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How Jeb Bush escaped the Florida housing meltdown

Rick Newman
Senior Columnist

Jeb Bush hasn’t held office for eight years, leading some analysts to argue that he’s rusty at the rough art of politics. But in one important way, he left office at just the right time and stayed out of public life just long enough.

Bush served two terms as governor of Florida as a bubble economy grew to unsustainable proportions in one of the most bubbly states in the nation. Bush was governor from 1999 to 2007, a period that included the modest 2001 recession and a decent recovery—so far, so good—but was then followed by the biggest housing bubble in perhaps 100 years. Florida was one of the four “sand states” (along with southern California, Arizona and Nevada) where the damage was greatest when the bubble burst. But Bush was gone by then, leaving others to deal with the rubble.

Bush is touting his economic record as governor as one of the strongest aspects of his resume in his pursuit of the White House. He says frequently (and correctly) that the Florida economy created 1.3 million jobs while he was governor, and grew by more than 4% per year. And he pledges to replicate that performance for the nation as a whole if elected president. “There is not a reason in the world why we cannot grow at a rate of 4% a year,” he said when announcing his candidacy for the Republican nomination.

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There’s often a lag between economic cause and effect, however, so Yahoo Finance examined a few key metrics to see how the Florida economy performed compared with the nation as a whole during Bush’s tenure, along with the difficult years that followed. The basic story is that Florida outperformed the rest of the economy during the housing bubble — which generally coincided with Bush’s tenure as governor — then suffered more than usual during the bust. Here’s a breakdown:

Real GDP

Sources: Bureau of Economic Analysis, Federal Reserve Bank of St. Louis

Bottom line: By the broadest measure of output -- GDP adjusted for inflation -- the Florida economy did better than the U.S. as a whole during the housing boom but lagged far behind during the recession, as lost home equity and waves of foreclosures hammered Florida consumers. The Florida economy did grow by 4% per year while Bush was governor — but it shrank a startling 10% from 2007 to 2009, right after Bush left office. If you add it all up, Florida’s economy has averaged just 2% annual growth for the last 15 years, which is a bit worse than the U.S. economy overall.

Jobs

Source: Bureau of Labor Statistics

Bottom line: The pace of job creation has been stronger in Florida than in the nation as a whole, even with the recession included. Florida firms did create 1.3 million new jobs while Bush was governor, but they shed 722,000 jobs during the three years after Bush left office. Since then, hiring has picked up, with total employment reaching new highs near the end of 2013. There are now about 1.8 million more jobs in Florida than when Bush first became governor in 1999. Bush claims he created a business-friendly environment in Florida by cutting taxes and streamlining regulation, and since the state's job numbers are better than the U.S. overall, he may have a point.

Home prices

Sources: Federal Housing Administration, Federal Reserve Bank of St. Louis

Bottom line: Compared with the nationwide average, home prices in Florida rose by more during the boom and fell by more during the bust, continuing a strong speculative trend in Sunshine State real estate that dates at least to the 1920s. Still, Florida property owners who have been able to hold onto their homes for a while are generally better off than those elsewhere.

Population

Source: Census Bureau

Bottom line: Population growth matters because more people usually means more economic activity and faster growth. Florida has long been one of the fastest-growing states, though its population flatlined from 2008 to 2010, as the state worked through the worst of the housing bust and some residents left. Population growth has since picked up again, making Florida lucky to be a place that attracts newcomers.

If Bush is going to take credit for an economy on steroids in the mid-2000s, then it seems fair to assign him responsibility for the pain that ensued as the performance-enhancing drugs wore off. By that standard, Bush wasn’t really much different from other officials in office during the bubble: He earned credit for good times that were illusory and destined to end.

Had he been in office for another year or two — like his brother, President George W. Bush — he would also have earned blame for a meltdown caused by Wall Street manipulation, shoddy lending standards, brain-dead borrowers and many other factors beyond his control. But none of that is on Bush's official record. As they say, timing is everything.

Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.