“We've submitted a plan that will enable this budget to become balanced by 2012, so long as Congress learns to set priorities,” said President George W. Bush. “And we can balance the budget without raising taxes.” Bush says he’s ‘optimistic about our economy,’ Sept. 20, 2007

Addressing views that the United States faced the risk of a recession, President George W. Bush on this day in 2007 responded: “I say that the fundamentals of our nation’s economy are strong.”

At a White House news conference, Bush noted these were “unsettling times in the housing market, and credits associated with the housing market.” But he added:


“I'm optimistic about our economy. I would be pessimistic, however, if the [Democratic-controlled] Congress has its way and raises taxes. I believe the worst thing that can happen now is to allow the Congress to do that which they have said they want to do, which is to raise the taxes on people, and — because I think taking money out of the hands of investors and consumers and small-business owners would weaken the economy.”

Asked to expound on the odds of a recessionary slide, Bush said: “You need to talk to economists. I think I got a B in Econ 101 [at Yale]. I got an A, however, in keeping taxes low — and being fiscally responsible with the people’s money. We've submitted a plan that will enable this budget to become balanced by 2012, so long as Congress learns to set priorities. And we can balance the budget without raising taxes.”

The president’s comments came a year after the start of an accelerating collapse in the U.S. housing market, which eventually erased some $7 trillion in wealth from the domestic economy.

The following September, with the presidential election less than two months away, Lehman Bros., a giant financial services firm, filed for Chapter 11 bankruptcy protection, triggering what remains to this day the largest bankruptcy filing in U.S. history. With Lehman holding more than $600 billion in assets, neither the Bush Treasury Department, nor the Federal Reserve nor its Wall Street rivals could devise a plan to bail out Lehman.

The investment bank had become so deeply involved in mortgage origination that it had effectively become a real estate hedge fund. At the height of the subprime mortgage crisis, it became exceedingly vulnerable to the spiraling downturn in real estate values.

The Lehman bankruptcy triggered a one-day drop in the Dow Jones Industrial Average of 4.5 per cent — the largest such decline since the Sept. 11, 2001 terrorist attacks. In the 22 trading days after Lehman went bankrupt, the S&P 500 fell 28 percent. (It kept falling for another six months, losing nearly three-fifths of its value, before embarking on a decadelong recovery.)

Meantime, the nation’s gross domestic product shrank by nearly 9 percent in the fourth quarter of 2008, its worst performance in a half-century. From January 2008 to January 2010, unemployment nearly doubled, rising from 5 percent to 9.8 percent. Over the same period, home mortgage defaults rose from 3.7 percent to 11.5 percent.

SOURCE: “THIS DAY IN PRESIDENTIAL HISTORY,” BY PAUL BRANDUS (2018)

