10/2/16

President Obama has less than four months left in his final term.

Thank God for that.

I am sure that it is enough time for him to continue to do lasting damage to the interests of the USA, not least as an example is his surrender of the governorship and stewardship of the Internet to a UN controlled body influenced heavily by the likes of China, Russia, etc.—one of the silent, irreversible disasters that this president is presiding over. By the way, he is doing it voluntarily, for no consideration, with neither rhyme nor reason. It is a sacrificial lamb on the altar of his anti-American “exceptionalism” fervor.

In the meantime, this model of presidential modesty (this is irony—thick irony—to those who have not read this blog before) goes around and pats himself on the back regarding his “achievements,” particularly in the matter of his economic successes. So I thought that it is an opportune time to take a look at his economic record, especially as the economy is already set. Nothing that he can do now will change it and, therefore, it is not too early to look at his 8-year term from that respect.

No president can make or break the US economy. Market forces built on a foundation of hundreds of years of free economy and honed by entrepreneurial spirits are simply too strong for any one man. Indeed, the USSR found that even the use of extreme violent dictatorship cannot keep market forces at bay forever. It took 70 years, but market forces beat them. Of course, here in the US we are not even close to that situation, so the effect of a president is limited. However, while limited, it is meaningful.

The president’s supporters keep harping on the fact that he inherited a very severe recession and they are obviously correct in that regard. But so did Reagan. Even G.W. Bush inherited a mild recession augmented shortly thereafter by the events of 9/11, with their effect on the economy and the wars that followed (whether you support those or not, the effect of these wars on the economy is material for analyzing economic performance under Bush) only to end his two-term presidency with a very severe recession too.

Obama and his cronies will have us believe that he single handedly saved us from a total economic collapse that Bush was responsible for. It may come as a shock that he did nothing of the sort. Even if the occupier of the White House would have done nothing, zero, the economy’s decline would have slowed down, come to a halt and then recovery would have set in.

So, the only remaining question worthy of any sort of analysis is did the President Obama’s actions help or hinder the economy?

In order to explore this question I have looked at a number of what I believe are the most meaningful economic indicators. I compared the performance of each of these indicators under Obama’s 8-year term to their performance for each of the 8-year terms of Presidents Reagan, Clinton, and George W. Bush.

It certainly comes as no surprise to me that all of these indicators performed the worst under Obama. In ALL measures of economic performance he is simply THE worst president on record in the modern era. What did come as a surprise to me is by how much and what cost we all paid for his misguided delusions and enormously inept execution, even of his own policies.

His supporters, defenders will blame it all on the recession and on the Republican Congress.

Even if one decides to allocate some of the blame for his terrible performance to the severe recession he indeed inherited, the results are so bad that he will remain the worst president on record in terms of economic performance; especially given that two of the three other presidents I compared him to also faced serious challenges to the economy during their 8-year terms.

In addition, both Reagan and Clinton faced a Democratic/Republican controlled Congress, respectively, for all or most of their 8-year terms. That did not stop them from achieving amazing economic feats. Obama, in contrast, actually had total control of Congress in the first two years, during which he, indeed, drove major economic bills through Congress.

Furthermore, none of the other three presidents in the comparative set were the beneficiaries of four huge beneficial factors that Obama reaped the rewards from. If it was not for these factors, his economic performance would have been so lousy that he would not have been reelected and carry on as he is today:

  1. Huge monetary expansion: The Federal Reserve balance sheet has grown by about $5 trillion during Obama’s term. This is unprecedented monetary easing and was obviously designed to finance his fiscal expansion, irresponsible and wasteful though it was. In addition, keeping interest rates as low as the Fed has done made it possible for Obama to spend prolifically and irresponsibly.
  2. An unprecedented fiscal expansion with the combined deficit over the 8 years amounting to about $10 trillion: That is the biggest Keynesian economic experiment in world history and it clearly failed, given the miserable economic statistics. This fact soundly refutes the claim by Obama and his cronies that the reason the economy is not much better is because they were not allowed to spend enough on “stimulus.”
  3. The so-called “peace dividend”: This, of course, is an ironic term given the situation in the world, but the fact is that Obama cut the defense budget by hundreds of billions of dollars every year. If he had not done that the deficit would have been that much worse and that much harder to sustain. But in the process he culled the military, leaving it broken and ill equipped to serve its purpose. Democratic presidents always do that, leaving it to their Republican successors to foot the bill when facing the absolute necessity to increase defense budget.
  4. In another ironic turn of events—and in the face of every possible measure against it by Obama—the oil and gas industry provided a huge boost to the Obama economy and a significant part of the growth during the 8 years. Without the revolution in this field his economic numbers would have been materially worse.

No other president even came close to this kind of accumulation of favorable positive factors to help him push the economy forward. The combined effect of all these factors outweighs, by far, the somewhat deeper recession that Obama inherited as compared to other presidents.

So none of Obama’s excuses hold water. He should be judged by the numbers, which speak for themselves.

The clear result of this analysis is yet again: Socialism does not work.

What is shocking to me, as always, is the Republicans’, Trump’s campaign, and (of course) the abhorrent media’s failure to look at and report on these objective economic factors.

Here are the factors and the results:

Economic Indicators

Supporting Arguments
GDP
1. In order to calculate a full 2016 for Obama I had assumed 3% growth for the second half of the year, which, at the moment, looks very much like wishful thinking. If growth will come, at less it will make the numbers for Obama even worse—if one can imagine that.
2. This percentage is the cumulative change in GDP over the 8-year term.
3. All in inflation adjusted 2009 $ terms.
4. The effect of the difference in the rate of growth of GDP between Obama and Bush is $900 billion. In rough terms, that translates to about $3,000 for every American citizen every year! Between Obama and Reagan it is $2.8 trillion! That’s about $9,000 for every person every year. WOW!!!
5. Obama suffered from a 2.8% GDP loss in the first year. Even if we were to credit him with the full loss, the GDP growth for his term would be only 15.4%, still way, way below others.

National Debt Held by Public as % of Economy
6. Reagan clearly increased the national debt burden, but the argument can be made that it was so low to begin with that it was not material. Furthermore, he laid the foundation to the Clinton/Congress debt reduction that followed.
7. The reduction in the debt burden under Clinton was the combined function of the budget surpluses in his final years and the fantastic rate of growth achieved under his presidency.
8. It is worth noting that nearly all of the deficit under Bush is attributable to tax cuts. If the level of the national debt had to increase, there is no better way of achieving it than by giving money back to the people where it belongs.
9. The level of debt under Obama has skyrocketed to such an extent as to be both unprecedented in modern times and dangerous.

Labor Productivity
10. This percentage represents the cumulative change over the 8-year term.
11. The Obama number assumes zero change in the second half. The first half was a MINUS 0.6%.
12. This is probably one of the most important indicators. The more productive a person is, the more he gets paid. The abysmal performance under Obama is the result of very low Capital Investment by corporations, which, in turn, is the result of the hostility toward business by Obama and his administration. This will have lasting damage and is, of course, one of the main reasons why Income Inequality is doing so poorly under Obama.
13. The magnitude of the slowdown in the growth of productivity under Obama is astounding. Another major reason for this debacle is the dearth of new business startups. Obama is the only president in modern times—and probably ever—to have LESS business startups than those closing.
14. The major increase in productivity during Bush’s term is striking. It is clearly the result of heavy business investment in prior years and the gathering momentum of the much maligned (these days) globalization.

Business Capital Investment
15. Total investment in then current (not real) $ terms for the 8 years as a % of last year’s GDP for each president.
16. By its nature, investment in capital goods is a long-term proposition with effects well beyond one president’s term; even an 8-year term. The miserable performance under Obama will be felt for years to come in slow labor productivity and negative effect on median salaries and income inequality.

Business Startups
17. Information here was very hard to obtain. However, from putting together a number of sources, it is absolutely clear that Obama is the first president ever under whose watch more business shut down than started. Under Bush, the relationship was positive not only for the entire 8-year term, but for every single year other than 2008.
18. The importance of start ups for economic performance is huge. Not only do they provide the biggest % increase in new jobs, one new company hiring one more person, in % terms, is large but it also effects labor productivity. No one works harder and is more productive than an owner of a new business just started.

Unemployment
19. The number for Obama is based on June 2016 rate.
20. The high/low numbers are based on January 1 for each year in the term. The average was calculated using the January 1 number from the year of inauguration until, and including, the final year; 9 numbers in the set.
21. Yet again we are seeing that the hype from the Obama administration is all a smoke screen. For years, we have heard that he has created so many jobs and on and on. Yet the numbers do not lie. The average unemployment in his 8-year term was basically the worst of all the comparative presidents, except Reagan. So he has the dubious achievement of having been only the second worse on this element.
22. Obama’s supporters will correctly point out that he inherited a bad unemployment level and trend. True, but the same can be said about Reagan, too; where, in spite of the phenomenal growth rate, the unemployment rate stayed stubbornly high like Obama’s. However, there is a huge difference between the two scenarios. The labor participation rate under Reagan grew by 2% over the 8-year term, thus increasing the labor pool and making it harder to reduce unemployment. The exact opposite occurred under Obama with labor participation rate at a multi-decade low of 63.5%. This represents a 3.5% reduction during his term, thus reducing the labor pool. This element more than compensates for the difficult employment situation he inherited and again exposes the terrible effects of his economic policies.

Real Median Household Income
23. It was very difficult to find good statistical information to allow the exact comparison between the four presidents. Therefore, the information on this item, as well as the income inequality indicator, are based on general research as follows:

  • All numbers are in real 2015 $ terms
  • Real median household income in 2015 reached the level of $54,462. That is below the $57,500 level achieved in 2007 but it seems to be marginally above the level achieved at the end of the Bush administration in 2008 after a huge fall that occurred that year due to the deep recession.
  • This income level seems to have grown fairly consistently during the Reagan and Clinton administrations followed by very erratic behavior during Bush and consistent reduction during Obama, saved by 2015.
  • The highest level was achieved in 1999 at just short of $58,000.
  • It is likely that Obama’s term will end with median income at above the level achieved by Bush but it is also likely to be well below the peak achieved by Bush. It is also a fact that for most of his 8-year term, the median income was thousands of dollars below the relevant year in Bush’s term, so that cumulative and average median incomes during Obama’s term would be well below that of Bush. This is especially troubling given Obama’s ostensible emphasize on this matter and his continuous claim to be looking after the middle class, blaming all and sundry for the trouble of the middle class while all along it was his economic failure that drove the middle class to such lower levels.

Income Inequality
24. Income inequality numbers are simply impossible to pin down. There are many different calculations and not one good reliable source. Therefore, the comments below are based on research and an effort at generalization and estimates.

  • The sort of standard for Income Inequality is the GINI coefficient; where 1 means bad since all the income is in the hand of one person and 0 means good because everyone is exactly equal. Both are, of course, unrealistic.
  • According to one UN report, the GINI index in the USA was 37.7% in 1986 and 41.1% in 2014. While worse, it is clearly not that bad.
  • According to the same UN report, the US has a relative high (bad) level of income inequality—which means nothing. As an example, Armenia had a significantly better GINI index at 31.5%. Great, they are all equally poor. I suspect that most Armenians would settle for a GINI index of 41% if they could have median income at US level.
  • Ultimately, there is no better way to improve median incomes or income inequality than to unleash the forces of the free market. The freer the market, the stronger the growth rate, the higher the median income, and the more equal the distribution.