Today, two factors threaten the US' recovery. First, high household debt means that if interest rates rise, as they do in a normal recovery, households will find themselves strapped. Moreover, real estate prices might fall dramatically, in which case many households may find the value of their mortgage exceeding the value of their house. US bankruptcy rates are already up 33 percent over four years ago.
But can Bush really be blamed for Americans' borrowing too much? He can and should. Failure to design an effective fiscal stimulus shifted the burden to monetary policy. Interest rates were brought to new lows, which helped the economy, but without stimulating much investment. Monetary loosening worked only because households took on more debt, leaving the economy more vulnerable to rising interest rates.
The second threat to economic recovery is high oil prices. Bush's failed Middle East policy is only part of the problem. He could, and should, have pushed for strong energy conservation measures; had he done so four years ago, US consumption -- and oil prices -- would be lower today.
Japan and other developed countries prove that a high standard of living requires only a fraction of the energy per dollar of GDP. Instead, Bush pushed for subsidies to oil companies to encourage more domestic production. This "drain America first" policy will leave America more vulnerable in the future.
We know from the recent US election campaign that facts do not always speak for themselves. Yet it doesn't take much to work out where the US economy is today, where it's heading, and who's to blame.
But more important than assessing blame is correcting mistakes. Unfortunately, Bush has been as reluctant to admit the mistakes of his economic policy as he has in the case of his Iraqi misadventure. Without grasping what has gone wrong in either area, it will be difficult to avoid repeating the same mistakes.
Joseph Stiglitz, a Nobel laureate in economics, is professor of economics at Columbia University and was chairman of the Council of Economic Advisers to former US president Bill Clinton and chief economist and senior vice president at the World Bank. His most recent book is The Roaring Nineties: A New History of the World's Most Prosperous Decade.
Copyright: Project Syndicate