The Obama Economic Record: The Worst Five Years Since World War II

Photo credit: shutterstock.com

Editor’s note: This article first appeared The Daily Caller.

In spite of the claims by President Obama’s Council of Economic Advisors regarding his administration’s economic accomplishments, the U.S. economy has grown very slowly in the years since the Great Recession of 2008-09. After four years of slow growth, the latest data reveals that the U.S. economy shrank at a 2.9 percent annual rate during the first quarter of 2014.

That figure has been widely reported, but here are some figures that have not been reported, and they are quite eye-opening:

Over the first five years of Obama’s presidency, the U.S. economy grew more slowly than during any five-year period since just after the end of World War II, averaging less than 1.3 percent per year. If we leave out the sharp recession of 1945-46 following World War II, Obama looks even worse, ranking dead last among all presidents since 1932. No other president since the Great Depression has presided over such a steadily poor rate of economic growth during his first five years in office. This slow growth should not be a surprise in light of the policies this administration has pursued.

An economy usually grows rapidly in the years immediately following a recession. As Peter Ferrara points out in Forbes, the U.S. economy has not even reached its long run average rate of growth of 3.3 percent; the highest annual growth rate since Obama took office was 2.8 percent. Total growth in real GDP over the 19 quarters of economic recovery since the second quarter of 2009 has been 10.2 percent. Growth over the same length of time during previous post-World War II recoveries has ranged from 15.1 percent during George W. Bush’s presidency to 30 percent during the recovery that began when John F. Kennedy was elected.

Economic growth is usually faster than normal following a recession as entrepreneurs find more productive ways to employ the resources that were idle during the recession. How rapidly the economy grows and recovers depends partly on whether market forces are allowed to allocate resources, including labor, to their most productive uses. Unfortunately, the Obama administration has pursued several policies that make it harder for market forces to work. These include: bailouts, expansion of entitlement programs, regulation of the economy, tax increases, and huge government deficits.

Bailouts have resulted in capital being stuck in businesses that are either inefficiently run or have failed to produce goods and services that consumers’ value highly. In the absence of bailouts, some firms would have gone bankrupt and the capital reallocated to vibrant firms that are producing what consumers demand in a cost-effective way.

Expansion of government entitlement programs, such as food stamps and unemployment compensation, has reduced the incentive to be employed. The average benefit per recipient of food stamps jumped by approximately 25 percent between 2007 and 2010 due to rule changes. It also became easier to qualify for food stamps. As Richard Vedder points out in a Wall Street Journal editorial, the number of food stamp recipients rose by over 7 million between 2010 and 2012, a period of falling unemployment.

Pages: 1 2

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

Lower Benefits, Higher Jobs — Paul Ryan Has It Right

Photo credit: Christopher Halloran / Shutterstock.com

Neel Kashkari, the Republican candidate for governor of California, just recounted in The Wall Street Journal his week on the streets of Fresno posing as a homeless man looking for work. At the end of his op-ed, Kashkari lamented that he didn’t need a higher minimum wage, paid sick leave, or a health care plan. What he needed was a job.

And Kashkari made the important point that all those government benefits, especially extended unemployment benefits, are work disincentives that may actually block job creation.

To be sure, there are signs that employment in the country is rising more rapidly these days. The February-July period was the first six-month stretch of consistent employment gains above 200,000 since 1997. And that came without any new programs from the federal government to “create jobs.” Even more surprising, those gains overlapped a quarter in which the gross domestic product actually contracted.

So what drove the increase? University of Chicago professor Casey Mulligan put his finger on it: “Major subsidies and regulations intended to help the poor and unemployed … reduce incentives for people to work and for businesses to hire.” And guess what happened when federal emergency job assistance ended? Job increases were the best they had been in 17 years.

Economists tend to focus primarily on the demand for labor in analyzing employment trends, giving short shrift to the supply of labor. Indeed, given the harsh winter weather and first-quarter drop in real GDP, it’s hard to believe that the demand for labor increased significantly in February and March. But is there anything about the supply of labor that could explain the improvement in employment?

