Economy & Business

Year Eight of Obama’s Recovery

(Jonathan Ernst/Reuters)
Two ways of judging the president

On the matter of Barack Obama and the performance of the U.S. economy, the aptest metaphor is anatine: We aren’t swimming in gold like Scrooge McDuck, and we haven’t blasted the beak off our face with a shotgun like Daffy Duck, but instead limp along like what the president is: a lame duck.

Spare me the technicalities about how President Obama isn’t officially a lame duck until after the election; we aren’t officially in recession, either, but 0.5 percent annualized growth — the most recent figure — is close enough.

How should we judge President Obama’s economic record? There are two ways to go about that: First, from the point of view of people who understand at least a little about economics; second, from the point of view of Barack Obama.

We Americans maintain a superstitious, priest-king attitude toward presidents and economies. Just as moral and religious defects in the holy chieftains of old were thought to be the source of droughts and crop failures, we take weakness in the economy to be the result of presidential flaws: He didn’t “care about people like us” enough, he followed the wrong policies, listened to the wrong people, etc. That’s mainly not true.

Obama’s presidency will be the first in modern times to fail to coincide with at least one year of 3 percent economic growth.

The most important factors shaping the economic performance of the United States, or that of any advanced country, isn’t policy, but events, from developments abroad to entrepreneurship and innovation at home. The 1990s didn’t boom because Bill Clinton pursued a radically different economic agenda from that of Ronald Reagan and George H. W. Bush: He ran on “time for a change” but more or less stayed the course, thanks in no small part to Newt Gingrich and the 1994 election. The 1990s boomed because the development of the personal computer and other forms of information technology, supercharged by the growth of the web, launched an extraordinary period of investment, innovation, and entrepreneurship. Bill Gates, Marc Andreessen (whose Netscape browsers brought the web to the masses), the development teams at Ericsson and Nokia, and a few million Americans who invested enthusiastically in everything marked “dot-com” had a lot more to do with the economy of the 1990s than Bill Clinton did. Likewise, the rough spots of that era (such as the Asian currency crisis) weren’t the president’s doing, either.

There is no mystical connection between presidents, GDP growth, employment, and wages.

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Policy of course has a non-trivial effect on economic events, but the most important policy choices that affect the economy in the near term don’t come from the White House: They come from Congress, from the courts, and from the Federal Reserve. A lot of what we think of as Reaganomics had relatively little to do with Reagan: Important deregulation efforts (airlines, oil prices, telecommunications, trucking and transit) had been enacted by Congresses before Reagan ever took office; in fact, Reagan pandered to the Teamsters by promising to delay deregulatory efforts pressed by the Jimmy Carter administration. What we used to call “the phone company” was broken up by the courts in 1984 as part of an effort that began years before he took office. Reagan’s tax reforms were enormously important, of course, both in terms of their real financial effects and their long-term psychological effects.

President Obama’s term in office was preceded by a housing crisis and a subsequent recession for which he was as much to blame as anyone then in government — which is to say, not very much. The housing and banking policies that resulted in the financial crisis were enacted by politicians of both parties over a span of many decades, from the housing schemes of the 1930s to the creation of Fannie and Freddie to changes in financial practices originating in the Reagan, Bush, and Clinton administrations. Senator Obama did not have much to say about these until after the fact. He is a practically Delphic oracle of hindsight.

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President Obama insists — straight-facedly — that in the context of a wrenching financial crisis, the United States under his leadership performed better than any major economy in modern history. That isn’t even close to being true, of course. Obama’s presidency will coincide with a remarkably weak recovery, with GDP essentially treading water. His presidency will be the first in modern times to fail to coincide with at least one year of 3 percent economic growth. It has teetered on the edge of recession, and may very well end in formal recession. (George H. W. Bush was thrown out of office in protest of a recession that had ended before the election; it wasn’t the economy, it was boredom.) Wages remain stagnant, and the rate of work-force participation is worryingly low.

#share#What can we actually say about Obama administration policies? One is that the so-called stimulus underperformed on one front and failed on another. It may have provided some meaningful stimulus (economists debate the question still) at a cost — there always is a cost — that will remain unknown for the foreseeable future. What it did not do — we have the president’s own word on this — is dramatically improve public infrastructure. Indeed, every time the Democrats call for a dramatic new campaign of infrastructure investment, it is an implicit indictment of the failure of previous campaigns. The stimulus mainly operated as a covert bailout for badly governed Democratic cities and states. Recovery and reinvestment? Weak, at best.

The Affordable Care Act is a failure. Again, we have the Democrats’ own word on this.

