The Numbers Show that Obama May Have Been an Economic Savior
The following is an excerpt from the new book The Best "Worst President": What the Right Gets Wrong about Barack Obama by Mark Hannah & Illustrated by Bob Staake (Dey Street Books, 2016):
Economics is called the “dismal science” for a reason. Try to host a feisty political debate about the nation’s economy and, as soon as the debaters whip out a bunch of economic statistics, eyes will glaze over. “The Obama administration oversaw the creations of millions of jobs, a steep decrease in the unemployment rate, and deficits are way down!” cheers Lefty McSmiley. But Righty Frownberg retorts, “That doesn’t account for the labor force participation rate and continued wage stagnation, while the national debt is way up!” Snooze. “Now let’s compare real weekly earnings to the fluctuations in the consumer price index. . . .” Yawn.
Although wonky economic discussions quickly bore most audiences, when it comes to more personalized reporting on the health of the economy, people perk up. That’s because the economy is frequently the single most important issue on the minds of voters during election years. That trend appears to continue in the 2016 contest. And it makes sense. The state of the economy affects everyone, from a millionaire expecting to make a killing from stock dividends to a minimum-wage worker hoping to get a good interest rate on a credit card.
Has President Obama’s record on economic issues been “dismal” or dazzling? We pull the curtain back on claims about Obama’s tax-hiking, job-killing, budget-crippling, regulation-loving economic policies. By the end of it, we’ll have a clearer sense of how much better off we are now than we were eight years ago.
The Charge: Job-Killing Tax Hikes
By letting President Bush’s tax cuts expire, President Obama raised income taxes on hardworking Americans. A lot of people who were hurt by the tax increase were business owners (aka job creators), and so this president created a hostile climate for job creation. When Jeb Bush announced his candidacy for the Republican presidential nomination, it was a hot summer day in Miami. He tore into the president’s economic record, claiming the Obama administration is “responsible for the slowest economic recovery ever, the biggest debt increases ever, [and] a massive tax increase on the middle class.” Obama’s supporters point out the unemployment rate has dropped and the economy continues to add more jobs. But a lot of these aren’t good jobs, and barely more than three in every five adult Americans is actively working or looking for a job. This is the lowest level of labor force participation in almost forty years. Obama’s economic policies have stymied, not stimulated, job growth.
It’s a true tale often told: when President Obama was sworn in, the economy was in disarray. Incomes had taken a hit, the stock market was avalanching, and the unemployment rate was escalating. Pundits credited Obama’s election, at least in part, to the economy’s dire straits. In the face of economic despair and the ravages of rampant deregulation, people walked into the voting booth and pulled the lever for financial “hope” and economic policy “change.” Did they get it? By almost every measure, the economy has shaken off its slump with the help of Obama administration policies. Let’s start with taxes.
Jeb Bush’s claim Barack Obama has raised taxes on the middle class is not true. Families that make less than a quarter of a million dollars a year (and individuals who make less than $200,000) have seen their federal income taxes decrease, not increase, under Obama’s watch. Federal taxes for middle-class Americans are among the lowest in decades. A tax credit tied to the stimulus package gave $800 back to working couples (or $400 to individuals) in 2009 and 2010. The next two years, middle-class families benefited from a reduction in Social Security payroll taxes. Tax cuts for middle-class families make good economic sense. Those families take that extra money and pay down debt or buy things—as opposed to betting on high-risk hedge funds or hiding it in offshore tax havens—and this improves the overall vitality and liquidity of the economy.
President Obama also cut taxes for small businesses, excluding business investments from some capital gains taxes and winning a tax credit for companies who hire people who’d been unemployed for at least two months. This has helped businesses overcome their post-recession skittishness and continue to grow. But tax cuts aren’t the economic panacea Republicans so often claim. Maintaining the world’s most powerful military, covering Social Security for an aging population, and providing a humane social safety net for the less fortunate all cost money. The Treasury can get the revenue it needs one of two ways: from taxes (i.e., the pay-as-you-go model) or from borrowing from foreign governments (i.e., the add-it-to-the-national-debt model). This is why the Obama administration let most of the Bush-era tax cuts, which mostly benefited the wealthy and had added about $3 trillion to the national debt, expire.
Republicans who argue Obama hiked taxes on the middle class defend this misleading claim by pointing to new taxes associated with the Obamacare law. Obamacare does set a reasonable limit for the pretax contributions to flexible spending accounts and introduces a modest new tax for indoor tanning salons, but these hardly constitute a “middle class tax hike,” as some conservative groups suggest.
Heck, in his State of the Union address in 2015, the president even unveiled a plan to further cut taxes for middle- and low-income families. He proposed offsetting this with some commonsense sources of tax revenue, such as a fee to the country’s largest banks when they seek leverage (thereby giving a disincentive to the kind of risky borrowing which precipitated the 2008 crash) or limiting the amount millionaires could contribute to their IRAs to about $3.4 million (since IRAs were designed to help middle-class families save for retirement, not to be a tax shelter for the rich). Of course Congress, which was controlled by Republicans, who were controlled by millionaires, thwarted the plan.
How has President Obama’s record been on job creation and economic growth, actually? On the first day of his new job, the economy hemorrhaged about 800,000 jobs per month. It took Obama just one year to steer us from monthly job losses to monthly job gains, and in the following six years, the economy netted more private sector jobs every single month, more than fourteen million of them created in all. Amid the nastiest economic recession in eighty years, the president and his economic advisers charted a course that cut the unemployment rate in half, significantly increased the number of available jobs and the number of business start-ups, and more than doubled corporate profits and stock market valuations.
Republicans hail Ronald Reagan as an economic savior. Compared with Reagan’s handling of the economic recession he inherited, President Obama has, as Polaris Financial CEO Bob Deitrick notes, “kept unemployment from peaking at as high a level as President Reagan, and promoted people into the workforce faster than President Reagan.” And a dollar put into the stock market at the start of the Obama presidency yielded an investor a better return than a dollar invested at the start of the Reagan presidency. Perhaps one day we’ll talk about Obama-nomics in reverential tones.
What about the argument that those official employment figures obscure the “hidden” labor force participation rate (which includes people who have stopped searching for work)? Hasn’t this figure decreased by 3 percent under Obama? Pointing to a chart by the Bureau of Labor Statistics that tracks this (unhidden!) rate, Deitrick explains “the difference between reported unemployment and all unemployment—including those on the fringe of the workforce—has remained pretty constant since 1994.”
What Obama’s critics don’t tell you is that the labor force participation rate should be decreasing, since this figure includes the baby boomers who bow out of the workforce. It would be a bad economic sign if older folks postponed their retirements and continued to seek work en masse. Unless you want your grandfather driving for Uber too. Even as the recovery continues, this figure is expected to continue to decrease for the next ten years in light of these demographic trends. As always, the more factors you can include, the more accurate a picture you can achieve of any complex phenomenon. But complexity doesn’t always serve cynicism or polarizing political moves.
The recession of 2008 was the worst in generations, and it was global in scale. Fortunately, because of the quick thinking of our political leaders and the resilience of the American people, the American economy recovered faster than almost every European country (Germany is the sole exception). So what do we make of the criticism that Obama’s economic policies have choked off job growth? Asked precisely that in an interview on CNBC, Treasury Secretary Jack Lew said plainly, “The facts have proven them wrong.”