Nor would I blame either president for the silliness of people using equity extraction far more than they should have. Refinancing existing debt made sense. People assuming their houses would go up and up made little. Had they not, growth would not have been what the graphs imply, it might have even been higher, but it would have been a different composition.

Also, growth is usually financed by debt, it is still real. Once again, it is just the source of that debt that is an issue. Too much of it based on rosy scenarios leaving us overly tied to housing (and some other things.) If that adjustment could be instantaneous it would not matter, but it isn’t. All those workers, capital and ideas will have to reorient themselves. That mismatch, or disequilibrium, is the real problem. If I took a graph and showed corporate or other debt for any period and its effect on growth it would look somewhat like that. It is not that large, but at the margin it is a real problem. It only has to shave a few percentage points to be a recession.

This is why the president’s numbers on the economy have been persistently way under historical lows for most of his term. All the people asking “why is Bush so unpopular?” always look at the economy and say, “hey, GDP has been great! It’s an untold story! Must be the media!” But that’s not it. A debt-based, wildly unequal recovery with minimal income and wage growth just doesn’t do it for the median citizen.