“This election to me is about which candidate is more likely to return us to full employment. This is a clear choice. The Republican plan is to cut more taxes on upper income people and go back to deregulation. That is what got us into trouble in the first place.”
— Former president Bill Clinton, in an Obama campaign ad running since August
When two different people give virtually the same message in two different ads, it’s a good bet that the language has been carefully poll-tested. Both President Obama and former president Bill Clinton assert that Mitt Romney wants to cut taxes for the wealthy and cut financial regulations — which they suggest is a recipe for another economic crisis.
The name “George W. Bush” is never mentioned but is certainly implied. This leads to the question:
Did the Bush tax cuts cause the economic crisis?
We’ve been interested in the Clinton comments for some time and never quite got a satisfactory response from the Obama campaign. But Clinton used the vague word “trouble,” which could be broadly defined as also meaning higher deficits. (Clinton’s staff did not respond to queries about what he meant.) Certainly the Bush tax cuts did play some role in higher deficits, though, as we have noted, increased spending played a bigger role.
But Obama is not vague at all. He highlights the tax cuts and then says the “same trickle-down policies” — Democratic code for tax cuts for the wealthy — led to the “crisis.” The campaign’s back-up material labels that as “economic crisis,” thus leaving no ambiguity about his reference.
We should stipulate at the outset that Romney adamantly rejects the idea that he has proposed more tax cuts for the wealthy. His plan would cut tax rates, but also eliminate tax deductions, which he says would make the plan revenue neutral. But no one has proven that his numbers add up, and the respected nonpartisan Tax Policy Center concluded that the available details on the Romney plan suggest taxes would decrease for the wealthy but rise for the middle class.
Romney has advocated repealing the Dodd-Frank financial regulation bill. As for the role of deregulation in the crisis, there certainly has been news reporting showing that the Bush administration generally took a hands- off approach to regulating financial institutions.
But others would note the irony of Clinton citing the perils of deregulation under Bush because he also is culpable. Clinton signed into law a repeal of the Glass-Steagall law that separated commercial and investment banks — a policy shift that some have said also played a role in the economic crisis.
Moreover, Clinton also signed into law the Commodity Futures Modernization Act, which essentially removed derivatives contracts from regulatory oversight. By many accounts, derivatives, such as the credit default swap, were at the heart of the financial crisis.
Indeed, Clinton has admitted that he was given wrong advice about the need to regulate derivatives contracts. “I think they were wrong, and I think I was wrong to take” their advice, Clinton said of his economic advisers.
The Dodd-Frank bill tightened regulations on derivatives contracts, thus reversing the decision that Clinton — not Bush — had made.
While one can argue whether deregulation under Clinton or Bush played a bigger role in the financial crisis, the notion that the Bush tax cuts “led” to the 2008 crisis is especially puzzling. The campaign’s back-up material for the Obama ad cites only one source — a column by our colleague Ezra Klein. Here is how it is presented: