Obama has failed as president of the United States. His first term was a failure. I will outline his failure, objections to the argument, and question whether or not he will fail in his second term.
1. Slowest recovery on record
We are in the slowest recovery on record. It has been the weakest recovery since WWII, so I guess it is the second slowest. We entered a severe recession in 2008-9. However, after a recession we should expect strong job growth. This is known as Zarnowitz's law. This is the basis for Friedman's plucking model introduced in the 70s and was given empirical evidence in the early 90s. Of 5/6 financial crises, the recoveries are amazing. Other then the current downturn, the great depression was the only exception (that recovery was slower, and there is evidence liberal policies made it worse.) In the recent recovery—where Obama tried similar policies to Roosevelt in the 1930's—our recoveries have been very similar. Slow growth—when there should be fast growth, this means the government is holding it down—etc. It is an interesting correlation. When liberal policies are enacted, the depression (or recession) fails to get better. It actually gets worse. A liberal would argue unemployment has been falling, how is it worse? That is correct, but I refer to Friedman's plucking model. Unemployment hasn't grown fast (when it should), in other words the government has prolonged the current crisis! Just like Roosevelt did before. Let's compare to the Reagan recovery—a recovery done right.
Nine quarters into the Reagan recovery, GDP growth was over 3%. In Obamas ninth quarter, we just barely got to 2%. The third month of Reagans recovery, it averaged over 9% GDP growth (it slowed down later because Zarnowitz's theory shows if done correctly, fast growth then back to normal rates.) Obama, three quarters in was under 4%. The percentage in the Reagan recession out of the job market in 1981 was over 36%, in 1987 it was 34%. Under Obama all it has done is rise, from around 20% and in 2011 it was about 45%. 29 months into Reagan's term, there was an 8% change in employment, under Obama under 1%. Reagan's problem was actually worse then Obama's, but he fixed it faster. Look at the policies. Reagan had tax cuts and deregulation. Obama has had regulation increase and a stimulus. Comparing the two, we see Obama has likely lengthened the recession although the trend is getting better. Reagan sped up growth, Obama has slowed it [1].
A liberal would still argue it is getting better. First, growth is exaggerated because of the way we count unemployment. You are not considered unemployed if you are not looking for work—even though you are. The U6 unemployment rate is a more accurate measure of unemployment. The recovery is a lot slower when using this measurement [2].
Now, it would be beneficial to compare unemployment rates with Canada. Canada has almost always had a similar economy as us—similar unemployment rates and all of it. It would make sense, they are our #1 trade partner. Canada uses a similar method of unemployment as our U6, so to properly calculate the differences we must adjust the rate. Before the stimulus, our unemployment rose 2.1%, Canada's rose 1.9%. About the same. ONLY AFTER THE STIMULUS, did our rates change dramatically. Our unemployment rose to 10% and stood above 9% for 14 months, Canadian unemployment peaked at 7% and has fallen to 6% during the same period we were stuck at 10. Now, lets compare the policies. Obama used flawed Keynesian policies while Canada chose not to create new government programs. The conservative approach worked best [1].
Obama will also destroy business in the long term. Of the economically significant regulations—ones that will cost business at least 100 million dollars—have exploded under the Obama administration. Compared to Bush, Obama has regulated 40% more, and 55% more then Clinton. Even if we focus on only 75 regulations (only a fraction) this will cost business 38 billion in the coming decade. The World Economic Forum—liberal bias—started in 2004 measuring a competitiveness in an economy. For 5 years, we were the most competitive. In 2009 we slipped to second, in 2011 fifth. The Cato Institute went from seventh in 2008 to tenth in 2009. Our business rating in the Heritage Foundation Index went from tenth to 2010 to thirteenth in 2011. In the long run, this will harm us [1].
Let me give a brief summary: liberals will often point out that the economy is getting better. It is worse then it was four years ago, but better then it was two years ago. They miss the point, however. Yes, it has been "getting better". Unemployment currently trends down. But the facts speak for themselves: Obama's policies have not worked. He has likely lengthened the current problem. If he adopted different policies, like Canada, or Reagan, the unemployment would be much lower. So in one sentence: Yes, it's getting better, BUT it could have been a lot better if he did not implement his policies; and his policies have lengthened the amount of time we [should] have been in this bad economy.
2. Objections to the argumentargunment
A) He inherited the mess!
Correct; so did Reagan, and look where he went. First, they usually assume George Bush created the mess, but here is my question: which policies of his made it?
