As unemployment soars and his signature health care plan pushes millions of Americans into greater financial hardship, President Barack Obama is attempting his most audacious feat of persuasion yet: convincing the American people that the economy is getting better.
But the president is getting a tough reception for his claims about reviving the American economy, and the claims themselves don’t bear up to scrutiny.
On Tuesday, Obama will deliver remarks at the Wall Street Journal’s CEO Council’s annual meeting. The address will be one of several verbal expeditions the president has made recently into the relentlessly hostile territory of America’s private economy, which has stagnated throughout his presidency.
In his weekend address Saturday, the president assured Americans, “[W]hile our carbon emissions have been dropping, our economy has been growing. Our businesses have created 7.8 million new jobs in the past 44 months. It proves that the old argument that we can’t strengthen the economy and be good stewards of our planet at the same time is a false choice. We can do both. And we have to do both.”
Obama is also holding a closed Oval Office meeting with Secretary of the Treasury Jack Lew Monday afternoon.
In two on-the-road speeches last week, the president also touted a putative economic recovery that has been driven mostly or entirely by technocratic planning and is threatened mainly by Republican recalcitrance.
“We rescued and retooled the American auto industry; it saved more than a million jobs,” Obama said Thursday in a speech at the Cleveland, Ohio facility of ArcelorMittal, a maker of “sustainable steel” that is headquartered in tiny Luxembourg under CEO Lakshmi Mittal. “We bet on American ingenuity and American workers. (Applause.) And assembly lines started humming again, and automakers started to make cars again.”
Obama declared himself wowed by ArcelorMittal’s positronic technology, telling the audience, “I was looking around this factory, and there’s a whole bunch of computer stuff going on.”
The White House’s full-court press on economic optimism also included a set of charts made available last week at the White House web site.
The launch of the web page entitled “Here’s What Economic Growth Looks Like, in 3 Charts” met with little interest last week, but the page makes a carefully decontextualized case that Obama’s economic policies are creating growth.
One chart, based on Census Bureau data, argues that 7.8 million private sector jobs “were added” in the last three and half years — an attempt to rebut frequent criticisms (from the left as well as the right) that U.S. job growth has lagged population growth through most of Obama’s presidency.
The figures appear somewhat impressive, in part because the chart slightly compresses the length of the x axis for Obama’s years and slightly lengthens it for the last year of the Bush administration. By diluting the time measurement, the chart distracts attention from the central feature of job creation during the Obama administration: It has been not only anemic, but anemic over a remarkable length of time.
By way of comparison, Bill McBride in his Calculated Risk blog maintains a chart depicting the length of time required for the economy to replace the total net number of jobs lost during every recession since the end of World War II:
Although Calculated Risk’s chart covers only a small fraction of American economic history, it makes clear that during the period of the so-called modern U.S. economy, the post-2009 recovery has been by far the weakest and the slowest.
Another chart tallies gross domestic product, an extremely imprecise measure of economic activity that is a favorite among believers in macroeconomics:
This chart indicates the Obama economy after its first year did not meet the popular definition of recession: two consecutive quarters of negative GDP growth. But the National Bureau of Economic Research actually defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”
By that yardstick, the recent Obama economy looks closer to recession than recovery, with one negative quarter and another within the margin of error. GDP growth has been above 4 percent in only one quarter (an unprecedented low after such a severe contraction), while much of the growth in 2009 and 2010 can be attributed to federal stimulus spending in the $800 billion American Recovery and Reinvestment Act. The stimulus famously failed in its stated goal of saving/creating/funding jobs. (Unemployment during the stimulus period was higher than the White House predicted it would have been if the stimulus were not passed at all.) But it did substantially increase federal spending — to which NBER gives outsized weight in its GDP calculations. In any event, the apparent 2010 GDP boost regressed to negative growth once ARRA spending dried up.
In a third chart, Obama’s second-term economic brain trust illustrates numbers from the White House’s own Office of Management and Budget, suggesting deficits have been falling steadily under Obama’s guidance:
Obama has made “deficits falling at the fastest rate in 60 years” a central talking point in his speeches since this summer, but according to a FactCheck.org report, they’re not even falling at the fastest rate of the last ten years: As a percentage of GDP, deficits fell faster between 2004 and 2007, and also between 1993 and 1996. FactCheck also notes that even now the deficit is still nearly double its annual average of 2.4 percent of GDP over the last 60 years. According to a Congressional Budget Office projection last week, even the modest falling-deficits trend will end next year, after which the gap between annual revenues and outlays will again increase through at least the end of this decade.
Obama has added about $7 trillion to the national debt since he took office, taking the outstanding debt from a little above $10 trillion in 2009 to more than $17 trillion today.
Addressing supporters last week at a fundraiser at the Philadelphia home of Comcast executive vice president for corporate communications David Cohen, Obama posited that his policies have advanced the well-being of average Americans. The president pointed out that “the auto industry bailout is very popular” and that “we were able to make progress on issues like health care reform” and also “make sure that young people got more help when it came to dealing with college costs.”
In fact, college affordability has not improved on Obama’s watch. According to the Federal Reserve Bank of New York, student loan debt has risen steadily since Obama took office. So has average debt per student, which was just under $21,o00 per student in 2009 and is around $25,000 today.
Other affordability measures have gotten worse as well. The concerted effort by both President George W. Bush and Obama to reinflate the real estate market and keep bad borrowers in their homes has brought with it a steady decline in home affordability. The National Association of Home Builders’ Home Opportunity Index took its steepest drop since 2004 in the third quarter, as ballooning home prices (coupled with fewer sales) and a stagnating median income of $64,400 made more than a third of new and existing homes unaffordable to middle-income earners.
Obama has “pivoted” to the economy about 20 times in his presidency, but the promise of laser-like focus on dollar-and-cent issues has never lasted very long. Obama’s entire original economic team, which once included luminaries like former Harvard president Larry Summers and the highly respected economist Christina Romer, has departed, and it’s unlikely his current roster of technocrats will be any better equipped to deal with the widespread failure of Keynesian market intervention. The credibility of macroeconomics has taken a severe beating in a period of debt and economic paralysis that is routinely called “uncharted territory.”
Meanwhile, broad and obvious measures of economic health — such as the labor force participation rate, which at 62.8 percent is the lowest it has been since 1978 — are becoming increasingly dire. Over the weekend the New York Times reported that long-term unemployment has increased 213 percent since the partial real estate correction began in 2007. (Related: Record high 91.5 million people not included in labor force)
The biggest challenge for the president, who famously remarked that the private sector was “doing fine” in 2012 and who has never shown much interest in the nitty-gritty of competitive for-profit business, will be persuading Americans who have been losing ground for more than five years that they should be happy about aggregate statistics compiled by Beltway experts. Still, Obama beats on against the current.
“Last month, another 200,000 Americans went back to work,” the president said in his Cleveland speech. “And a lot of those jobs are in manufacturing. So now we’ve got more work to do to get those engines of the economy churning even faster. But because we’ve been willing to do some hard things, not just kick the can down the road, factories are reopening their doors, businesses are hiring new workers, companies that were shipping jobs overseas, they’re starting to talk about bringing those jobs back to America. We’re starting to see that.”