Accounts of the economic policy in the George W. Bush administration usually center on the tax cuts in his first year in office and the economic collapse in his last year, a result of his failure to effectively regulate housing finance. While these policies are important in the context of Bush's presidency, most discussions miss the underlying dynamics of the economy in the Bush administration. The key here is a backdrop of "secular stagnation" that had its basis in the large U.S. trade deficit. The trade deficit was an enormous drain on demand, which could only be filled by large budget deficits or asset bubbles. This trade deficit was in turn the result of a severely over-valued dollar, which can be dated to the Clinton Administration's design of the International Monetary Fund (I.M.F.) bailout of countries affected by the Asian financial crisis.
There are two reasons this discussion may appear somewhat at odds with most assessments of the Bush administration's economic record. The first is that it doesn't fit well with the story either political party likes to tell. Republicans would like to tell a story whereby the tax cuts put in place in 2001 and 2002 boosted the economy out of recession. By contrast, Democrats pitch a tale where the Bush administration threw away the budget surpluses from the Clinton years with unneeded tax cuts and expensive wars. This analysis is at radically at odds with both perspectives.
Now that we seem to be experiencing a prolonged period of below full employment levels of output, secular stagnation is again an acceptable view within the economics profession. This analysis puts it at the center of the economy's problems during the Bush years.