--It was his tax cuts!! This is a common argument I hear when my liberal school mates or teachers are preaching on the issue. It was the evil free market republicans. This argument makes no sense, though. Increasing the amount of money in small business, (yes, even the "evil" corpurations) would hurt the economy? This makes little sense, letting people keep their hard earned money to spend, save, and invest hurts us? This argument makes little sense.
--Income inequality! A study done over 14 countries using data from 120 years - present finds no correlation between income inequality and found credit booms cause banking crises', but that income concentration (liberals call it inequality) does not correlate with a credit crisis. The study said it proves there should be doubt with blaming income inequality with recessions.
--Bush deficits! Alright, first they never explain how. Deficits can cause a crisis, and although the Bush deficit was very irresponsible it was not crisis worthy. It likely had a small effect on consumers, but not enough to cause the current crisis. Also, the Obama deficits are much larger then the Bush deficits, yet you don't hear them complaining now. Interesting how they flip flopped, isn't it?
B) Clinton did better then Bush, Obama is like Clinton, therefore his policies helped.
Interesting, isn't it? The losses would have been no different, and maybe even less because without the stimulus they would be more competitive. The stimulus left them at a slight disadvantage, meaning Obama's "I saved you" rhetoric is untrue.
Oh, I hope so, but it is unlikely. According to Americans for Tax Reform, taxes will raise 442 billion dollars on small business in the next decade. This result is not the work of ATR—an advocacy group for a flat tax—but the Tax Policy center—a non biassed group—so I doubt the claim is biassed. Families making above 250,000 dollars will be taxes 14,000 dollars more. The ATR reports an Ernst and Young study has been done to predict the impact of the changes. 20% of workers employed by the small business public sector will be affected. They project this will cost the economy 700,000 jobs [6].
1. Norquist, Grover Glenn., and John R. Lott. Debacle: Obama's War on Jobs and Growth and What We Can Do Now to Regain Our Future. Hoboken, NJ: John Wiley, 2012. Print.
2. http://portalseven.com/employment/unemployment_rate_u6.jsp
3. http://www.aei-ideas.org/2012/11/obama-didnt-end-the-great-recession-that-bush-didnt-cause/
4. http://www.heritage.org/research/reports/2011/09/setting-the-tax-record-straight-clinton-hikes-slowed-growth-bush-cuts-promoted-recovery
5. http://www.forbes.com/sites/paulroderickgregory/2012/10/28/ohioans-are-no-fools-obama-did-not-save-your-automotive-jobs/
6. http://www.atr.org/president-obama-raise-taxes-successful-small-a7356
1. Slowest recovery on record
We are in the slowest recovery on record. It has been the weakest recovery since WWII, so I guess it is the second slowest. We entered a severe recession in 2008-9. However, after a recession we should expect strong job growth. This is known as Zarnowitz's law. This is the basis for Friedman's plucking model introduced in the 70s and was given empirical evidence in the early 90s. Of 5/6 financial crises, the recoveries are amazing. Other then the current downturn, the great depression was the only exception (that recovery was slower, and there is evidence liberal policies made it worse.) In the recent recovery—where Obama tried similar policies to Roosevelt in the 1930's—our recoveries have been very similar. Slow growth—when there should be fast growth, this means the government is holding it down—etc. It is an interesting correlation. When liberal policies are enacted, the depression (or recession) fails to get better. It actually gets worse. A liberal would argue unemployment has been falling, how is it worse? That is correct, but I refer to Friedman's plucking model. Unemployment hasn't grown fast (when it should), in other words the government has prolonged the current crisis! Just like Roosevelt did before. Let's compare to the Reagan recovery—a recovery done right.
Nine quarters into the Reagan recovery, GDP growth was over 3%. In Obamas ninth quarter, we just barely got to 2%. The third month of Reagans recovery, it averaged over 9% GDP growth (it slowed down later because Zarnowitz's theory shows if done correctly, fast growth then back to normal rates.) Obama, three quarters in was under 4%. The percentage in the Reagan recession out of the job market in 1981 was over 36%, in 1987 it was 34%. Under Obama all it has done is rise, from around 20% and in 2011 it was about 45%. 29 months into Reagan's term, there was an 8% change in employment, under Obama under 1%. Reagan's problem was actually worse then Obama's, but he fixed it faster. Look at the policies. Reagan had tax cuts and deregulation. Obama has had regulation increase and a stimulus. Comparing the two, we see Obama has likely lengthened the recession although the trend is getting better. Reagan sped up growth, Obama has slowed it [1].
