Obama's Persistent Economic Malaise
The August jobs report was hardly reassuring. On Friday, the Bureau of Labor Statistics reported net job creation of 173,000, far below estimates. There's no way to sugar-coat it, though White House officials attempted to do just that. They pointed out that the unemployment rate had fallen to 5.1%. But that was because another 200,000 workers had simply given up trying to find a good job.
Good jobs are not being created because economic expansion has stalled. And expansion has stalled because Obama has presided over the greatest assault on free enterprise in our nation's history.
It didn't have to be this way. Obama's punitive tax and regulatory policies have caused businesses to rein in capital investment and have all but killed small business creation. As two major economists recently pointed out, capital investment is "historically weak." In fact, capital investment net of depreciation for 2013 was just 60% of what it was in 2006. A recent survey found that only 35% of small business owners were optimistic about the U.S. economy. American businesses are choosing not to invest because they have no confidence in Obama's policies, and barring new investment, the economy does not grow.
By contrast, Ronald Reagan cut taxes and reduced regulations, and the economy expanded at an annualized rate of 3.37% over eight years. At the end of Reagan's second term, the U.S. economy had expanded by a cumulative 33%. During the first six years of his presidency, Obama has generated a growth rate of 1.8%. That amounts to cumulative growth of 15% over 8 years. The Reagan economy was growing more than twice as fast.
Cumulative growth of 15% is bad enough, but it gets worse. During Obama's two terms, U.S. population growth is projected to grow by 6%. So per capita GDP growth is closer to 9%, or just over 1% annually. At that rate, even with compounding, it takes 40 years to double the economy. If Obama's policies are not reversed, workers will have to wait until 2049 to see a major improvement in their standard of living. This is Obama's legacy to the poor and middle class.
Despite the president's talk of helping the poor, the poverty rate has not declined during his time in office. In 2008, the last year of the Bush presidency, the poverty rate was 13.2%. By 2014, it had risen to 14.5%.
Obama has spent trillions "fighting poverty," but he has only created more of it. The only way to reduce poverty rates is to create good jobs, and the only way to do that is to promote economic expansion by lowering taxes and reducing regulation. With Obama, it's been taxes and regulation on steroids. The dismal results are not surprising.
Back in the day, Obama was insisting that the economy was in a "ditch," and it was his predecessor's fault. It's now clear that the economy is still in a ditch, and no sane person can claim that it is "George Bush's fault." Obama has driven the economy deeper into the ditch. Hillary Clinton's proposals, such as taxing capital gains at a marginal rate of 47%, would create an even deeper ditch because they would reduce capital investment even more. Under Bernie Sanders, the ditch would become a chasm.
Obama has done everything possible to suppress economic growth. It appears that he either does not understand free markets or is opposed to capitalism on principle, or both. In any case, his policies have cost Americans an average $1,170 in annual wages per worker. That may not sound like much, but it amounts to a loss of $255 billion per year for the U.S. economy.
For seven years, Obama has done all he can to stifle economic growth. Had he simply done nothing, the U.S. economy would be larger than it is at present. Had he actively promoted American business by aggressively lowering taxes and regulation, the economy would have been at least 11% larger (based on 1.57%, the difference between growth during the Reagan and Obama administrations, times 7).
It has been obvious for some time that Obama has failed. He has failed to bring about the 5 million "green" jobs he spoke of in 2009. By his own admission, the million "shovel-ready" jobs he promised as part of his $857-billion stimulus were not shovel ready. The only people he hasn't failed are his billionaire cronies, who have benefited from government handouts like the ones he continued to promote at the annual clean energy summit in Las Vegas last week. Every one of Obama's billionaire buddies is doing better than he was in 2009. Ordinary Americans are struggling.
This is the economic reality of a low-growth economy. In the short term, workers and investors suffer lower wages and investment returns. That's bad enough, but in the long term, the consequences are much greater. Families struggle to feed, house, and educate their children. Workers fail to receive the advancement and higher pay they deserve. And for most Americans, retirement gets delayed further and further. An entire generation will find themselves working into their seventies because of Obama's blunders.
Liberals want the American people to think that Obama's handling of the economy hasn't been all that bad, and they've made all kinds of excuses for him. Some economists have begun speaking of 2% growth as the "new normal." There's nothing normal about it. The average real growth rate over the past century has been 3.4%.
It's important for the public to realize just how bad Obama's handling of the economy has been. It has been worse than any president since FDR, who managed to magnify what should have been a two-year recession into an eight-year depression. Obama took what should have been a two-year recession and made it into what, for most Americans, feels like an eight-year recession.
The failure of Obama's economic policies is now beyond doubt. Its human consequences are just as real. Even with conservatives in the White House after 2016, it will take years to correct the effects of Obama's economic policies. With Hillary or Bernie in the White House, doubling down on Obama, it would take decades.
Jeffrey Folks is the author of many books on American politics and culture, including Heartland of the Imagination (2011).