Obama’s Recovery and the Impact of Government Intervention

by Veronique de Rugy

Listening to the media and most of social media, you may believe that Barack Obama’s presidency was a spectacular success. Never mind that he was replaced by President Donald Trump (which should signal to many that things weren’t as great as they pretend), almost 60 percent of Americans think that the country is on the wrong track, and that the Obama administration betrayed many of the values the Left claims to hold dear. They also continue to ignore the economic reality of eight years of an Obama recovery. The Wall Street Journal has a summary:

The recovery since the 2007-09 recession has been unusually slow but is also the fourth longest on record, and recent data point to rising incomes for U.S. households. Median household incomes rose 5.2% in 2015 after adjusting for inflation, leaving them 2.4% below the record reached in 1999, according to the Census Bureau. The unemployment rate has fallen to 4.7%, a nine-year low.

Still, there are broader concerns over declining opportunity for large swaths of the country, particularly Americans without college degrees and in more rural areas. The U.S. homeownership rate is near a 50-year low, and the average debt load for college students is rising.

There is more data about the slow recovery, here. Growth has been timid, in spite of low unemployment rates, labor markets are pretty unhealthy with lots of under-employment and a low participation rate, and our debt has grown considerably (and is still growing). And don’t buy the argument that this slow recovery is a product of the size of the recession.

Instead of counterproductive stimulus spending, new regulations of the labor and financial markets, and a large Federal Reserve expansion, Harvard University’s Robert Barro explained a few months ago that the Obama administration would have had different economic outcomes if only it had pursue policies to enhance economic freedom:

Variables that encourage economic growth include strong rule of law and property rights, free trade, rolling back inefficient regulations and other constraints on market activity, public infrastructure such as highways and airports, strong institutions for education and health, fiscal discipline (including a moderate ratio of public debt to GDP), efficient taxation, and sound monetary policy as reflected in low and stable inflation.

Also, in a recent post economist Casey Mulligan published an interesting chart showing the impact of government interventions on the labor market:

Mulligan writes:

[This] is an index of hours worked per person, which reflects both the amount of employment and the number of hours that employees work up through Dec 2016. It shot up when the Emergency Unemployment Assistance program was finally canceled. Its growth was especially slow when the new health care law began to penalize employers. Over the most recent twelve months, the trend is (infinitesimally) negative.

Hopefully, this administration will free the market from the grip of government regulations and taxes to reverse this trend. We will see.

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