Economic Growth
At the time Bush took office the economy had grown at a 1.1% annualized rate over the previous three quarters to March 31 of the first year of Bush presidency (see Early 2000s recession). Bush had his tax cut plan approved by Congress in June.
Overall real GDP from January 2001 through December 2008 grew at an average annual rate of 2.0375%. From 2001 through 2004, GDP growth was clocked at 2.225%. The number of jobs created grew by 6.5% on average. The growth in average salaries was 1.2%. Growth in consumer spending was 72% faster than growth in income. Investment in residential real-estate soared, growing 26% faster than average.
A March 2006 report by the United States Congress Joint Economic Committee showed that the U.S. economy outperformed its peer group of large developed economies from 2001 to 2005. (The other economies are Canada, the European Union, and Japan.) The U.S. led in real GDP growth, investment, industrial production, employment, labor productivity, and price stability.
A significant driver of economic growth during the Bush administration was home equity extraction, in essence borrowing against the value of the home to finance personal consumption. Free cash used by consumers from equity extraction doubled from $627 billion in 2001 to $1,428 billion in 2005 as the housing bubble built, a total of nearly $5 trillion dollars over the period. Using the home as a source of funds also reduced the net savings rate significantly. By comparison, GDP grew by approximately $2.3 trillion during the same 2001-2005 period in current dollars, from $10.1 to $12.4 trillion.
Economist Paul Krugman wrote in 2009: "The prosperity of a few years ago, such as it was — profits were terrific, wages not so much — depended on a huge bubble in housing, which replaced an earlier huge bubble in stocks. And since the housing bubble isn’t coming back, the spending that sustained the economy in the pre-crisis years isn’t coming back either." Niall Ferguson stated that excluding the effect of home equity extraction, the U.S. economy grew at a 1% rate during the Bush years.
President Bush tried to calm turmoil in financial markets on March 17, 2008, by saying that his administration is "on top of the situation" in dealing with the slumping Economy of the United States. Bush and Congress had responded to signs of a slowing economy with the Economic Stimulus Act of 2008 on February 13.
Read more about this topic: Economic Policy Of The George W. Bush Administration, Economic Indicators
Famous quotes containing the words economic and/or growth:
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