A liberal would still argue it is getting better. First, growth is exaggerated because of the way we count unemployment. You are not considered unemployed if you are not looking for work—even though you are. The U6 unemployment rate is a more accurate measure of unemployment. The recovery is a lot slower when using this measurement [2].
Now, it would be beneficial to compare unemployment rates with Canada. Canada has almost always had a similar economy as us—similar unemployment rates and all of it. It would make sense, they are our #1 trade partner. Canada uses a similar method of unemployment as our U6, so to properly calculate the differences we must adjust the rate. Before the stimulus, our unemployment rose 2.1%, Canada's rose 1.9%. About the same. ONLY AFTER THE STIMULUS, did our rates change dramatically. Our unemployment rose to 10% and stood above 9% for 14 months, Canadian unemployment peaked at 7% and has fallen to 6% during the same period we were stuck at 10. Now, lets compare the policies. Obama used flawed Keynesian policies while Canada chose not to create new government programs. The conservative approach worked best [1].
Obama will also destroy business in the long term. Of the economically significant regulations—ones that will cost business at least 100 million dollars—have exploded under the Obama administration. Compared to Bush, Obama has regulated 40% more, and 55% more then Clinton. Even if we focus on only 75 regulations (only a fraction) this will cost business 38 billion in the coming decade. The World Economic Forum—liberal bias—started in 2004 measuring a competitiveness in an economy. For 5 years, we were the most competitive. In 2009 we slipped to second, in 2011 fifth. The Cato Institute went from seventh in 2008 to tenth in 2009. Our business rating in the Heritage Foundation Index went from tenth to 2010 to thirteenth in 2011. In the long run, this will harm us [1].
Let me give a brief summary: liberals will often point out that the economy is getting better. It is worse then it was four years ago, but better then it was two years ago. They miss the point, however. Yes, it has been "getting better". Unemployment currently trends down. But the facts speak for themselves: Obama's policies have not worked. He has likely lengthened the current problem. If he adopted different policies, like Canada, or Reagan, the unemployment would be much lower. So in one sentence: Yes, it's getting better, BUT it could have been a lot better if he did not implement his policies; and his policies have lengthened the amount of time we [should] have been in this bad economy.
2. Objections to the argumentargunment
A) He inherited the mess!
Correct; so did Reagan, and look where he went. First, they usually assume George Bush created the mess, but here is my question: which policies of his made it?
--It was his tax cuts!! This is a common argument I hear when my liberal school mates or teachers are preaching on the issue. It was the evil free market republicans. This argument makes no sense, though. Increasing the amount of money in small business, (yes, even the "evil" corpurations) would hurt the economy? This makes little sense, letting people keep their hard earned money to spend, save, and invest hurts us? This argument makes little sense.
--Income inequality! A study done over 14 countries using data from 120 years - present finds no correlation between income inequality and found credit booms cause banking crises', but that income concentration (liberals call it inequality) does not correlate with a credit crisis. The study said it proves there should be doubt with blaming income inequality with recessions.
--Bush deficits! Alright, first they never explain how. Deficits can cause a crisis, and although the Bush deficit was very irresponsible it was not crisis worthy. It likely had a small effect on consumers, but not enough to cause the current crisis. Also, the Obama deficits are much larger then the Bush deficits, yet you don't hear them complaining now. Interesting how they flip flopped, isn't it?
--It was deregulation! Obama used this in his debates, he made jokes about it in his speeches and in the debates. Yes, Mister President, the way to counter this crisis is to roll back regulations. As explained, I showed the tremendous cost of these regulations. AEI notes, "Except the law that ended Glass-Steagall was signed by President Bill Clinton. And few analysts think the end of Glass-Steagall directly contributed to the financial crisis. ... But it was the Fed’s monetary policy miscues after the downturn began that turned a run-of-the-mill recession into a once-in-a-century disaster."[3]
B) Clinton did better then Bush, Obama is like Clinton, therefore his policies helped.
Was Clinton such a good president? His economy was booming, and Bushes fell. It is impossible to defend Clintons high taxes as an example for growth. As the Heritage Foundation notes, and rightfully so, "The economic defense of the Clinton tax hikes does not hold up against the historical facts. The economy did exhibit strong economic growth during the 1990s, but rapid growth did not occur soon after the tax hike—it came much later in the decade, when Congress cut taxes. After the 1993 tax hike, the economy actually slowed to a point below what one would expect, considering the once-in-a-generation favorable economic climate that existed at the time." And, "As for the overall economic recovery—that started well before President Clinton took office. In January 1993, the economy was in the 22nd month of expansion following the recession from July 1990 to March 1991." Lastly, they list a number of factors explaining why the economy boomed, and no, it wasn't tax hikes: 1) The cold war ended, meaning many military jobs would merge with other industries (like mechanics etc.) which are more productive, helping the economy; 2) Energy Prices were low; 3) Inflation was low, only two percent, helping economic growth; 4) The tech boom, new electronics, the internet, impriving computers, creating a new economic market AND more productivity. All of this created a good economy, not high taxes [4].