Well, there is a very good reason to believe that extending unemployment benefits to a maximum of 99 weeks in recent years held back the labor supply. Rather than take a job, potential workers could more easily lengthen their job searches, hold out for higher-wage positions, or just choose not to work.

However, supply-side theory would also suggest that as extended unemployment benefits expired at the end of last year — despite major hand-wringing from the president and Democratic leaders — workers would go back to work. And they did. Technically, this would be visible as an outward expansion of the supply-of-labor curve. Without the crutch of continued unemployment benefits, workers are willing to take jobs, even at a somewhat lower wage. They know that work is its own virtue.

Now, if the demand for labor is steady, what would be the implications of an increased labor supply? Here, as the supply curve shifts, economic analysis would suggest that wages might fall somewhat–but the level of employment would increase. And guess what? Since the month after extended unemployment benefits expired, the number of employed workers has increased, the employment-to-population ratio has increased (59 percent in July, versus 58.8 percent in February), and the civilian labor force has increased (to 156 million in July, from 155.7 million in February.) Average hourly earnings growth remains sluggish, at only 0.2 percent per month over the past six months; but at least wages have risen modestly while employment gains have increased markedly.

Pages: 1 2

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

Obama Dragged Down By Chaos At Home And Abroad, Not By The Economy

Photo credit: Barack Obama (Flickr)

“Why do you think President Obama’s job rating is falling, even though the economy is recovering?” the interviewer asked.

It’s a fair question, even though the economy declined 2.9 percent in the first quarter, even though most jobs created in June were part-time, and even though labor force participation remains low.

The fact is that the economy is growing, however slowly; jobs are being created, and the unemployment rate is heading down toward what economists consider full employment. And still, the president’s job rating languishes.

What’s wrong with the question is an assumption embedded within it, that what voters seek most from government and political officeholders is economic growth. I think there’s something they value even more: the maintenance of order.

This isn’t what I was taught in political science classes. Political scientists who had grown up in the 1930s Depression taught that politics was about “who gets what, when, and how.”

Operating on that assumption, political scientists developed rules that explained past election outcomes as a function of economic variables — how much the economy grew in the second quarter of the election year, for example.

Those rules generally worked pretty well at predicting future elections — until they didn’t.

What they don’t explain very well are the political upheavals that come when voters perceive that the nation and the world are in disarray. Americans, blessed with a mostly happy history, tend to take fundamental order for granted. They recoil and rebel when things spin out of control.

Example: The political scientists taught that the big shift toward Democrats in 1874 was a response to the financial panic of 1873. Sort of like the Great Depression.

But further study convinces me it was a rebellion against Ulysses Grant’s military occupation of the South to protect blacks’ rights. Voters tired of violence voted for the anti-black Democrats, who held House majorities for 14 of the next 20 years and won the popular vote for president in five of six presidential elections in those years.

Or consider Republicans’ “back to normalcy” victory in 1920. This was a response to disorder at home (dizzying inflation and depression, waves of strikes, terrorist bombings) and abroad (Communist revolutions, continued fighting in Russia and the Middle East, rejection of Woodrow Wilson’s League of Nations).

Closer to our times, Jimmy Carter was rejected in 1980 as the nation faced not only stagflation (inflation-plus-recession) at home but also an “arc of instability” abroad.

Americans, unlike voters in many other countries, demand the maintenance of order in the world as well in their own nation. From the early days of the republic, there has been an unspoken awareness that what happens in the world affects their own lives.

In the 19th century, American merchants went out into the Mediterranean, American whalers to the Pacific, and American missionaries to China and the Middle East.

American troops followed. The Navy and Marines went after the Barbary pirates on the shores of Tripoli. American gunboats opened Japan to the world in 1854 and were stationed on rivers in China from the 1840s to the 1930s.

Pages: 1 2

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

Obama Is Crushing The Reagan Link, And Putin Knows It

Photo credit: Barack Obama (Flickr)

Across his remarkably successful presidency, Ronald Reagan repeatedly made the link between the U.S. economy and U.S. international security and defense. He consistently argued that weakness at home leads to weakness abroad.

Reagan was aiming at the dismal Carter years. But he understood for all times that economic strength at home sends a powerful signal for international security overseas.

