There’s a bright side to the upcoming presidential election, even if you dislike both candidates—it will bring an end to the Obama administration.
That may seem like a harsh assessment, but the past eight years have not been good to the U.S. economy, which has been weaker than instant coffee. As POTUS, President Obama bears much of the responsibility.
How bad has economic performance been? Today, about 66.6% of American youth aged 15 to 29 are living with their parents. That’s up from 62.8% before the Great Recession. Fifteen-year-olds should, of course, be living at home. But 29 year olds? Adults don’t typically live with mom and dad if they can afford to live away from home.
Talk all you want about the Great Recession, but that was eight years ago. And if you think tax cuts and insufficient spending by the Bush administration resulted in the economic malaise of the past eight years, you may want to consider reading economists other than Paul Krugman.
President Obama’s Forecasts vs. Reality
The Wall Street Journal may not be a fan of the president, but the recent review it published of the Obama economy by Lawrence Lindsey, a former Federal Reserve governor and assistant to President George W. Bush for economic policy, couldn’t have been fairer. It compares what President Obama said would happen with what actually happened.
Consider.
When President Obama submitted his 2010 budget, he projected that the economy would grow at an average rate of 3.9% over the five years to follow. That would have been a reasonable expectation, given that the economy grew at an average rate of 3.3% a year in the pre-Obama years and the economy typically grows at a faster-than-average rate after a recession.
Yet during the five-year period after his forecast, economic growth averaged only 2.2% a year.
A year later, when the president submitted the budget for FY 2012, President Obama again forecast that growth would average 3.9% for the five years to follow. Not even close. Instead, the economy grew by just 2% a year.
Undeterred, President Obama’s five-year growth project when he submitted the FY 2013 budget was 3.6%.
While it’s too early to say how badly he missed the mark, because the five-year mark won’t be reached until the end of this year, it’s safe to conclude that he missed it badly. Lindsey generously assumes average growth of 3% for the second half of 2016, but even with that gimme, actual growth for the five-year period would still be only 2.1%, which Lindsey notes is “the third consecutive overestimate and an average of 1.7 percentage points lower than expected.”
The estimates haven’t gotten any better.
“Mr. Obama began his second term with a budget submitted in April 2013,” Lindsey wrote. “Somewhat chastened by the disappointments of the first term, the administration cut its growth projection for the next four years to an average of 3.3% annual growth. This estimate was repeated the following March for the three-year period beginning in 2014. Making the same 2016 growth assumption as above, real growth will average only 2.3% annually from 2013-16 and 2.1% annually from 2014-16. This means five consecutive overestimates by the administration.”
The Lessons of Obamanomics
Yes, we’ve noted in the past that growth has been slow. And we’ve also noted that the Federal Reserve Board is consistently overly optimistic with its economic growth projections. So are there lessons to be learned here or are we belaboring the point? There are lessons, of course.
Keynesian economics is fraudulent. The most important lesson of Obamanomics is that Keynesian economics is quakery. Politicians like to pretend that government spending stimulates the economy, because the more that’s spent, the more power politicians have and the more pork they can bring home to their district. More government spending is great if you’ve a government employee, especially one in charge of a budget, but if you’re not, it just means more debt or higher taxes, both of which are a drain on the economy.
Forbes compared the results of Obamanomics with its polar opposite, Reaganomics (aka, voodoo economics), which it called “the most successful economic experiment in world history.”
“The Reagan recovery started in official records in November 1982,” Forbes notes, “and lasted 92 months without a recession until July 1990, when the tax increases of the 1990 budget deal killed it. This set a new record for the longest peacetime expansion ever, the previous high in peacetime being 58 months.
“During this seven-year recovery, the economy grew by almost one-third, the equivalent of adding the entire economy of West Germany, the third-largest in the world at the time, to the U.S. economy. In 1984 alone real economic growth boomed by 6.8%, the highest in 50 years. Nearly 20 million new jobs were created during the recovery, increasing U.S. civilian employment by almost 20%. Unemployment fell to 5.3% by 1989.”
Inflation reached double digits during the Carter years, but was tamed during the Reagan years. It was reduced by more than half, to 6.2% by 1982, then cut to 3.2% in 1983, Forbes notes.
“Real per-capita disposable income increased by 18% from 1982 to 1989, meaning the American standard of living increased by almost 20% in just seven years. The poverty rate declined every year from 1984 to 1989, dropping by one-sixth from its peak. The stock market more than tripled in value from 1980 to 1990, a larger increase than in any previous decade.”
Given the past eight years, it’s time to put Keynesian economics in reverse.
The worst is yet to come. The other important lesson is that the true impact of this presidency will be felt in years to come. The federal debt nearly doubled during the Obama years and our children will be stuck with the bill.
In addition, the more than 600 major rules that President Obama created during his record-breaking regulatory reign have not yet had their full impact. Many of the rules were created without Congressional approval, which makes President Obama solely responsible for them.
Consider the Affordable Care Act, the crown jewel of the regulatory state. Major insurance carriers have been pulling out of the state healthcare exchanges that were supposed to provide affordable care to those who were otherwise uninsured.
As of July, 16 of the 23 non-profit, state-chartered co-ops created by Obamacare to sell affordable insurance plans have gone bankrupt. Others are destined to follow. In Tennessee, the insurance commissioner approved premium increases of up to 62% in an effort to save that state’s exchange.
The Obama administration has desperately tried to save the exchanges by—how else—issuing new regulations.
Regulation of the Internet has received less attention, but the actions of the Federal Communications Commission, which last year decided to subject the Internet to the 1930s regulations that govern utilities, are already beginning to have an impact.
Economist Hal Singer, who has tracked broadband investment since the passage of the new regulations, found that the 12 largest U.S. Internet service providers reduced investment by 8% in the first six months of 2016, compared with 2014, before the Internet was subject to regulation.
“Companies making computer and electronic products and in the telecommunications side of the information industry employed 29,000 fewer workers in August than they did a year earlier,” The Wall Street Journal noted.
President Obama has been vocal about his alleged economic success, but consider just a few of the many points we could make to the contrary:
- Obama is the only U.S. chief executive in history not to preside over even a single year with 3 percent GDP growth.
- During the Obama years, the number of Americans below the poverty line is up 3.5 percent.
- Real median household income: down 2.3 percent.
- Americans on food stamps — 33 million then, 46 million now: up 39.5 percent.
- Americans who own homes: down 5.6 percent.
- National debt — $10.63 trillion then vs. $19.19 trillion last Wednesday: up 80.5 percent.
That’s the real Obama legacy.