Obama Wrongly Accuses Bush (and Paul Ryan) of Causing the Great Recession

AEI Ideas ^ | August 14, 2012 | Pethokoukis

The Obama campaign has made a curious economic argument as part of its attack on Paul Ryan:
Ryan rubber-stamped the reckless Bush economic policies that exploded our deficit and crashed our economy. Now the Romney-Ryan ticket would take us back by repeating the same, catastrophic mistakes.

Actually, Team Obama is saying the same thing twice here since the deficit would not have initially exploded without the Great Recession. (In 2007, the federal government ran a tiny budget deficit of 1.2% of GDP)
So which Bush policies, exactly, “crashed the economy”?
Certainly not the much reviled — at least by Democrats — Bush tax cuts, most of which President Obama says he wants to keep.
And certainly not Bush’s spending and debt, since Obama wants more of both. The most recent Obama budget, according to the Congressional Budget Office, would add $6.4 trillion more to the federal budget deficit over the next decade, leaving debt as a share of the economy stuck at around 76% of GDP vs. 37% pre-recession.
OK, if it wasn’t the taxes Bush cut or the money he spent, then what were the Bush policy actions that led to the Great Recession and “crashed our economy”?
Maybe the villains here are the Bush policies that deregulated Wall Street? A few problems with this theory, though. For starters, the law that ended Glass-Steagall was signed by President Bill Clinton — the guy who will be introducing Obama at the Democratic National Convention — in 1999. Second, few analysts think the end of Glass-Steagall directly contributed to the financial crisis.
Another candidate — and you hear this one a lot — was a 2004 rule change by the Securities and Exchange Commission — the Bush SEC! – that supposedly allowed broker dealers to greatly increase their leverage, contributing to the financial crisis. But as Prof. Andrew Lo of MIT notes in a 2011 paper,” … it turns out that the 2004 SEC amendment to Rule 15c3–1 did nothing to change the leverage restrictions of these financial institutions.”
And besides, there’s a strong case to be made that it was the economic downturn — begun by negative wealth effects from the collapse in the housing market and then greatly exacerbated by the Fed — which caused the financial crises rather than the crisis causing the severe downturn. As Robert Hetzel, an economist with the Richmond Fed, argues in The Great Recession: Market Failure or Policy Failure: