Political Spin in Full Spin on the Obama Economy

Real Clear Markets ^ | December 6, 2016 | Ray Keating

[expat_panama]

As their time in office winds down, U.S. presidents and their supporters tend to focus on legacy: What will history say about them? Unfortunately, on the economy, the Obama crowd has a lot of work to do in the hopes that political spin will cloud or even overrule economic reality. The effort is well under way.

It's not like this hasn't happened before. Franklin Delano Roosevelt's New Dealers successfully spun the idea that Herbert Hoover was a laissez-faire president, unwilling to use the tools of government to fight off the Great Depression, and it took FDR and his government programs to end the depression and save capitalism from itself. Of course, a cursory review of the facts shows that Hoover was anything but a free-market advocate. Instead, he signed the protectionist Smoot-Hawley Tariff Act, jacked up government spending and intrusiveness in unprecedented ways, and hiked taxes dramatically. FDR built and drastically expanded on such measures, including ramping up federal regulation like never before. Hoover and FDR were alike in imposing burdensome costs and uncertainties on the private sector. Hence, we experienced the Great Depression.

It took decades for the real history of the era to begin to get more widely reported, by historians, economists and authors like Paul Johnson, Amity Shlaes, Larry Schweikart, Burt Folsom, and Robert Higgs.

Like FDR, Obama was dealt a very bad hand on the economy. However, he largely followed the Roosevelt prescription of government activism. Obama imposed more spending, hyper-regulation, and tax increases, while also threatening throughout his two terms to inflict even more tax hikes, regulations and spending. The results of increased costs and uncertainty on the private sector were predictable, that is, fewer resources and diminished incentives for starting up, expanding and investing in businesses.

Obama supporters apparently will have plenty of help in spinning the Obama economy, as a December 2 article in The New York Times carried the title "President Obama Is Handing a Strong Economy to His Successor." Really? The article basically highlighted an unemployment rate of 4.6 percent in November, and served up assorted quotes from the Obama crowd, which included Jason Furman, chairman of Obama's Council of Economic Advisers, offering the typical declaration from Obama circles that his policies saved us from another Great Depression.

But putting aside the spin and just looking at the numbers, it's unmistakable that Mr. Obama is handing over a badly under-performing economy to his successor. Consider economic growth and employment.

Real annual GDP growth since the end of the recession in mid-2009 has grown at less than half the rate it should during periods of recovery and expansion (averaging a mere 2.1 percent during this recovery compared to the historic average of 4.3 percent). If growth during this recovery had matched the historical average, GDP this year would approximately $2.5 trillion larger.

As for the recent drop in the unemployment rate, from 5.0 percent in September to 4.6 percent in November, it turns out that 78 percent of that reduction was due to people leaving the labor force altogether, rather than new jobs being created. Indeed, labor force participation and job creation have been woeful. Employment as a share of the population in November registered 59.7 percent. If this employment-population ratio registered a more typical level prevailing before the recession (for example, 63 percent), we'd have 8.3 million more people working today.

In the end, the additional costs and uncertainties courtesy of government policies under Obama have discouraged private investment and entrepreneurship (both also down markedly from where they should be), and resulted in less growth and diminished job creation.

Through costly, wrongheaded policymaking, Hoover in effect created a recession, and both he and FDR turned it into the Great Depression. Similarly, President Obama took a bad economy, turned it into a deeper recession, and generated one of the worst recoveries on record.

Given his dismal performance in office, in order to polish up his legacy, President Obama will have to rely on his own delusional declarations, the work of his political spin-meisters, and the complicity or ignorance of some in the media. Let's hope that historians look at the actual record.

Ray Keating is an economist and a novelist. His latest thriller is Wine Into Water: A Pastor Stephen Grant Novel.

[dp0622]

When people give up looking and rely on welfare/ssdi/SNAP or retire early, that ain’t a boom.

They also supplement these small incomes by working off the books.

But they Can’t WAIT to put out the real numbers the first month Trump is in office.

3999999999939393 percent unemployment!!!

[x_plus_one]

The Obama fake news spincycle is dying.

[jsanders2001]

I have another theory as to why the economy picked up suddenly the last month - Trump go elected and Hillary didn’t and Obama the Nation Destroyer is packing his bags and leaving. Now if that isn’t real Hope and Change I don’t know what is. Obama had nothing to do with any of it.

[seawolf101]

Obamacare - disaster

Iranian deal -Aiding the enemy

Men in women's bathrooms

White House - Republican President

House of Reps - Republican majority

Supreme Court - Conservative appointments overturn Roe v Wade

[NTHockey]

FDR inherited a depression, true. It didn’t end until FDR’s unprecedented third term and it took Pearl Harbor. In 1933, when FDR took office, unemployment was 24.9%. In 1939, unemployment was 17.2%.

If FDR had done nothing, the depression would have ended 7 years earlier, according to research done by UCLA professors Harold L. Cole and Lee E. Ohanian.

A key conclusion from that study is:”We found that a relapse isn’t likely unless lawmakers gum up a recovery with ill-conceived stimulus policies.”

[rb22982]

Why do none of these articles about Hoover and the Great Depression ever mention that debt to gdp at al levels net tripled in the 1920s to over 300% as the main reason for the Great Depression? Otherwise good article

[ridesthemiles]

IF the Left wishes to cling to the idea that Obama was ‘handed a very bad hand on the economy’, then Obama has no one to blame but his Muslim heritage buddies.

IF 9/11 had NEVER happened, there wouldn’t have been all he expenses of going to war with Saddam & all the Muslims in the Middle East.

AMERICA did NOT attack them first-—they attacked US.

I cannot blame Bush 43 for the costs of men & equipment for retaliating.

IF there are so many ‘smart’ economists in the country- let them come up with a scenario for 2008 numbers that removes the effects of 9/11.

Obama has been cooking the books over many aspects of the American economy. He doesn’t even bother to send out the NEW unemployment claims every Thursday. Those used to be released every week and the ‘new jobs’ released at the end of the month. I haven’t seen Thursday figures for about a year.