When GOP presidential candidate Jeb Bush is asked how he can double the U.S. economy’s growth rate to 4 percent, his answer is simple: “Check out my record when I was governor of Florida,” he says in a recent campaign website posting.
Florida’s economy did grow at a 4.4 percent annual pace from 1999 through the end of 2006, his years in office. Yet a housing bubble, not Bush’s tax cuts and other policies, was responsible for most of that growth, analysts say. “If there was a tax cut that could get the economy growing at 4 percent, any politician—whether it’s Jeb or Bernie Sanders—would be pushing it,” says Bruce Bartlett, an official in the Reagan and George H.W. Bush administrations. “But there’s not one. Period. Full stop.” Bush campaign spokeswoman Kristy Campbell, in a statement, called the former governor’s record “impressive,” citing economic and job growth, balanced budgets, and a AAA bond rating during his time in office.
GOP candidates Chris Christie, Ted Cruz, and Scott Walker have also embraced 4 percent or more as a growth goal. That’s due in part to “The 4% Growth Project” launched by George W. Bush’s presidential center. The project promotes policies to help low- and middle-income Americans without adopting policies Republicans hate, such as Obamacare.
The U.S. economy has grown at a 4 percent pace for five straight years only once since World War II, from 1962 through 1966. Four years of 4 percent growth occurred in the early 1950s and from 1997 through 2000. “Episodes of it are few and far between,” says Allen Sinai, chief executive officer of consultant Decision Economics. The Congressional Budget Office predicts that while growth could reach 2.9 percent this year and next, it’s likely to slide back in 2017 to the 2.2 percent it’s averaged since the end of the recession.
Almost one-third of Florida’s growth in the Bush years was generated by construction and real estate, according to U.S. Department of Commerce figures. Numbers from the Federal Housing Finance Agency show clear signs of a bubble, with Florida house prices rising during much of Bush’s tenure at twice the national pace, then falling sharply soon after he left office. Even assuming that some of the growth in construction and real estate was normal, Wells Fargo economist Mark Vitner estimates that a quarter of the state’s growth stemmed from the bubble, which bid up housing prices to unsustainable levels and drove employment and tax collections up.
If population rises 1 percent, the economy grows about 1 percent, too, according to Moody’s Analytics. Florida’s population grew at a 2 percent pace during Bush’s tenure, compared with less than 1 percent for the U.S., adding to the state’s rapid growth.
Bush says that as governor he cut state taxes by $19 billion. A review of state records by the publication Tax Analysts shows $13 billion worth of cuts. The difference, according to PolitiFact Florida, an independent political fact-checking website, is that the Bush campaign’s figure includes what Floridians saved from the elimination of the federal estate tax, which Bush’s brother, George W., got through Congress in 2001.
The largest reductions Governor Bush made were in Florida’s tax on “intangibles,” mostly stocks and bonds. That accounted for almost $2 billion of his tax cut total and resembled his brother’s cuts on federal capital-gains and dividend taxes. “It’s an open question what the magnitude of the effect of tax cuts on capital is,” says Alan Auerbach, a tax economist at the University of California at Berkeley. “What’s not open is whether they can cause the economy to consistently grow at 4 percent. They can’t.”
The bottom line: The success of Florida’s economy under Jeb Bush was made possible by a housing bubble and population growth.