OPINION:
Voter polls notwithstanding, this year’s election hinges on the economy. Everyone knows the economy is growing at a snail’s pace, keeping unemployment high and wages low. Whom will voters blame for this economic malaise? Mitt Romney hopes voters will blame President Obama for the sluggish economy and high unemployment. Mr. Obama defends himself by claiming we’re a lot better off than we would have been without his stimulus program — and light years ahead of where we would have been with “Bush-type policies.” He claims he averted another Great Depression and points with pride to 24 consecutive months of job gains. The Obama campaign pleads for more time — and more stimulus spending — to reap the full benefits of Mr. Obama’s economic stewardship.
The magnitude of the recovery failure is breathtaking. Since the end of the recession in June 2009, the economy has grown by 2.4 percent, 1.8 percent and 1.6 percent annually. In no other post-recession period has output grown so slowly. In fact, Mr. Obama’s best year of gross domestic product (GDP) growth — 2.4 percent — is below the worst growth rate in every other recovery since 1930. Even during the middle of the Great Depression (1934-36), GDP grew five times faster than during the Obama recovery. In the wake of every one of the subsequent 13 recessions, GDP routinely grew at rates of 3 percent to 5 percent — even as high as 7.2 percent in a single year (1984). When economists such as Edward Lazear dub this “the worst economic recovery in history,” they are not kidding.
The slow pace of GDP growth is mirrored in job-creation statistics. Since this recession ended, an average of 100,000 jobs per month have been created. That’s not enough to keep pace with population and productivity growth, much less bring down the unemployment rate. Indeed, at that rate of job creation, we would never reach full employment. By contrast, job growth during the George W. Bush recovery (2002-05) averaged 150,000 jobs per month, and during the Reagan recovery (1983-85) more than 270,000. Moreover, the labor force back then was far smaller. If adjusted to the size of today’s labor force of 155 million, the Reagan-era job creation would be nearly 400,000 per month — quadruple Mr. Obama’s record. The Reagan result brought the unemployment rate down from a peak of 10.8 percent in December 1982 to 7 percent three years later. The less spectacular jobs record during the Bush recovery pushed the unemployment rate down from 6 percent in December 2002 to 4.9 percent three years later. Mr. Obama’s anemic jobs creation has kept the unemployment rate above 8 percent for the three years since it peaked at 10 percent in October 2009.
How can anyone defend such an abysmal record? The Obama administration claims this recession and its subsequent recovery were different from all previous ones. They say the pace of recovery was uniquely slowed by (1) the depth of the 2008-09 recession, (2) the collapse of housing, (3) widespread bank failures, (4) persistent European crises, (5) China’s unfair trade policies and (6) Republican intransigence on additional stimulus spending.
History suggests, however, that this defense is meritless. As noted above, unemployment was more severe in 1982 than in 2009. Furthermore, residential construction collapsed in almost every other recession: In 1973-75 and 1980-82, residential construction shrank by more than 30 percent. Between 1930 and 1934, construction plummeted by 90 percent. There also were far more bank failures in earlier recessions than in 2008-09: 10,000 during the Great Depression, more than 1,000 in the savings-and-loan crisis of the late 1980s, and in excess of 800 in 1990-92. That was much worse than the 350 bank failures in 2008-10.
As for Europe’s continuing crises, the picture was far worse in the global recession of the early 1980s, when exports declined for two consecutive years (1982-83). Exports have risen during the past two years. China, of course, has kept its currency unfairly cheap for decades to boost exports and deter imports. However, the Chinese government actually has appreciated the yuan in recent years, lessening this trade advantage. Last but not least, Republican intransigence might be impeding further stimulus now, but it was inconsequential when the Democrats controlled both houses of Congress and gave Mr. Obama carte blanche for his economic program.
Mr. Obama has never accepted responsibility for the failed economic recovery. At most, he concedes that he was surprised at the breadth and depth of the recession he inherited. But none of the six reasons he cites for the abysmal economic performance of the past three years stands up to careful scrutiny. The only reasonable conclusion is that his own economic policies were not up to the task. That is the conclusion voters will have to consider when they go to the polls in November.
Brad Schiller is professor of economics at American University and author of “The Economy Today” (McGraw-Hill, 2012).
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