. The entire US government is set up in such a way that it's quite hard for either the Executive Branch or the Legislative Branch to do much without the approval of the other.
To make matters worse, a lot of people didn't see this coming until it was too late. As I already said. The banks were doing an impressive job at masking just how big the problem was, so even as it was burning them alive, a lot of people still had no idea just how bad it was until it all finally came crashing down.
Coming Soon...
US Economy? Bush vs Obama? (Part 2) (link not yet available)
Now that we've covered The Global Financial Crises of 2007-2012, next we'll look into the actual numbers of both Presidents' economies and see how they compare.
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