First let us review some history and economic theory. Now you have heard often enough that the recent recession was the “worst since the Great Depression.” This bit of disinformation is repeated by those with a poor grasp or history and/or really don’t care if their information is accurate as long as it furthers their political agenda.
The worst recession “since the Great Depression” was clearly the recession American suffered through in the late 1970s. Double digit unemployment, double digit inflation and double digit interest rates! The prime rate actually hit 21%! So even if you had a job, the cost of living was rising faster and higher than you could possible get a raise and forget about buying a house with interest rates around 20%.
So we have that lie out of the way, let us get to some actual facts. The last recession end way back in mid 2009. That is when economy when from negative GDP growth to positive GDP growth. You may ask what growth? In most of America, there are still far too many empty store fronts as small business are shutting down faster than they are opening. What growth we have had has been anemic at best. GDP growth has not been over 2% in the three and half years since the last recession ended and employment has been over 7.5% and has even hit 10% during that time as well. What you are experiencing is clearly the worst recovery since the Great Depression.
Let’s review, worst recession followed by a roaring recovering in four years. Not the worst recession, worst recovery on record with no signs of getting better. Why such a glaring difference? Well the nice folks at Forbes covered this nicely. Let us review the facts about Reaganomics vs Obamanomics.
Reaganomics had four key points.
1. Cut tax rates to restore incentives for economic growth (just like JFK)
2. Real spending reductions, nearly 5% of the federal budget
3. Anti-inflation monetary policy
4. Deregulation, which saved American consumers an estimated $100 billion per year!
This simple plan resulted in the longest peacetime expansion in American history. The American standard of living increased by close to 20% and the poverty rate declined every year.
Now let’s look at Obama’s economic, and we are being generous here, plan. It is the exact opposite of President Reagan’s plan, which was clearly very successful. In addition to the new Obamacare taxes, he is calling for a sharp increase in the federal tax rate on the Americans who already pay the majority of the federal income tax. In additions, Obama is calling for increases in:
1. The capital gains tax
2. Corporate dividends tax
3. The Medicare tax
4. The death tax
Instead of spending cuts, Obama and the democrat controlled congress opened with nearly a trillion dollars in new federal spending, most of which was borrowed money, further increasing an already high federal debt.
Then we have the double-whammy of an inflationary monetary policy (the Quantative Easing non-stimulus acts) and massive re-regulation in health care, finance, energy and pretty much anything else Obama thinks he can get away with.
Mr. Ferrara sums up the results of the two policies nicely:
As a result, while the Reagan recovery averaged 7.1% economic growth over the first seven quarters, the Obama recovery has produced less than half that at 2.8%, with the last quarter at a dismal 1.8%. After seven quarters of the Reagan recovery, unemployment had fallen 3.3 percentage points from its peak to 7.5%, with only 18% unemployed long-term for 27 weeks or more. After seven quarters of the Obama recovery, unemployment has fallen only 1.3 percentage points from its peak, with a postwar record 45% long-term unemployed.
Previously the average recession since World War II lasted 10 months, with the longest at 16 months. Yet today, 40 months after the last recession started, unemployment is still 8.8%, with America suffering the longest period of unemployment that high since the Great Depression.
This is the Obama Economy. The worst recovery from a recession since the Great Depression. To make it worse, Obama’s policies are likely to cause that record to be broken, rather than produce real, sustainable economic growth.
Update: From Forbes: One Year Later, Another Look at Obamanomics vs. Reaganomics Here is the summary, it’s still Reagan for the win. Here are some of the highlights.
Let’s start with the GDP data. The comparison is striking. Under Reagan’s policies, the economy skyrocketed. Heck, the chart prepared by the Minneapolis Fed doesn’t even go high enough to show how well the economy performed during the 1980s.
Under Obama’s policies, by contrast, we’ve just barely gotten back to where we were when the recession began. Unlike past recessions, we haven’t enjoyed a strong bounce. And this means we haven’t recovered the output that was lost during the downturn.
This is a damning indictment of Obamanomics
Writing in today’s Wall Street Journal, former Senator Phil Gramm and budgetary expert Mike Solon compare the current recovery to the post-war average as well as to what happened under Reagan.
If in this “recovery” our economy had grown and generated jobs at the average rate achieved following the 10 previous postwar recessions, GDP per person would be $4,528 higher and 13.7 million more Americans would be working today. …President Ronald Reagan’s policies ignited a recovery so powerful that if it were being repeated today, real per capita GDP would be $5,694 higher than it is now—an extra $22,776 for a family of four. Some 16.9 million more Americans would have jobs.
…As I’ve written before, Obama is not responsible for the current downturn. Yes, he was a Senator and he was part of the bipartisan consensus for easy money, Fannie/Freddie subsidies, bailout-fueled moral hazard, and a playing field tilted in favor of debt, but his share of the blame wouldn’t even merit an asterisk.
My problem with Obama is that he hasn’t fixed any of the problems. Instead, he has kept in place all of the bad policies – and in some cases made them worse.