Contributor Post Created with Sketch. Did Hillary Clinton Really Just Blame the Bush Tax Cuts for the Financial Crisis? Does Bill Agree?

 

Hillary-Clinton-6-14-15-Reuters-500x293During her presidential announcement speech over the weekend, Hillary Clinton offered this interesting explanation for the Financial Crisis:

We’re still working our way back from a crisis that happened because time-tested values were replaced by false promises. Instead of an economy built by every American, for every American, we were told that if we let those at the top pay lower taxes and bend the rules, their success would trickle down to everyone else.

What happened? Well, instead of a balanced budget with surpluses that could have eventually paid off our national debt, the Republicans twice cut taxes for the wealthiest, borrowed money from other countries to pay for two wars, and family incomes dropped. You know where we ended up.

Tax cuts? Inequality? Budget deficits? I have heard this story before. It is highly unpersuasive, as I argued in a 2012 blog post with one of my favorite ever headlines, “Obama didn’t end the Great Recession that Bush didn’t cause.” Don’t believe me? Trying reading any of the opinions in the Financial Crisis Inquiry Commission report. They seem to blame banks and regulators and government agencies and credit raters and so forth. Interestingly, here is one of Time magazine’s “25 people to blame for the financial crisis”:

Bill Clinton. President Clinton’s tenure was characterized by economic prosperity and financial deregulation, which in many ways set the stage for the excesses of recent years. Among his biggest strokes of free-wheeling capitalism was the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act, a cornerstone of Depression-era regulation. He also signed the Commodity Futures Modernization Act, which exempted credit-default swaps from regulation. In 1995 Clinton loosened housing rules by rewriting the Community Reinvestment Act, which put added pressure on banks to lend in low-income neighborhoods. It is the subject of heated political and scholarly debate whether any of these moves are to blame for our troubles, but they certainly played a role in creating a permissive lending environment.

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  1. James Gawron Thatcher
    James Gawron Joined in the first year of Ricochet Ricochet Charter Member

    Jim,

    The ridiculous permissive rules of the lending environment enforced by idiots like Barney Frank were the main cause. As far as the Bush administration goes, if Alan Greenspan had been on his game he would have pulled the plug in 2005 with monetary policy. We would have gone into a normal but deep recession and come out of it before 2008.

    Regards,

    Jim

    • #1
    • June 15, 2015, at 12:32 PM PDT
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  2. Blue State Blues Member
    Blue State Blues Joined in the first year of Ricochet Ricochet Charter Member

    What do you expect from Hillary Clinton – the truth?

    • #2
    • June 15, 2015, at 2:20 PM PDT
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  3. tigerlily Member

    James Gawron:Jim,

    The ridiculous permissive rules of the lending environment enforced by idiots like Barney Frank were the main cause.

    Regards,

    Jim

    Exactly.

    • #3
    • June 15, 2015, at 2:25 PM PDT
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  4. I Walton Member

    The tax cuts were a mistake. The dot com bust was quickly self correcting, the people who lost jobs were quickly rehired, the measure cut lower brackets too much, thus gutting the code and moving us further toward half the population indifferent to taxing and spending. It was an attempt to avoid the charge of cutting taxes for the rich while spurring spending. It was Keynesian not supply side. We don’t need anymore of this, either Keynesian or supply side cuts. The regulatory and tax codes must be tossed and replaced because they promote rot and corruption while repressing the economy, risk taking and saving. The tax cut, however, had nothing to do with the burst housing bubble.

    • #4
    • June 16, 2015, at 1:08 PM PDT
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