Nasdaq and NYSE are closed today, in accordance with the national day of mourning declared by President Trump, to honor the life of George H. W. Bush, the forty-first President of the United States. It is then appropriate to look back on the life and legacy of “41” from a market and economic perspective, but it is also informative to make an assessment based on numbers rather than opinions. Doing so gives a different perspective, one that suggests that the first President Bush is often underrated.
If you ask most people what they remember or know about the first Bush Presidency, their answer will probably be dictated by their politics. Those on the right will most likely remember his military heroism and life of service to his country, but will also recall that he raised taxes, breaking his famous “Read my lips” promise.
Those on the left will probably focus on his opportunistic rebuttal of the 1964 Civil Rights Act and the infamous “Willie Horton” ad, or his launching of the first Gulf War which seemed to set the tone for his son’s later time in office.
Whatever their political views though, if you ask about his performance on the economy, most would have a negative, or at the very least neutral, view. That, however, does a disservice to Bush’s legacy.
If you look at the performance of the S&P 500 from his election in November of 1989 to the end of his term in 1993 that becomes clear right away. Obviously, as is frequently stated, the market is not the economy, but market gains can only be sustained in good underlying economic conditions, so it is a decent measure of the real-life success of policies. On that basis, with a seventy percent gain in stocks over the four years of his presidency, his term was a success economically.
Even so, that doesn’t tell the whole story.
The effects of economic policy are rarely, if ever, immediately evident. It takes time for their impact to show in data, and therefore in the market, so a better guide to the influence of a President is usually to extend the analysis a couple of years past the end of their term. If you do that with Bush, you get this chart:
The sharp rise that followed Clinton’s inauguration is often attributed to him, but as mentioned, there is always a lag between the implementation of policy and its effects, so it could be argued that president Bush was responsible for the market climbing by well over 100%. That contention is also supported by an analysis of what he did as President.
The decision to break a promise to voters and raise taxes is a case in point. Bush was a smart man and politically astute, so I’m sure that he was aware of the potential political consequences of that action. However, he believed it was in the best interests of the country at the time, so he went ahead and did it anyway.
No matter how aware of that, I am sure not even he anticipated the ferocity of the attacks from within his own party that followed the decision.
That ferocity and insistence on ideological orthodoxy set the tone for politics on both sides of the aisle for decades to come, and one could argue that it is responsible for the polarity and the uncivil tone of politics today. Politics aside though, the chart above and the path of the U.S. economy after the tax hike indicate that it was the right thing to do.
It was the last stand of fiscal responsibility in the Republican Party and probably in either of the major political parties, but the economic success that followed addressing the deficit should be a lesson to modern politicians.
Foreign policy has a less direct effect on the economy and markets than economic policy, but in George Bush’s case it could be argued that, over time, his successes in that area were even more impactful. Ronald Reagan usually gets the credit for bringing about an end to the Soviet Union and Bill Clinton gets the credit for the economic boom that resulted in the 90’s, but without George Bush, history could well read very differently.
Creating the kind of civil unrest that ultimately led to the collapse of the Soviet Union is one thing, but navigating through the ensuing chaos to a peaceful end involving a legitimate, elected government is something else. That is what Bush achieved, and his vital contribution to the relative peace and prosperity of the 90s should not be underestimated.
Political history is, by definition, subjective, but in George H.W. Bush’s case, any attempt at objectivity creates a good impression. The fact that he was at different times, and sometimes at the same time, vilified by both the left and the right suggests to cynics like me that he was doing something right. If that isn’t enough for you, consider his history as a war hero, or his life of service, or, most impressively of all, celebrating late-life birthdays with parachute jumps.
The obvious conclusion is that he was a man of principle, and an admirable person regardless of politics. The real indication of how much his four years in office have been underestimated, however, comes when you look at his economic legacy. He had the courage to make a politically unpopular decision that put the long-term prosperity of all Americans before his own short-term benefit, and the skill and humility to negotiate a peaceful transition of the former U.S.S.R. without endangering progress by bragging about his involvement.
Those two things combined ensured that George Bush was a one-term President, but they also set the stage for a decade or so of peaceful prosperity for which we should all be grateful.