Fake History in the Making: Karen Hughes' Bad Advice for the GOP

She thinks Mitt Romney could've convinced voters that Democrats were primarily responsible for the housing crisis.

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To the chagrin of Republicans, American voters still assign a large part of the blame for the bad economy to George W. Bush, who was still president at the beginning of the financial crisis. That's part of why Mitt Romney lost, says Karen Hughes, the former Bush Administration official. And in her telling, the GOP could've easily persuaded voters that is just isn't so. 

Hughes is latest high-profile Republican to advise the GOP on the lessons it should take from its electoral drubbing. The most memorable line from her op-ed in Politico Friday: "If another Republican man says anything about rape other than it is a horrific, violent crime, I want to personally cut out his tongue." Is she mocking the movement conservatives who accused her of being friendly to sharia law? Pandering to Ellen Jamesians? Whatever her reason for using language so graphic, it shouldn't distract from what she said about the economy. It's as disconnected from reality as ever.

"The economy was the biggest issue and the economy is creeping along with unemployment stubbornly high, higher than it was when the president took office. The problem is that exit polls showed more than half of Americans blame that economy not on Obama, but on his predecessor, President George W. Bush," she wrote. "That's because Republicans never made the case that the financial crash was not the result of Bush -- and by implication, Republican policies. It happened during the final months of Bush's presidency, but had its roots in the crisis in the housing market. Both parties bear some of the blame, but it was Democrats who aggressively backed policies giving home loans to people who had little chance of repaying them." (emphasis added)

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What a demonstrably false claim.

To me, it's discrediting for a supposed expert in political communication to come out with advice as bad as that. Yes, per Hughes, both Democrats and Republicans bear blame for the housing crisis. What rankles is that even now, years ofter Bush left office, Republicans won't level with themselves or one another about the actual policies he pursued, and continue to pretend as if the financial crisis could've been avoided but for politically correct Democrats. In this telling, Democrats insisted that poor minorities be given mortgages that they couldn't afford, somehow effected the necessary policies over Republican objections, and predictably caused a rash of defaults. (Hughes writes as if this line of argument has never been used before, even though it failed to persuade anyone outside the conservative movement back in 2008, when it was tried by Rush Limbaugh, Glenn Beck, and a number of conservative columnists.)

Why is that narrative problematic? 

For one thing, it ignores various causes of the financial crisis that implicate Wall Street, ratings agencies, and the Fed; but it also obscures the bipartisan nature of efforts to expand home-ownership.

Democrats did advocate on behalf of imprudent loan policies.

And Republicans?

Well, it's hard to believe Hughes has forgotten "The Ownership Society," a centerpiece of Bush's communications strategy. Here's an excerpt from a 2004 "fact sheet" his White House released:

The President believes that homeownership is the cornerstone of America's vibrant communities and benefits individual families by building stability and long-term financial security. In June 2002, President Bush issued America's Homeownership Challenge to the real estate and mortgage finance industries to encourage them to join the effort to close the gap that exists between the homeownership rates of minorities and non-minorities. The President also announced the goal of increasing the number of minority homeowners by at least 5.5 million families before the end of the decade. Under his leadership, the overall U.S. homeownership rate in the second quarter of 2004 was at an all time high of 69.2 percent.

Minority homeownership set a new record of 51 percent in the second quarter...

The "fact sheet" goes on to detail specific things the Bush Administration was doing to expand homeownership among poor and minority families:

- American Dream Downpayment Initiative, which provides down payment assistance to approximately 40,000 low-income families;
- Affordable Housing. The President has proposed the Single-Family Affordable Housing Tax Credit, which would increase the supply of affordable homes;
- Helping Families Help Themselves. The President has proposed increasing support for the Self-Help Homeownership Opportunities Program; and
- Simplifying Homebuying and Increasing Education. The President and HUD want to empower homebuyers by simplifying the home buying process so consumers can better understand and benefit from cost savings. The President also wants to expand financial education efforts so that families can understand what they need to do to become homeowners.

There isn't any way around it. Homeownership was at an all-time high. The housing bubble was already inflated in various locales. And Bush favored public and private sector efforts to approve millions of additional mortgages to low-income households (among other bubble-making policies).

Take a look at the details of Bush's 2002 "Homeownership Challenge":

  • The Administration has issued America's Homeownership Challenge to homebuilders, realtors, nonprofits, and government-sponsored enterprises that purchase the mortgages made by lenders, to unite in a concerted, multifaceted and collaborative effort to dismantle barriers to homeownership in each community and increase the number of minority homeowners by at least 5.5 million families by the end of this decade. This broad-based effort will (1) harness the capital and expertise of major private sector financial institutions, (2) involve minority advocacy groups in key roles to guide industry efforts, and (3) complement the legislative and regulatory initiatives put forth by the Administration to achieve this goal."
  • Under almost any projection scenario, adding 5.5 million families to the number of minority homeowners by the end of this decade would be a substantial achievement that could be accomplished only with great effort."
  • Some of the measures to be taken include:A substantial increase of at least $440 billion in the financial commitment made by the government-sponsored enterprises involved in the secondary mortgage market, specifically targeted toward the minority market;"
  • "A commitment to raise $750 million in below-market-rate investments by 2007, which will work in collaboration with local homeownership initiatives and be targeted to heavily minority program areas;"
  • "Aggressively developing new mortgage products so that conventional market alternatives are available to combat the predatory loan products that are disproportionately targeted to minorities;"
  • "Creating new mortgage products to meet the unique needs of recent immigrants;"

The Bush Administration explicitly expected its efforts would result in "increased innovation in mortgage products," and so it did! By Bush's second term you could get a "no income, noasset" home loan, as memorably detailed in the stellar This American Life episode "The Giant Pool of Money."

Democrats were as clueless about the unintended consequences of the well-intentioned policies being tried. But how can Hughes, a veteran of the Bush White House, now claim, "it was Democrats who aggressively backed policies giving home loans to people who had little chance of repaying them"? Bush aggressively pursued the same well-intentioned but catastrophic policies, as several of his former economic advisers more or less acknowledged four years ago. (Perhaps Hughes should ask former Freddie Mac historian Newt Gingrich for the real story.)

The whole American establishment was complicit in the policies that caused the financial crisis. The average voter may not know the details. But they know better than to accept what Hughes is saying (and even Romney knew better than to make defending Bush core to his campaign). Imagine if Hughes would've been in charge of communications for the 2012 GOP nominee. Say the Republican campaign began insistently saying, "it was Democrats who aggressively backed policies giving home loans to people who had little chance of repaying them."

Would this have worked?

It might have resonated with the minority of voters who cast ballots for Romney, or at least a subset of them. But for many more people, I think what would have happened is that 1) many Americans would've resented the idea that home-buyers alone, rather than Wall Street crooks, caused the financial crisis; 2) Americans who remember "The Ownership Society" and bought their mortgage during the Bush years would've intuitively understood that Hughes' narrative was bullshit; 3) Hughes' argument would've invited people to compare the Bush and Clinton economies since her effective argument is that Clinton was mostly responsible for the housing crisis; 4) Democrats could dredge up the actual history, as I've just done, and make the GOP look stupid.

It is remarkable that even after its recent drubbing, high profile Republicans are still eager to defend Bush's record and to distinguish themselves from Democrats in such unpersuasive ways. The GOP is constantly talking about the Democrats as if their deviations from free market ideology are disqualifying, even when Republicans have a record of deviating just as much or more. The talking points work within the bubble of movement conservatism, but not outside it. Let this be a lesson to any Republican thinking of hiring Hughes to run a national campaign.