George H.W. Bush, a boring economic policy maker

Written by Andrew Szabo
Wednesday, 05 January 2011 23:00

George H.W. Bush came to office with a distinguished résumé and a privileged social class background.

His father was a successful investment banker — the family has roots here in Greenwich — and he attended prep school at Philips Andover. He earned distinctions for heroism as a World War II fighter pilot in the Pacific, took a bachelor’s degree from Yale and made a fortune in Texas oil.

He then served as representative in Congress from Houston, ambassador to the U.N. (under Nixon), director of the CIA (under Ford), and vice president (1981-89) under Ronald Reagan, who defeated him in the 1980 Republican primaries, then nominated him for his party’s ticket.

Bush’s most memorable achievements were in foreign policy, not domestic. His administration coincided with the collapse of Soviet power and the fall of the Berlin Wall, and he helpfully maintained a personal relationship with Gorbachev. In 1991, America and the Soviets agreed on the Strategic Arms Reduction Treaty (START 1).

Bush orchestrated the Desert Storm campaign against Saddam Hussein, achieving U.N. backing, that rolled back Iraq’s invasion of Kuwait.

Bush served loyally as vice president under Reagan, but it’s fair to say he was not an apostle of Reaganomics. His view was more pragmatic, like Nixon’s, but without Nixon’s iconoclastic boldness. During the 1980 Republican primaries, Bush famously characterized Reagan’s supply side rhetoric as “voodoo economics,” a phrase Democrats loved to repeat. Indeed, as President, he faced two kinds of radioactive fallout from the Reagan regime. The first problem was fiscal — to reduce the mushrooming federal deficit, which ran over $200 billion in 1990. Bush reached a deal with congressional Democrats in 1990 to increase taxes, violating his cinematic campaign promise, “Read my lips: no new taxes.” The second contamination was the collapse of hundreds of federal savings and loan associations, partly as a result of poorly guided deregulation, along with many other factors. This implosion led to a massive federal bailout, costing taxpayers about $125 billion.

In sum, Bush’s economic policies were moderate, compromising and boring, and there is something to be said for each of these qualities. Bold action on the economy — take Kennedy’s attack on the U.S. Steel industry (1962), or Nixon’s imposition of a range of temporary wage and price controls (1971), or even perhaps some of the Fed’s and Treasury Department’s recent bold measures — often leads to seriously detrimental unintended consequences.

Although Danton may have been right to recommend, as a policy for revolution, “audacity, audacity, and still more audacity,” the same cannot be said for government regulation of the economy.

The economy entered into a modest recession in 1991 and was anemic going into the presidential campaign of 1992. Although Reagan had also approved selected tax increases during his administration, he is more remembered for bringing down the maximum marginal federal income tax rate; conservatives skewered Bush as an apostate to the doctrines of supply side economics. This issue weakened Bush’s support with the potent conservative base in the Republican Party, some of whom defected to Pat Buchanan during the primaries and to Ross Perot’s popular third-party candidacy during the general election. Democratic candidate William Clinton defeated George H.W. Bush, leaving him a one-term President.

Next week: Bill Clinton’s inclusive politics.

Andrew Szabo is managing director of Greenwich Financial Management Inc. Securities offered exclusively through NewOak Capital, member FINRA/SIPC/MSRB. Write to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .Copyright (c) 2010, Greenwich Financial Management Inc.