The Obama Economy
by Benjamin Studebaker
It has become a common sense view that the US economy has performed poorly under Barack Obama. The assorted punditry are all trying to explain how Obama managed to win the election despite this fact. Perhaps they should stop to consider that perhaps this fact is not a fact at all? Well, if no one else is going to do it, it might as well be me.
The traditional argument for the economy performing poorly under Obama stems from two main ideas:
- US economic growth has been poorer than it was during the eighties and nineties.
- US unemployment remains higher than historical levels.
These two arguments share a commonality–they are comparing the present economy to the economies in the past. While both of these premises are true, they are missing an important fact, that the global economic environment in which the Obama administration lives is significantly more hostile than the environment of the eighties and nineties. Knowing that there was a time in the past when unemployment was lower and growth was higher does not necessarily mean that present circumstances are conducive to an unemployment rate that low or a growth rate that high.
A better measure is to look at how the United States is doing relative to other countries with similar traits–highly developed, highly industrialised, world-leading economies. In other words, the United Kingdom, France, Germany, and Japan. Compiling data from Trading Economics, I’ve managed to create some comparisons.
What we’re using here is the average percent change in GDP per quarter to measure average economic growth/contraction.
Reagan’s First Term (1981-1984):
GRM: N/A (not yet united)
US growth is 5.8 times UK’s, 7.7 times France’s, 3.7 times Japan’s, for an average superiority figure of 5.7.
Clinton’s First Term (1993-1996):
US growth is 4 times UK’s, 9.4 times France’s, 8.8 times Germany’s, 9.3 times Japan’s, for an average superiority figure of 7.9.
Bush’s First Term (2001-2004):
US growth is 3.1 times UK’s, 6.3 times France’s, 44.2 times Germany’s, 7.1 times Japan’s, for an average superiority figure of 15.2, but, German stagnation in the early 2000’s is a uniquely German problem, and merits exclusion of Germany as an outlier. Excluding Germany, the figure is 5.5.
Obama’s First Term (2009-2012):
US growth is 13.7 times UK’s, 10.1 times France’s, 4.9 times Germany’s, 8.9 times Japan’s, for an average superiority figure of 9.4.
If we measure US economic performance by the multiplier by which it exceeded the performance of its developed, industrialised competitors (the superiority figure above), we see that Barack Obama’s economy is actually performing better relative to the competition in its environment than Bush, Clinton, or Reagan:
The United States is consistently economically awesome in terms of growth compared with similarly developed nations with which it competes, but there is significant fluctuation in precisely how much more awesome it is, with the two most recent two-term democrats besting the two most recent two-term republicans in their respective first terms. What this suggests is that democrats make better use of global economic circumstances than republicans do to achieve better results relative to other nations.
Now, how might a person take issue with the argument here presented? One might argue that China, which has seen monstrously high economic growth in recent years, deserves to be included in the comparison. However, I do not include China because China is not a developed, industrialised country. This is not a matter of opinion–there are several definitions of a “developed country” and none of them include China:
- Human development index score over .788. The US scores a .910, UK scores a .863, France scores a .884, Germany scores a .905, Japan scores a .901, China scores a .687. Not even close.
- Inclusion in the OECD list: All countries used by me included, China excluded.
- Inclusion in the IMF list: All countries used by me included, China excluded.
- Inclusion in the World Bank list: All countries used by me included, China excluded.
One could argue that I should have used every developed country rather than just the major economies–I chose not to do so not only because it would be exhaustingly time consuming, but because larger economies are more similar to the United States than smaller economies, which can rely on individual industries to carry the economic growth because of their small populations (as say, Norway does with oil).
Now, none of this is to say that Obama has done an ideal job managing the economy. Economic growth should be even higher and unemployment should be lower. If Obama had been more aggressive about pursuing his policy agenda, the numbers might be higher still.
If you’re still not convinced, consider that the 1.51% term average itself includes the first quarter of Obama’s term before his policies took effect–if that were excluded from his term average, the figure rises further to 2%. That higher figure would revise Obama’s superiority rating upward to 12.45, over twice the score of Reagan or Bush.
Now, perhaps if you’re on the right you’re still holding out. Perhaps you think that a McCain presidency would have done better still, that the Eurocrisis is giving Obama an unfair advantage over the European countries (though neither the UK nor Japan are on the euro). Let’s be clear–the Republican Party’s advocated economic policies were identical to the policies that produced extremely slow growth in places like the UK. Here are a few republicans praising the very policies responsible for the failed recoveries in Europe:
Senator Jeff Sessions (R-Alabama):
We need a budget with a bold vision – like those unveiled in Britain and New Jersey; one that reduces both the size of the deficit and the size of the government.
Representative Kenny Marchant (R-Texas):
This week the Economist highlighted Germany’s new budget cut proposal by Chancellor Angela Merkel. If her plan is enacted, the country will save an estimated 80 billion euro ($96 billion) from its federal budget by 2014…Merkel hopes to set an example for Europe, yet Europe is already setting an example for the U.S.
Representative Joe “You Lie” Wilson (R-South Carolina):
At the same time the administration pushed the failed stimulus spending here, the president urged German Chancellor Angela Merkel to do the same in her country. The chancellor refused, and now, as a result of her good judgement, Germany’s economy has recovered. German unemployment levels are reduced, while over 14 million Americans don’t have jobs. The president should learn a lesson from the German miracle.
The German economic minister “urgently” prodded America to cut spending at a press conference on June 21, prior to the G-20 meeting. The president of the European central bank took direct aim at Mr. Obama’s argument, telling the Italian newspaper La Repubblica on June 16 that “the idea that austerity measures could trigger stagnation is incorrect.” The European Union president, Czech Prime Minister Mirek Topolanek, tore into Mr. Obama’s stimulus and other spending policies in a stunning address to the European Parliament in March 2009, calling them “the road to hell” and saying “the United States did not take the right path.” If it sounds strange to have European leaders lecturing the U.S. about fiscal restraint, it should. But that is where America finds itself after Mr. Obama’s 17-month fiscal orgy.
These guys had no new ideas. If they had their way, we would have followed David Cameron and Angela Merkel down the road to economic stagnation. It’s time we stop pretending that the right has legitimate workable economic policy ideas. We have seen what sort of economic growth results from republican economics in the hands of the Europeans, and we should, rightly, find it wanting.