He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under the first President Bush. He is a graduate of Harvard College and Harvard Law School. He is author of The Obamacare Disaster, from the Heartland Institute, and President Obama's Tax Piracy, and his latest book: America's Ticking Bankruptcy Bomb: How the Looming Debt Crisis Threatens the American Dream-and How We Can Turn the Tide Before It's Too Late.
Latest posts by Peter Ferrara (see all)
- Tax Reform Would Modernize How U.S. Taxes Global Business Income - June 24, 2017
- Saving Money but Costing Lives - June 23, 2017
- A Principled Tax Reform Allows Expensing of all Business Costs - June 23, 2017
The recession ended four years ago, according to the National Bureau of Economic Research. So Obamanomics has had plenty of time to produce a solid recovery. In fact, since the American historical record is the worse the recession, the stronger the recovery, Obama should have had an easy time producing a booming recovery by now.
Obama likes to tout that we are doing better now than at the worst of the recession. But every recovery is better than the recession, by definition. So that doesn’t mean much.
The right measure and comparison for Obama’s record is not to compare the recovery to the recession, but to compare Obama’s recovery with other recoveries from other recessions since the Great Depression. By that measure, what is clear is that Obamanomics has produced the worst recovery from a recession since the Great Depression, worse than what every other President who has faced a recession has achieved since the Great Depression.
In the 10 previous recessions since the Great Depression, prior to this last recession, the economy recovered all jobs lost during the recession after an average of 25 months after the prior jobs peak (when the recession began), according to the records kept by the Federal Reserve Bank of Minneapolis. So the job effects of prior post Depression recessions have lasted an average of about 2 years. But under President Obama, by April, 2013, 64 months after the prior jobs peak,almost 5½ years, we still have not recovered all of the recession’s job losses. In April, 2013, there were an estimated 135.474 million American workers employed, still down about 2.6 million jobs from the prior peak of 138.056 million in January, 2008.
Ronald Reagan suffered a severe recession starting in 1981, which resulted from the monetary policy that broke the back of the roaring 1970s inflation. But all the job losses of that recession were recovered after 28 months, with the recovery fueled by traditional pro-growth policies. By this point in the Reagan recovery, 64 months after the recession started, jobs had grown 9.5% higher than where they were when the recession started, representing an increase of about 10 million more jobs. By contrast, in April, 2013, jobs in the Obama recovery were still about 2% below where they were when the recession started, about 2 ½ million less, or a shortfall of about 10 million jobs if you count population growth since the recession started, as discussed below.
Obama’s so-called recovery included the longest period since the Great Depression with unemployment above 8%, 43 months, from February, 2009, when Obama’s so-called stimulus costing nearly $1 trillion was passed, until August, 2012. It also included the longest period since the Great Depression with unemployment at 9.0% or above, 30 months, from April, 2009, until September, 2011. In fact, during the entire 65 years from January, 1948 to January, 2013, there were no months with unemployment over 8%, except for 26 months during the bitter 1981 – 1982 recession, which slayed the historic inflation of the 1970s. That is how inconsistent with the prior history of the American economy President Obama’s extended unemployment has been. That is some fundamental transformation of America.
Moreover, that U3 unemployment rate does not count the millions who have dropped out of the labor force during the recession and President Obama’s worst recovery since the Great Depression, who are not counted as unemployed because they are not considered in the work force. Even though the employment age population has increased by 12 million since the recession began, only 1 million more Americans are counted as in the labor force. With normal labor force participation rates, that implies another 7.3 million missing U.S. jobs, on top of the 2 ½ million missing jobs we are still short from when the recession began, for a total of about 10 million missing jobs.
If America enjoyed the same labor force participation rate as in 2008, the unemployment rate in December, 2012 would have been about 11%, compared to the monthly low of 4.4% in December, 2007, under President George Bush and his “failed” economic policies of the past. We will not see 4.4% unemployment again, without another fundamental transformation of America’s economic policies.
The number of unemployed in January, 2013, at the end of President Obama’s first term, was 7.7 million. Another 7.9 million were “employed part time for economic reasons.” The Bureau of Labor Statistics (BLS) reports, “These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.”
Another 2.3 million were “marginally attached to the work force.” The BLS reports, “These individuals…wanted and were available for work, and had looked for a job sometime in the prior 12 months. [But] [t]hey were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.”
That puts the total army of the unemployed or underemployed at nearly 18 million Americans in January, 2013. They are all counted in the BLS calculation of the U6 unemployment rate, which still totaled 13.9% that month.
But the Shadow Government Statistics website also includes in its “SGS Alternative Unemployment Rate” long term discouraged workers, those who wanted and were available for work for more than a year, and had looked for a job, but not in the prior 4 weeks. That is how the BLS U6 unemployment rate was calculated prior to the changes made in the early 1990s under the Clinton Administration. Including these workers as well raises the SGS unemployment rate for April, 2013 to 23%. That seems more consistent with how the economy still feels for the majority of Americans, despite Democrat Party controlled media cheerleading.
This utterly failed jobs record of Obamanomics reflects the more basic reality that the economy has not been growing under President Obama. In the 10 post depression recessions before President Obama, the economy recovered the lost GDP during the recession within an average of 4.5 quarters after the recession started. But it took Obama’s recovery 16 quarters, or 4 years, to reach that point. Today, 21 quarters, or 5 plus years, after the recession started, the economy (real GDP) has grown just 3.2% above where it was when the recession started. By sharp contrast, at this point in the Reagan recovery, the economy had boomed by 18.6%, almost one fifth.
