So did Obamanomics work or not?
AEIdeas
How to evaluate the economic record of Barack Obama? To even begin answering, it’s necessary to go beyond just counting the number of jobs created during his presidency (10 million) or calculating the average growth rate (1.5%) or even looking at something more wonky like the labor force participation rate.
First, a president’s policy actions may take years to play out. Reaganomics didn’t move the needle on productivity growth during the 1980s. But maybe they helped set the stage for the 1990s boom. The US economy is a complicated piece of business. Its deeper structural components are altered neither easily nor quickly. Will universal healthcare — or whatever form it morphs into under the GOP — make us healthier, or promote entrepreneurship? Will Dodd Frank prevent future financial crises or constrain lending or both?
President Barack Obama waves goodbye at the conclusion of his final press conference at the White House in Washington, U.S., January 18, 2017. REUTERS/Kevin Lamarque.
Second, even evaluating policies meant to have immediate impact is hard. Consider the ongoing debate about the 2009 stimulus plan. Sure, there are models purporting to show this or that many jobs created or GDP percentage points added. But there was also a lot else happening back then, including unorthodox monetary policy and a dramatic regulatory expansion.
Third, there are also long-term macroeconomic trends to consider. Demographic factors suppressing GDP growth today and nudging down labor force participation rates didn’t emerge in 2009. Likewise, weak US productivity growth — as official measured — also predates the Obama years. These observation has given rise to various flavors of theory that the US economy is suffering from chronic “secular stagnation.”
Was there something special about the Great Recession and Financial Crisis that probably precluded a more robust recovery?
Fourth, there’s the rather large matter of the Great Recession and Financial Crisis. Obama inherited a nasty economic mess. But so did other presidents, such as Ronald Reagan. Was there something special about the Great Recession and Financial Crisis that probably precluded a more robust recovery? That would seem a pretty important determination to make.
Example: Research from my AEI colleague Robert Barro suggests severe downturns — even when accompanied by financial shock — are typically followed by stronger recoveries. Others disagree. Economists Carmen Reinhart and Kenneth Rogoff argue recessions accompanied by systemic shocks to the banking and housing systems tend to be followed by painfully sluggish recoveries. It was a “crisis greatly amplified by financial market breakdown,” Rogoff has written. And from that perspective, “the post-2008 U.S. recovery has not been unusually weak or prolonged,” argues Goldman Sachs.
Yet from either perspective, policy was likely suboptimal. For his part, Barro thinks the recovery could have been faster had there been more pro-productivity policies reducing “constraints” on market activity: deregulation, tax reform, infrastructure upgrades, freer trade. And as Rogoff sees it, “more vigorously pursued debt write-downs” and even more aggressive monetary policy would have been helpful. Even so, the role of the Bernanke Fed is often downplayed by those crediting Obamanomics from preventing an even worse downturn.
For now, at least, I prefer to learn what I can from the Obama years and focus on the challenges at hand to expand work and boost productivity to create sustainable growth benefitting the broad swath of Americans. Growth can be faster, mobility higher, opportunity greater.
Obamanomics cannot be evaluated without taking into account the additions to debt and Fed QE, which pumped $14 trillion into the U.S. economy. This must someday be reckoned with. If Obama just gave that money to every household, they would have each gotten $112,000 cash.
So totally correct but overlooked.
I agree with your premise but I believe the $14 trillion number was the combined total for all central banks. I believe the Fed expanded their balance sheet from approx $500 billion to $3.5 trillion or so. My numbers are ballpark from memory
Thank god this idiological idiot is OUT! Economy does not run on hope.
It doesn’t run on hope? So why does consumer confidence play such a huge role in the markets?
Actually, it doesn’t, Chris. Confidence is ,at best, a coincident indicator to both the economy and the markets. More likely, it lags.
Terrible article. Even it is entirely correct, I wish the author would have simply said : “Even though I teased you with the question in my headline, I have no intention of answering it. It’s just too hard.” What a waste of time.
Agreed. Interesting questions; less-than-compelling answers.