When Reagan went to Reykjavik to meet with Gorbachev, he believed the resurgent American economy would hammer the nails in the coffin of Soviet communism. And he explained to Gorbachev that if the Soviets didn’t come to the negotiating table with nuclear weapons, the U.S. would out-produce them on nukes and with technological superiority. Similarly, Reagan would not give up his vision for strategic missile defense.

And in both cases — building nukes and SDI — Reagan knew the American economy had the resources capable of achieving these goals, while the sinking Soviet economy couldn’t match us.

In the end, the Soviet system imploded in one of the greatest reversals in world history. Freedom won. Communism lost.

Now, circumstances are somewhat different today. But the horrible Malaysia Airlines crash in Ukraine highlights some worrisome facts about American-Russian relations. Mitt Romney was right. Russia is our biggest threat.

We know that the Malaysian plane was brought down by a ground-to-air missile fired from Russian-made SA-11 weapons run by pro-Russian Ukrainian rebel terrorists. We also know that Russia is fighting a proxy war with the U.S. in Ukraine, and that Russian special forces are leading the terrorist movement in Ukraine. We can add to this the proxy war fought by Russia in the Middle East, with its main ally Iran, and the fact that Russia is engaging in state-sponsored terrorism.

Whether President Obama understands all this, I don’t know. His policies have been alternatively passive (Libya, Egypt), incoherent (Russian reset), and feckless (Syria). But the fact that the current U.S. economic recovery is the slowest in post-WWII history — spanning 70 years — is surely a key factor in Vladimir Putin’s adventurism.

This brings us back to Reagan’s link. Putin may recognize that Russia’s economy is a thin deck of cards. But he surely doesn’t fear the weak American economic position. Ditto for the broken economic dictatorships in North Korea, Iran, and Venezuela, and the rising economic dictatorship in China. They don’t fear us.

In fact, America’s economic weakness is so worrisome, one suspects our friends are losing respect for us, too. Whether in Europe, Asia, Latin America, or Israel, our allies know that America has been the backstop for freedom. If not us, who?

But can they say that now?

As I testified this past week before the congressional Joint Economic Committee, at 2.1 percent average real growth, the U.S. is lagging far behind the 4.1 percent average recovery pace of the post-war business cycles. The Reagan recovery averaged 5 percent annual growth at the same point as the Obama recovery.

Obama’s stock market from the depth of the meltdown does beat Reagan’s market and the post-war average for equities. But here’s a very worrisome trend. Over the entire post-war period, average yearly growth has been 3.2 percent. And in the 1980s and ’90s, growth was 3.7 percent. Since 2001, however, under Republican and Democratic presidents and congresses, as the dollar lost over a third of its value, growth has dropped to only 1.8 percent annually. Something has clearly gone very wrong.

Pages: 1 2

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

Obama’s America: Number Of Young Adults Living With Parents Just Passed A Shocking Milestone

Photo Credit: Ojedamd (Creative Commons)

The Obama administration has been intensely criticized by many who contend its leftward trajectory has stunted economic growth and kept unemployment levels unreasonably high.

Recent studies show the startling effect these policies have had on the traditional American family structure. According to a Los Angeles Times report, the scarcity of good jobs has been a major factor in a record high number of adults forced to live with parents to make ends meet.

Nearly one in four Americans between the ages of 25 and 34 now live with parents or grandparents, the study found.

That number has spiked in just the first six years of Obama’s presidency. In 2007, just 18.7 percent of those in the same age group shared a home with older relatives.

More than twice as many Americans live in so-called multigenerational households now compared to 1980. As of 2012, a staggering 57 million citizens found such an arrangement optimal.

Perhaps the most astounding discovery revealed in the study was a comparison between young adults living with parents and elderly Americans living with their children.

In the U.S., large numbers of middle-aged adults have typically cared for their aging parents in a common home. While the rate of such arrangements has increased in recent years, less than 23 percent of those over 85 years of age currently reside with their children – a lower percentage than young adults living with parents.

As expected, the number of multigenerational households saw an increase correspondent with the 2008 recession.

Despite the fact that the Obama administration asserts the American economy is in recovery, however, this way of living has only continued to rise.

Photo Credit: Ojedamd (Creative Commons)

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom