WASHINGTON, July 21 (UPI) -- He got into a war without an obvious exit route, on the basis of evidence that was later held to be false. He instituted new Federal spending programs without worrying about how to pay for them until too late. And, after huge popularity for several years, he began to suffer a serious credibility gap.
No, not George W. Bush, Lyndon Baines Johnson.
On foreign policy, the comparison is a little unfair. Johnson admittedly inherited an impossible situation from President John F. Kennedy, who had allowed the assassination of Ngo Dinh Diem, the main prop of the South Vietnamese regime (such as it was) just weeks before his own assassination. Whatever Kennedy had planned to do following Diem's removal, stabilizing South Vietnam under a competent democratic government was never likely to be achieved. For one thing, there was at that stage almost no obstacle to the economic destruction of the South Vietnamese economy by North Vietnamese guerilla forces. Nevertheless, Johnson, by escalating U.S. participation in the war without taking decisive steps to defeat the North Vietnamese regime, made things very much worse. It was a case where either extreme position -- invade North Vietnam or get out altogether -- would have been likely to have brought a better result than the expensive, ineffectual "moderate" course Johnson chose.
Johnson exacerbated his political problems by the Tonkin Gulf resolution of September 1964, passed with only 2 opponents in the U.S. Senate (maverick liberals Ernest Gruening and Wayne Morse, both of whom gained lifetime cred. in the leftist community by their votes.) Instead of asking Congress for a formal declaration of war, and putting all the facts before it -- this was, after all, an election year -- Johnson used a murky and equivocal naval incident in the Gulf of Tonkin to obtain what effectively became a carte blanche for military action in Vietnam, while running for President against Barry Goldwater on the platform of no escalation of the war in Vietnam. Woodrow Wilson had done likewise in 1916, against Republican Charles Evans Hughes, but in Wilson's case, the war had been won before the electorate could express its disapproval of being fooled. For Johnson, no such military rescue was available.
If you believe that the World Trade Center attack "changed everything" then George W. Bush had no need of complex justifications for the invasion of Iraq, and indeed the ease with which he obtained Congressional resolutions on the subject in October 2002 should have left his path open. The problem came with his foolish decision the previous month to take the problem to the United Nations. Not only did this produce endless delay, it also allowed first Gerhard Schroeder in Germany and then Jacques Chirac in France to be swayed by the substantial but non-majority leftist anti-American public opinion in those countries. Consequently, Bush was forced to justify in the State of the Union address an invasion for which he already had Congressional authorization, and Colin Powell was forced to defend an eroding position at the United Nations. Like Johnson in 1964, they used dubious or maybe non-existent evidence to buttress a case that didn't really need buttressing. Like Johnson in 1966-68, Bush may well pay a high price for these errors.
Where the comparison breaks down is in the war itself. The Vietnam war caused 58,000 U.S. casualties, and while it may have been obvious to military experts that the U.S. was winning at the time of the 1968 Tet offensive, it certainly wasn't obvious to anyone else. Iraq, conversely, caused less than 150 casualties in the initial assault, and now seems to have settled down into the kind of low level guerilla colonial warfare such as Britain and France have historically experienced many times, with casualties running at around 20-30 per month. This is nowhere even close to Vietnam, and only a serious worsening of the situation on the ground, or total loss of credibility by the Bush administration, will make the bleating about "another Vietnam" credible to the American public.
Of course, if the public remains convinced that 9/11 "changed everything" and Bush's foreign policy does not meet with disaster, then his credibility in this area will remain reasonably high; there is a serious problem, and the administration is taking serious if expensive steps to meet it. Even further atrocities similar to 9/11 will not shake credibility, although a nuclear incident involving North Korea presumably would.
The problem will arise if the public becomes less convinced that 9/11 "changed everything." Having lived in London in the 1980s, I'm not at all sure that it did, for the world as a whole. After all, there were a number of bombings in 1980s Britain which killed many people and did a great deal of damage, and indeed the Irish Republican Army were with the Brighton hotel bombing of 1984 within feet of changing British history unimaginably by wiping out Lady Thatcher -- BEFORE the miners' union had been defeated or British Telecom privatized. In many ways, the World Trade Center bombing was simply a matter of al Qaeda getting lucky, and 1970s construction techniques, allied to who knows what shenanigans in New York public sector procurement, producing buildings that may have been more fragile than they should have been. As we get further from the tragedy, if the administration's credibility is already under attack, and there are no further major outrages, the public may come to question the administration's view that "everything has changed" and revert to the levels of pacifism prevalent in 1975-2001, when military operations in Lebanon and Somalia were aborted after a couple of hundred casualties.
It is however on the economic side, more usually covered by this column, that the Bush-Johnson comparison becomes less favorable to Bush. Here Johnson was the lucky one, inheriting a booming but stable economy and a tax cut already passed that brought substantial supply-side benefits to the economy without great loss of revenue. As is well known, he decided to increase public spending, on both defense and social programs, without increasing taxes. According to OECD statistics, U.S. public spending rose from 25.58 percent of Gross Domestic Product in 1965 to 28.81 percent in 1968, this at a time of rapid growth in GDP and -- magic word -- productivity.
It is generally agreed that the Johnson spending buildup, which was very slightly reversed under President Richard Nixon (to 28.42 percent of GDP in 1973) and then greatly worsened, to 32.33 percent, by the 1973-75 recession, was largely responsible for the decade of stagflation in the 1970s. Certainly the regression I did some time ago, which showed that both high public spending and rapidly rising public spending are inversely correlated to economic growth would suggest this -- public spending in Johnson's time was not particularly high, but its sharp growth was remarkable for an economy which was not in recession and where unemployment was trending downwards. Johnson instituted a number of new social programs, at a time of intense military activity, and had no clear idea of how to pay for them.
Here the parallel with Bush is close, assuming a "prescription drugs benefit" is passed, which will be the first major expansion of Medicare coverage since Johnson's inauguration of the program in 1965. Bush has not only failed to increase taxes, he has cut them, while non-defense discretionary spending has increased in the first three Bush budgets by 5.8 percent per annum. Total Federal spending has increased at an inflation-adjusted 5.3 percent per annum, faster than in any Presidency since Nixon's second term when the process, like most others in that period, got out of control. Moreover, this is taking place, not during the 1960s when demographic factors are favorable but at a time when we are only 5 years from the dreaded moment, 2008, when social security funding goes into deficit and we have to start subsiding the Social Security Trust Fund by diverting increasing amounts from general revenues.
Apart from Medicare drug benefits, the two lowlights of the Bush term have been the Ted Kennedy (D.-Mass.)-blessed education bill, which did nothing for reform but a great deal for funding the existing mess, and the huge increase in agriculture subsidies, which gave us a double whammy in messing up both the U.S. budget and international trade. Like Johnson, Bush is increasing spending on social programs without any clear idea of how to pay for them, but unlike Johnson, Bush is a Republican, who was elected not to do that kind of thing.
Bush has an excuse, kind of. He was left by the last President, not the healthy economic picture of November 1963, but a disaster waiting to happen, in the form of a stock market that had become grotesquely overvalued, with the usual unpleasant knock-on effects on top management and Wall Street behavior. Whoever had been elected in 2000 would have had a grim four years, with the stock market dropping to around half its peak level and the consequent "negative wealth effect" and high bankruptcies that such a drop would bring. Had Bush collected around himself an economic team that realized this, and took effective steps to combat it, one could have forgiven him quite a lot, maybe even much of the excessive public spending.
However, Bush's economic team is notable for its boundless optimism and general lack of grip on the levers of economic power. It has encouraged Alan Greenspan to pump up money supply, thus creating a housing and mortgage bubble to match the stock market bubble. It has endangered the U.S. budget position by running so quickly into substantial deficit -- the surplus was artificial, but the expected deficit in the year to September 2004 of $475 billion will be 4.2 percent of GDP (a figure which may well rise sharply if the economy falters further.) The Johnson administration's highest deficit, in the year to June 1968, was 2.9 percent of GDP, and the budget ran a surplus in the following year, owing to a sharp tax increase (passed in the 1968 election year -- those were the days!)
More damagingly, the Bush team still refuses to admit that the U.S. economy is in trouble, preferring to babble about a productivity miracle that is supposed to have occurred since 1995. As I have exhaustively shown, there was no such miracle in the period 1995-2001; instead, labor productivity rose at a rate only slightly above the 1983-95 period (and well below that of 1947-73), while total factor productivity actually fell in 2000-2001, because capital was so inefficiently deployed in the late 1990s.
The quarterly figures originally announced, to much fanfare, for GDP and productivity in 1995-2001 showed at least a modest "miracle." However subsequent annual corrections, announced to minimal publicity in late July or early August each year, revised down the original optimistic figures to a level where the miracle disappeared. Currently, hopes are being pinned on a fairly sharp rise in productivity, very surprising in a quasi-recessionary period, that appears in the un-revised figures between the third quarter of 2001 and the fourth quarter of 2002.
Last year, the Bureau of Economic Analysis and Bureau of Labor Statistics produced their revised GDP and productivity figures for 1999-2001, with sharp downward revisions, on July 31 and August 8 respectively. This year, supposedly, the Bureaus have revised their entire methodology for the national accounts, and therefore the revised figures for 2002, covering the disappearance or otherwise of the latest productivity "surge" will be available, not in a few weeks as had been supposed, but on December 10. Thus any crisis of confidence in the markets that might be caused by a disappearance of the 2001-03 productivity gains is postponed yet again.
From another administration, one might take this at face value, but for Lyndon Baines Bush, as for George W. Johnson, there is a credibility gap.
(The Bear's Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that, in the long '90s boom, the proportion of "sell" recommendations put out by Wall Street houses declined from 9 percent of all research reports to 1 percent and has only modestly rebounded since. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)