Real GDP per capita growth rates: Comparing Obama with FDRs New Deal
1929 – 4.95% Hoover — 2000 – 2.96% Clinton
1930 – (9.48%) Hoover — 2001 – (0.02%) Bush
1931 – (7.12%) Hoover — 2002 – 0.82% Bush
1932 – (13.45%) Hoover — 2003 – 1.86% Bush
1933 – (1.84%) FDR — 2004 – 2.85% Bush
1934 – 10.09% FDR — 2005 – 2.39% Bush
1935 – 8.16% FDR — 2006 – 1.69% Bush
1936 – 12.21% FDR — 2007 – 0.81% Bush
1937 – 4.47% FDR — 2008 – (1.22%) Bush
1938 – (4.06%) FDR — 2009 – (3.63%) Obama
1939 – 7.10% FDR — 2010 – 1.68% Obama
(WWII starts in Europe Sept 1939)
1940 – 7.90% FDR — 2011 – 0.83% Obama
1941 – 16.57% FDR — 2012 – 1.47% Obama
2013 – 0.74% Obama
2014 – 1.68% Obama
2015 – 1.62% Obama
2016 – not in yet; likely to be under 2%
The best peacetime economic growth in U.S. history, the 1960s:
1957 – 0.29% [The year of Sputnik] Ike
1958 – (2.37%) Ike
1959 – 5.10% Ike
1960 – 0.50% Ike
1961 – 0.89% JFK
1962 – 4.50% JFK
1963 – 2.86% JFK
1964 – 4.32% LBJ
[Goldwater runs for Prez and Reagan gives speech on how bad we are doing.]
1965 – 5.18% LBJ [Vietnam buildup is announced by LBJ July 28th.]
1966 – 5.37% LBJ
1967 – 1.63% LBJ
1968 – 3.87% LBJ
1969 – 2.13% Nixon
1970 – (0.95%) Nixon
In 1965 with a workforce of approximately 60 million, less than half what it is today at over 140 million:
Monthly jobs —– Monthly jobs
added in 1965: —- added this year:
Jan — 162,000 — 168,000
Feb — 217,000 — 233,000
Mar — 203,000 — 186,000
Apr — 256,000 — 144,000
May — 233,000 — 24,000
June – 198,000 — 271,000
July — 273,000 — 252,000
Aug — 265,000 — 176,000
Sep — 262,000 — 208,000
Oct — 228,000 — 135,000
Nov — 279,000 — 204,000
Dec — 324,000 — 156,000
The 1960s is the best peacetime decade for economic growth, a GDP 3x greater than what we have today. The Vietnam War buildup did not start until mid-1965 and the big years for the buildup were 1967 through 1970; after 1970 was the peak year and the decline in troop strength went down.
We had alot of public and private investment and consumption with the Cold War, Space Race, commercial jet aviation, Interstate Highway and suburb build out, and civilian nuclear research.
https://twitter.com/tPfit87ter/status/814326867557658628
Consumer confidence (and spending) is a result of an improving economy, not its cause.
Any benefit to the economy from Obamanomics was incidental to the purpose of the Progressive left to make the US economy more like China’s model of state-run capitalism (which strictly speaking is fascism) with governing elites in control supported by crony capitalists — the difference being that the Chinese leadership is a lot smarter than Obama and his cronies.
That’s what this election was all about — the decimation of high-quality jobs (making total number of jobs created meaningless) and record-low level of meaningful work force participation by the “deplorables” — while the D.C. and Silicon Valley folks are doing just fine.
The future is, indeed, uncertain under our new leadership — and thank God for that, because it was depressingly certain under the Progressives — slow death by economic regulation and cultural degradation, just like the EU. Ironically, our former colonial masters the Brits showed us the way — and we took it.
I am curious to see how the new president will create jobs to re-build the infrastructure, inner cities and rural America. If he does, he and Senator Sanders will forge a strong working relationship. He cannot bring back jobs that were lost either to trade or technology. I hope those who voted for him realize that.
Obama inherited a collapsed economy and in his eight years he gave his best efforts. Did his policies work? The article doesn’t answer the question in the title. I guess that the conclusion that it could have been faster had there have been more pro-productivity stimuli, means that the answer is: yes, Obamanomics worked. Let’s pray that president Trump’s anti-elite Goldman Sachs’ policies will prove that economic growth can be faster and more sustainable.
All I know is 2008 was the year our retirement fund got hit for 50%. And we didn’t have any stocks. I figure the government was very careless in managing the banks and owe us our losses.
With 0% interest rates one must own stocks! The only game in town.