Obama’s economic performance has even been much worse than Bush’s. Jeffrey H. Anderson, a senior fellow at the Pacific Research Institute, writes inInvestors Business Daily on January 13, “Prior to Obama, the second term of President Bush featured the weakest gains in the gross domestic product in some time, with average annual (inflation-adjusted) GDP growth of just 1.9%, [according to the official stats at the Bureau of Economic Analysis (BEA)]” But average annual real GDP growth during Obama’s entire first term was less than half as much at a pitiful 0.8%, according to the same official source.
Even Jimmy Carter produced 4 times as much economic growth during his one term as Obama did during his entire first term. In fact, as Anderson notes, real GDP growth under Obama has been the worst of any President in the last 60 years!
But it’s even worse than that. Obama’s real GDP growth has actually been less than half as much as the worst of any President in the last 60 years. In other words, even if you doubled actual GDP growth under President Obama, it would still be the worst record of any President in the last 60 years!
Anderson adds, “In fact, the real GDP in 2009 was lower than it had been three years earlier (in 2006).” That has happened only twice before in the last 100 years at least, maybe in American history. One was in 1933 and 1934, at the height of the Great Depression. The other was in 1946 – 1948, when the World War II economy was powering down.
And what happened in the years after those two experiences? From 1935 – 1937, real GDP growth reached a peak of 13.1% in one year (1936). From 1949 – 1951, real GDP growth reached a peak of 8.7% (in 1950). That reflects once again the basic principle for the American economy that the worse the recession, the stronger the recovery. That is what Obama should have produced for America. But under Obama, real GDP growth in the following years, 2010 – 2012, peaked at only 2.4% (in 2010). “[A]nd never again hit even that meager mark in the two years following ObamaCare’s passage,” Anderson adds. Yes, Obama and his sycophants really are transforming America, into a banana republic.
Even if the economy finally breaks out into some real growth during this year, that is only because of the long overdue real recovery that is still straining to break out inside this economy, as indicated by the data above for 1936, in the depths of the depression, and the postwar boom that started in 1950. That and the startling Reagan recovery from the 1970s are the standard for Obamanomics. Don’t be fooled by some way overdue short term growth spurt this year that just reflects the basic cycles of the economy. Unless the fundamentals of Obamanomics are changed, the result will be long term stagnation compared to the historic, world leading, booming economic growth of the American Dream.
In his 2013 State of the Union Address, President Obama said, “A growing economy that creates good, middle class jobs, that must be the North Star that guides our efforts.” But the slow growth, and negligible job creation under Obama, in turn have caused steeply declining middle class incomes. The latest numbers compiled from the Census Bureau’s Current Population Survey show that real median household income declined by more than $4,500 during Obama’s first term, about 8%, meaning effectively that the middle class has lost annually the equivalent of one month’s pay under Obama. Even President Bush again did better during his disastrous second term, when real median household income at least rose by 1.7%, not enough, but still positive rather than negative.
Even if you start from when the recession ended in June, 2009, the decline in median real household income since then has been greater than it was during the recession. Four years into the supposed Obama recovery, real median household income has declined nearly 6% as compared to June, 2009. That is more than twice the decline of 2.6% that occurred during the recession from December, 2007 until June, 2009. As the Wall Street Journal summarized in its August 25-26, 2012 weekend edition, “For household income, in other words, the Obama recovery has been worse than the Bush recession.”
Despite his rhetoric, Obama has failed to deliver for the poor as well. But we know Obama loves the poor, because he has created so many of them. Indeed, the only thing booming under Obamanomics has been poverty. Poverty has soared under Obama, with the number of Americans in poverty increasing to the highest level in the more than 50 years that the Census Bureau has been tracking poverty. Over the last 5 years, the number in poverty has increased by nearly 31%, to 49.7 million, with the poverty rate climbing by over 30% to 16.1%. This is another natural result of negligible economic growth, paltry job creation, declining real wages, and the worst economic recovery since the Great Depression.
These dismal results of Obamanomics have been produced because all of Obama’s economic policies are thoroughly anti-growth, indeed, the opposite of what is needed for long term booming growth. Instead of cutting tax rates, which provides incentives for increased production, Obama has been focused on raising rates. Instead of deregulation, which increases the cost of doing business, and results in barriers to productive activity (see, e.g., Keystone Pipeline), Obama has been all about increasing regulation. Instead of cutting spending, Obama entered office exploding spending during his first two years, and was only restrained when the people elected Republicans to control the House.
And instead of adopting monetary policies that would produce a stable dollar, Obama’s monetary polices have mimicked the devaluationist ones previously embraced by George W. Bush on the way to sagging investment, and with the latter, slow growth. President Obama derided Mitt Romney during the 2012 campaign as proposing to bring back the same economic policies that led to the financial crisis in the first place. But it is Obama who is bringing back precisely those policies, overregulating banks to make loans on the basis of supposed fairness. Moreover, Obama’s Fed has thrown oil on the bonfire with its zero interest rate, and runaway quantitative easing policies. With those policies having been in place for years now, they are the foundation of the current economy, which is just another bubble that will pop when the Fed tries to implement any exit strategy.
Next week I will discuss why and how these misguided, Keynesian monetary policies will only lead to another, even worse financial crisis, probably during Obama’s second term, and why only fundamental monetary reform can restore America to its traditional booming, economic growth.
[First Published by Forbes.com]