The Affordable Care Act is a failure. Again, we have the Democrats’ own word on this, as they labor feverishly to keep its least-popular features (such as the taxes that pay for it!) from taking effect. In fact, Obama’s would-be successor, Hillary Rodham Clinton, seeks to partly dismantle Obamacare, repealing the so-called Cadillac tax that vexes her public-sector supporters, whose health-care plans are a great deal better than yours. The woefully misnamed Affordable Care Act hasn’t been a dramatic job-killer, but there is evidence (from the Congressional Budget Office and other sources) that it creates some headwinds against employment, undercutting the equivalent of 2 million full-time jobs. It hasn’t solved the problem of health-care inflation, and probably has made it worse, at a very high cost in terms of actual outlays and economic distortion.

The usual this-’n’-that stuff that the president likes to talk about during State of the Union addresses — green-economy dreams, tax incentives for politically favored businesses, etc. — do not seem to have had much of an effect at all.

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We have pursued, with the president’s blessing, a wildly inflationary monetary policy (quantitative easing and all that) without wildly inflationary results, at least in terms of general prices. It may be that the idea of “inflation” as a unitary concept is inadequate to the modern global economy, that the general devaluation of the dollar one would expect has been offset by the supply of inexpensive consumer goods and raw materials from around the world and has mainly made itself felt in the steadily rising stock portfolios of the millionaires and billionaires that President Obama enjoys castigating. (The question of asset-price inflation vs. ordinary consumer-good inflation is an interesting one; I do not necessarily agree with everything in this Robert Blumen essay, but it is an interesting discussion.) Generally speaking, the beneficiaries of a bubble are the last to complain about bubble prices.

The election of Barack Obama did not turn out to be a pivotal moment in human history.

In a thousand years or so, archaeologists seeking to understand the last days of the Westphalian nation-state will study the works of Robert Higgs the way Hellenists study fragments of Sappho, and it is here that judging President Obama will be much more art than science. To Professor Higgs we owe the term “policy uncertainty” and its nasty big brother, “regime uncertainty.” Policy uncertainty refers to the costs inflicted when investors and enterprises are faced with unknown developments in the rules governing their activities; for example, employers making plans about employee benefits, headcounts, compensation, and the distribution of part-time and full-time positions cannot make rational plans if they do not know how the Affordable Care Act is going to affect them, whether they will be exempted from it, whether the National Labor Relations Board will take extraordinary and possibly illegal action against them, etc. Regime uncertainty describes the same problem but in relation to the much more fundamental question of whether and how property rights will be respected. For example: How certain are you that this administration, or a future administration, will not attempt to seize through taxation a portion, and possibly a large one, of your purportedly tax-free retirement savings? How certain are you that the federal government will not attempt to rewrite bankruptcy law and apply it retroactively at the expense of the rights of secured creditors, when politics demands it?

The intelligent answer in both cases is: “Not very.”

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It is in the matter of such uncertainty that the Obama administration probably will have its longest-lasting and most intensely negative effect. The president’s predilection for unilateral executive action and a maximalist interpretation of presidential powers will no doubt be considered precedent by Democratic and Republican successors alike (the greatest hope of a Ted Cruz presidency is that the great constitutionalist would reverse this even though it would diminish the power of his office) and, because executive action inevitably is more unpredictable and arbitrary than is legislative action, Obama’s poison gift of uncertainty will grow, cancerously, long after he has left office. But it is impossible to put a price on that.

That’s how Obama stacks up on the first metric.

#related#The second task, evaluating Obama by his own standard, won’t take nearly so many words, inasmuch as the streets of this country are not full of automobiles that run on happy thoughts and the lights of our cities are not kept burning bright by the power of unicorn flatulence. The election of Barack Obama did not turn out to be a pivotal moment in human history. He will be remembered as a minor figure, the Al Smith of the early 21st century.

If everything that transpired in these United States up until January 20, 2009, was uniquely and especially the fault of George W. Bush, then there is no dodging responsibility for the weak and muddled current state of affairs. Obama, who must be judged harshly by his own standard, hasn’t read his James George Frazer. (Honestly, he doesn’t seem to have read much.) If you’re going to be a god-man or a priest-king, there’s only one way that those careers come to an end: “The scapegoat, upon whom the sins of the people are periodically laid, may also be a human being. . . . The Athenians regularly maintained a number of degraded and useless beings at the public expense; and when any calamity, such as plague, drought, or famine, befell the city, they sacrificed two of these outcast scapegoats.”

I wonder if they campaigned for the job, the way our contemporaries do.

— Kevin D. Williamson is National Review’s roving correspondent.

NOTE: This article originally misstated the dates of the early 1990s recession and has been corrected. 


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