The Republican charge is a body shot aimed right at the belly of President Barack Obama’s re-election effort: He made it worse.
No, not that White House efforts at boosting the American economy and creating jobs and “winning the future” were merely inefficient or wasteful, which they certainly were. Even Obama finally seems to understand that. “Shovel-ready was not as shovel-ready as we expected,” he joked lamely at a meeting of his jobs council.
Rather, that the product of all the administration’s stimulating and regulating is an economy that’s in significantly worse competitive and productive shape than when Obama took the oath in January 2009. He was dealt a bad hand, to be sure – and then proceeded to play it badly. At least, that is what Republicans have been saying. “He didn’t cause the recession as we know,” presidential candidate Mitt Romney said in New Hampshire yesterday. “He didn’t make it better, he made things worse.”
Team Obama offers a different narrative, of course. As the president said in his State of the Union address earlier this year, “Two years after the worst recession most of us have ever known, the stock market has come roaring back. Corporate profits are up. The economy is growing again. … These steps we’ve taken over the last two years may have broken the back of this recession.” He somehow failed to insert his usual boilerplate about the economy losing 700,000 jobs a month when he took office.
But Obama is correct, to a degree. The economy is growing (slowly) now and adding jobs (modestly) whereas neither was happening back in early 2009. Of course, economies in recession will eventually recover even without government action. So the question is whether Obamanomics helped, hurt or was inconsequential.
The centerpiece of Obama’s plan to “push the car out of the ditch” was the trillion-dollar (including interest expense on the borrowed money) American Recovery and Reinvestment Act. A recent article in The Weekly Standard determined that it may have cost as much as $278,000 for each job created. But that’s generous. Respected Stanford economist John Taylor, perhaps the next chairman of the Federal Reserve, has analyzed the actual results of the ARRA. Not what the White House’s garbage-in, garbage-out models say happened, but what actually happened as gleaned from government statistics. Taylor, simply put, looked at whether consumers actually consumed and whether government actually spent in a way that produced real growth and jobs. His devastating conclusion:
Individuals and families largely saved the transfers and tax rebates. The federal government increased purchases, but by only an immaterial amount. State and local governments used the stimulus grants to reduce their net borrowing (largely by acquiring more financial assets) rather than to increase expenditures, and they shifted expenditures away from purchases toward transfers. Some argue that the economy would have been worse off without these stimulus packages, but the results do not support that view.
Indeed, the results are horrifying. The two-year-old recovery’s terrible tale of the tape: A 9.1 percent unemployment rate that’s probably closer to 16 percent counting the discouraged and underemployed, the worst income growth and weakest GDP growth of any upturn since World War II, a still-weakening housing market. Oh, and a trillion bucks down the tube. Oh, and two-and-a-half years … and counting … wasted during which time the skills of unemployed workers continue to erode and the careers of younger Americans suffer long-term income damage. Losing the future.
Next, add in healthcare reform that Medicare’s chief actuary says will not slow the overall growth of healthcare spending. (Even its Obama administration godfather, Peter Orszag, warns that “more drastic measures may ultimately be needed.”) And toss in a financial reform plan that the outspoken and independent president of the Kansas City Fed says he “can’t imagine” working. “I don’t have faith in it all.” Indeed, markets continue to treat the biggest banks as if they are still too big to fail.
But wait there’s more. Obama created a debt commission that produced a reasonable though imperfect plan to deal with America’s long-term fiscal woes. But he stiffed it and then failed to supply a plan of his own, sowing the seeds for an impending debt ceiling crisis and making an eventual fiscal fix that much harder. One more step along the path not taken, along with pro-growth tax and regulatory policies that would have reduced policy and economic uncertainty and unleashed the private sector to invest, expand and create.
Elections have results. So do bad policies. Obama’s choices on taxing and spending and regulating, sorry to say, seem to have made things worse.