Better late than never. Four days ago during the presidential debate, Hillary Clinton claimed that the 2008 Great Recession originated in “large part” from the tax cuts put in place by George W. Bush. The allegation came up during an exchange over tax policies:

“We had the worst financial crisis, the Great Recession, the worst since the 1930s. That was in large part because of tax policies that slashed taxes on the wealthy, failed to invest in the middle class, took their eyes off of Wall Street, and created a perfect storm.”

That’s not even remotely true. While one could argue that the tax cuts might have cost too much in terms of the deficit, especially while fighting two wars abroad (I’d disagree at least in part, but it’s an arguable point), none of that had anything to do with the 2008 collapse of financial markets and the start of the Great Recession. Neither did a lack of regulation, although Democrats have argued that point for years, and passed Dodd-Frank in response to it.

The problem occurred when the federal government — spurred by both parties, but starting with Bill Clinton’s administration — attempted to artificially increase demand in home ownership by subsidizing increasingly risky mortgages. That actually started with interventionist regulation: a revision to the Community Reinvestment Act in 1999. That put pressure on banks to expand lending and lower standards for approvals; later, Congress would step up subsidizing such loans through Fannie Mae and Freddie Mac, which then sold the mortgages on the bond markets with the implicit guarantee from the federal government.  That created a huge but artificial increase in demand that drove housing values way up, delinking them from their traditional relationship to the rate of inflation. Suddenly lots of people saw their equity as an ATM, so consumer spending rapidly increased, and politicians of both parties took credit for great economies and rising home ownership.

Until the bubble crashed, that is. Fannie Mae and Freddie Mac’s bad paper poisoned the financial markets, which had indeed innovated in very risky ways, but it took the deluge of cash first to prompt the innovations. The supposed lack of investment in the middle class had even less to do with the failure; federal tampering with the market was predicated on investing in the middle class in the first place, in ways that Hillary Clinton herself appears ready to try again.

Hillary’s claim was three Pinocchios too much for the Washington Post’s Glenn Kessler, and notes a sin of omission as well:

It is interesting that Clinton made no reference to the role that the home mortgage market played in the crash. But that might have been a sensitive issue, given that many analysts cite a 1995 Clinton administration policy to encourage home ownership by pushing for less-stringent credit requirements for middle-class families. Bush expanded on the push by introducing a zero-down-payment initiative for first-time home buyers.

Clinton is a disciplined debater, but it’s pretty clear she flubbed this. No credible analyst would cite the Bush tax cuts as playing a key role in spurring the crash. If she had meant to pin the blame on rising income inequality, she should have said so clearly, without putting a political spin on the policies of a Republican president. (If, as Johnson said, she meant that the tax cuts made it more difficult to respond to the crisis, she certainly could have been clearer.)

Her statement is mitigated, slightly, by the reference to lax oversight of Wall Street, a traditional liberal position. That keeps her, barely, out of the Four-Pinocchio range. The causes of the Great Recession are complex and debatable, but there’s no debate that she is wrong to put the Bush tax cuts at the top of the list.

Without the pressure from the CRA and the federal government to demand riskier mortgage approvals, none of this would have taken place at all. There’s plenty of blame to go around about that, but it’s very telling that Hillary doesn’t want to discuss it at all. Instead, she offers shabby lies, and keeps her options open for a repeat.