It seems incredible, but the Democrats are promoting the idea that the Obama administration represents a sort of economic triumph, comparable to Ronald Reagan’s 1980s boom or Bill Clinton’s 1990s stock market rise (putting aside the crash that ended the decade). Absent mass hypnosis, this will be a tough sell. Dan Mitchell takes a scalpel to the Democrats’ attempt at revisionist history (numerous links omitted):
In a 2014 study for the National Bureau of Economic Research, Stanford University’s Robert Hall wrote about America’s sub-par economic performance. His opening line was basically a preemptive refutation of Obama’s claim – made during the State-of-the-Union Address – that the economy is strong.
The years since 2007 have been a macroeconomic disaster for the United States of a magnitude unprecedented since the Great Depression.
I don’t know that I would use “disaster” to describe the economy. That word would be much more appropriate for failed welfare states such as Italy and Greece.
But Professor Hall was definitely correct that the U.S. economy has been sputtering, as illustrated by comparative business-cycle data from the Minneapolis Federal Reserve.
This is one of the linked Federal Reserve charts that pretty much says it all. The blue line is GDP growth during the Reagan recovery, the yellow line is the Clinton recovery, and the red line is the pathetic Obama “recovery.”
The Federal Reserve’s chart shows that after more than six years, Obama’s recovery, the worst of the post-WWII era, was still behind what the Reagan administration achieved in just two years.
Why has the Obama recovery been so lousy? Dan Mitchell continues:
So what accounts for America’s anemic economy? Hall has about 50 pages of analysis, but since brevity is a virtue, let’s look at some of what he wrote in his final paragraph.
Labor-force participation fell substantially after the crisis, contributing 2.5 percentage points to the shortfall in output. The decline showed no sign of reverting as of 2013. …an important part may be related to the large growth in beneficiaries of disability and food-stamp programs. Bulges in their enrollments appear to be highly persistent. Both programs place high taxes on earnings and so discourage labor-force participation among beneficiaries. The bulge in program dependence…may impede output and employment growth for some years into the future.
In other words, he pointed out that a large number of people have left the labor force, which obviously isn’t good since our economy’s ability to generate output (and boost living standards) is a function of the degree to which labor and capital are being productively utilized.
And his work suggests that redistribution programs are a big reason for this drop in labor-force participation.
In other words, government welfare programs are crushing America’s economic growth. Mitchell sums up (many links are present in the original but omitted here):
[A]t some point we have to ask whether it really matters whether people are being lured out of the labor force by food stamps, disability payments, unemployment insurance, Obamacare, or any of the many other redistribution programs in Washington.
What does matter is that we have a malignant welfare state that is eroding the social capital of the country. The entire apparatus should be dismantled and turned over to the states.
Mitchell’s article includes a reprise of this image, which tries to identify the profusion of federal welfare programs–more than 80–that spend more than $1 trillion annually. No doubt some are missing. One wonders whether there is anyone in Washington who could even list all of the federal welfare programs, let alone understand how they work, and what their impacts are. Click to enlarge; you almost have to:
So don’t let anyone fool you about the economy of the last seven years. Barack Obama was set up for success, as he took office on the heels of a sharp economic downturn that had a limited, specific cause. The economy should have come roaring back as it did under Ronald Reagan, only if anything even more so, since the government errors that gave rise to the 2008 financial collapse were relatively easy to correct. Instead, the Democrats’ left-wing policies inhibited economic growth and produced the worst recovery of modern times.