President Bush has repeatedly touted his adherence to free markets throughout his term. “Free markets remain the best way to promote growth, create good jobs, and ensure rising living standards. That is why the President has actively sought to open markets,” Gregory Mankiw of the Council of Economic Advisers explained in 2004.
But amidst a deep recession characterized by $8.5 trillion in various bailouts, Bush’s laissez-faire ideals are a distant memory. Today on CNN, Bush claimed he has “abandoned” the free market in order to “save” it:
BUSH; Well, I have obviously made a decision to make sure the economy doesn’t collapse. I’ve abandoned free market principles to save the free market system. I think when people review what’s taken place in the last six months, uh, and put it all in one, in one, (sigh), you know, in one package, they’re realize how significantly we have moved.
Bush’s logic of abandoning the free market to “save” the free market is deeply flawed. Much of the crisis was caused by the “belief that markets are self-adjusting and that the role of government should be minimal,” Nobel Prize-winning economist Joe Stiglitz explained. Stiglitz recalled this telling exchange from Alan Greenspan:
Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, “I have found a flaw.” Congressman Henry Waxman pushed him, responding, “In other words, you found that your view of the world, your ideology, was not right; it was not working.” “Absolutely, precisely,” Greenspan said.
Indeed, one of the chief problems was the administration’s failure to regulate mortgage markets. As the Wonk Room explained, the administration ignored several “prescient warnings” about the crisis. In 2005, regulators proposed stringent checks on bankers and mortgages. Bowing to pressure from big banks, however, the administration ignored these warnings and also gutted several important regulations.
Bush’s market fundamentalism has not been “abandoned.” Rather, it has failed.