Jeb Bush is boasting about his economic success as governor. But he owes a large amount of that success -- well more than half, at least -- to the housing bubble that popped as he was leaving office, leaving Florida in deep and prolonged recession.
Bush is officially running for president, and he's leading with his record as governor of Florida. In his kick-off speech Monday in Miami, he promised the U.S. economy would grow 4 percent per year if he is elected, creating 19 million jobs - "growth," he said, "that lifts up the middle class."
He touted his gubernatorial tenure as proof. "It’s possible," he said. "It can be done. We made Florida number one in job creation and number one in small business creation. 1.3 million new jobs, 4.4 percent growth, higher family income, eight balanced budgets, and tax cuts eight years in a row."
Those stats are, indeed, something to brag about. They're also missing a huge caveat, as many Bush critics immediately noted: A significant amount of Florida's economic and job growth in the Bush era was driven by a massive run-up in housing prices -- which peaked in Bush's last year in office, then plunged the state into a worse recession than the nation as a whole.
When you account for the role of housing, Bush's economic record looks a lot more mixed. Almost all of the gains he talks up today, including three-fifths of the job creation, were wiped out in the four years after he left office, once the bubble burst.
It is "empirically inescapable" that "housing was a big part of the robust Florida economy at the time,” said Stan Humphries, the chief economist at the real estate website Zillow, which analyzed the role of housing-driven spending in the state's economic boom.
A Bush campaign spokesman did not return two emails seeking comment.
It's easy to see just how much higher the bubble rose in Florida than in the rest of the country. By the mid-2000s, the state's housing prices were rising by nearly 30 percent a year, more than double the national average. But by 2011, they'd bottom out -- and lost all the extra value they'd gained since 2003.
Escalating home prices fuel the economy in several ways. They drive more activity in the construction and real estate sectors. Indirectly, rising prices make homeowners spend more money on consumer goods. That's because those homeowners feel wealthier, because their houses are more valuable.
Both those effects helped Bush when he was in office, and hurt Florida when he was out of office.
Florida saw a much sharper increase in its construction and real estate sectors than the nation as a whole during the time Bush was governor. According to a Post analysis of Commerce Department statistics, more than a third of Florida's better-than-the-nation growth under Bush was a direct result of increased construction and real estate activity.
Estimating the "wealth effect" - the extra consumer spending due to rising housing prices - is less exact. Economists at Zillow attempted to do so at the request of the Post. They added up the total value of all housing in Florida and in the nation from 1998 through 2006, and the change in value from year to year. Then they assumed - based on a conservative read of economic literature - that consumers would increase their spending each year by one-tenth the added value of their homes.
Zillow found that, through the peak of the housing bubble in 2005, half of Florida's faster-than-the-nation growth was attributable to the housing wealth effect.
In the last year of Zillow's analysis, 2006, the housing effect disappears - because the growth in housing prices slams to a halt. Examining the several years that followed Bush's term, Humphries said, would show housing extracting a drag on the state's economy.
Just as the housing bubble helped the Florida economy rev hotter than the nation under Bush, its collapse pushed the state into a more severe recession. Florida construction employment grew by half under Bush, more than double the national rate -- and in the following eight years, it fell nearly twice as fast.
The most striking stat, though, is growth. Under Bush, Florida indeed averaged 4.4 percent growth per year, after adjusting for inflation; at the same time, the nation averaged 3 percent growth. In the four years after Bush left office, as housing prices tumbled and recession set in, the nation averaged 0.3 percent growth. Florida averaged -2.4 percent.