'The Economic Blue Screen of Death'

John Mauldin's latest "Thoughts from the Frontline" column, "The Economic Blue Screen of Death¹", includes the above histogram that estimates what U.S. GDP growth would have been from 1996-2006 without the stimulus provided by homeowners cashing equity out of their houses via refinancing. Mauldin writes,

Without US homeowners using their homes as an ATM, the economy would have been very sluggish indeed, averaging much less than 1% for the six years of the Bush presidency. Indeed, as a side observation, without home equity withdrawals the economy would have been so bad it would have been almost impossible for Bush to have won a second term[²].

[...]

It is likely that whatever recovery we see will be slow in coming. Without MEWs, the period from 2001-2007 would have seen GDP growth of less than 1%! What has changed for the better? It is going to be a rather serious recession and a slow Muddle Through recovery of several years. Unless Obama, Pelosi, and Reid push through their tax increase. Then it will be a lot longer.

¹The title of the column refers to the screen old versions of Microsoft Windows would show when the system crashed.

²Mauldin's assumption is consistent with the research Larry Bartels wrote about, as we discussed in a previous post, "Contingency and Causation".