The Heritage Foundation gives us a data table: After the 1993 tax hike. GDP grew 3.3% and wages fell 0.06% (note, the tech boom was occurring causing an increase in GDP). After the 1997 tax cuts, wages rose 1.7% and GDP grew 4.4%.
C) We would have been worse.
This is the most common rebuttal: without the stimulus we would have been worse. However, as I explained above, countries (like Canada—they have a similar economy as we do) did far better then we did and they did no large stimulus. In other words, the argument is invalidated: Canada has an economy almost exactly like ours unemployment wise. They never did a stimulus, and are doing better then us now.
Paul Krugman usually argues the states that got the most stimulus money are doing better off, however this is untrue. The whole correlation relies on the state North Dakota. When North Dakota—which always has a great economy—is taken out of the data, there is no difference in the states improvement. It did little to help the economy. It was a failed policy, as explained above.
D) Obama saved the auto industry.
This is the most common rebuttal: without the stimulus we would have been worse. However, as I explained above, countries (like Canada—they have a similar economy as we do) did far better then we did and they did no large stimulus. In other words, the argument is invalidated: Canada has an economy almost exactly like ours unemployment wise. They never did a stimulus, and are doing better then us now.
Paul Krugman usually argues the states that got the most stimulus money are doing better off, however this is untrue. The whole correlation relies on the state North Dakota. When North Dakota—which always has a great economy—is taken out of the data, there is no difference in the states improvement. It did little to help the economy. It was a failed policy, as explained above.
D) Obama saved the auto industry.
What is interesting is Romney's normal bankruptcy plan actually would have done better then the stimulus. It would allow them to return to the market and let free market processes fix the situation. They would be more competitive and less subsidized. The treasury could have provided no risk credit, but no such thing occurred. GM still cut jobs by 25%. Interestingly, the Airlines went through normal bankruptcy (what Mitt Romney proposed). These companies lost the same amount of jobs—25%—meaning the Obama stimulus failed to "save" anything, it had the same effect as normal bankruptcy but was FAR more expensive. Forbes.com notes, "Such was the case in Ohio: In March of 2008, GM employed 12,300 Ohioans. Today, GM employs 9,533, for a loss of 2,767 jobs — equal the average GM job loss in U.S. operations. A structured bankruptcy would have yielded a similar jobs result, but a competitive GM. There would be about 10,000 GM jobs in Ohio today with or without Obama “Saving GM.”[5]
Interesting, isn't it? The losses would have been no different, and maybe even less because without the stimulus they would be more competitive. The stimulus left them at a slight disadvantage, meaning Obama's "I saved you" rhetoric is untrue.
3. Life will recover.
Oh, I hope so, but it is unlikely. According to Americans for Tax Reform, taxes will raise 442 billion dollars on small business in the next decade. This result is not the work of ATR—an advocacy group for a flat tax—but the Tax Policy center—a non biassed group—so I doubt the claim is biassed. Families making above 250,000 dollars will be taxes 14,000 dollars more. The ATR reports an Ernst and Young study has been done to predict the impact of the changes. 20% of workers employed by the small business public sector will be affected. They project this will cost the economy 700,000 jobs [6].
1. Norquist, Grover Glenn., and John R. Lott. Debacle: Obama's War on Jobs and Growth and What We Can Do Now to Regain Our Future. Hoboken, NJ: John Wiley, 2012. Print.
2. http://portalseven.com/employment/unemployment_rate_u6.jsp
3. http://www.aei-ideas.org/2012/11/obama-didnt-end-the-great-recession-that-bush-didnt-cause/
4. http://www.heritage.org/research/reports/2011/09/setting-the-tax-record-straight-clinton-hikes-slowed-growth-bush-cuts-promoted-recovery
5. http://www.forbes.com/sites/paulroderickgregory/2012/10/28/ohioans-are-no-fools-obama-did-not-save-your-automotive-jobs/
6. http://www.atr.org/president-obama-raise-taxes-successful-small-a7356
I plan on sharing this with others and I hope they do the same!
ReplyDeleteThanks Bill!
ReplyDelete