Since the beginning of Barack Obama’s presidency, the federal government has enacted many major laws designed to deal with what we often call the Great Recession of 2008. Dodd Frank, the government bailout of General Motors, a trillion-dollar stimulus, an increase in the national debt of nearly 100%—these are just a few of the major efforts to kick start the economy and prevent another Great Recession.
After nearly eight years, it is time to take stock. Presidential candidate Hillary Clinton promises to expand on these policies, so we should see what the Federal Reserve statistics show. Let us look at some categories.
First, let us examine COMPENSATION TO WORKERS AND THEIR SHARE OF GROSS DOMESTIC INCOME—the workers’ share of the economy.
Let’s turn to FOOD STAMPS AND GOVERNMENT ASSISTANCE. One would think that, as the economy improves, as more people are able to secure employment, government assistance would drop. As the economy gets worse, government assistance increases. Government assistance is supposed to be countercyclical. The government is telling us that things are getting better. Food stamps tell a different story.
In January 2009, we spent nearly $55 billion in federal welfare. Eight years later, we are spending nearly $69 billion. That is not what countercyclical spending would have guessed. Moreover, new Census Bureau figures, released just a week ago, show that the poverty rate last year was 13.5% —a slight increase from 13.2% in 2008. The poverty rate is now is higher than prior to the recession and “well above poverty rates close to 11% that were seen in the 1970s and in the year 2000.” Unfortunately, since President Obama took office, the poverty level at every age bracket (young, old, middle) has increased according to census figures.
The increase of income in the bottom quintile during President Obama’s two terms is zero, in inflation-adjusted terms. In contrast, those with household incomes that put them in the 95th percentile rose 8.2%. President Obama’s policies have helped those already very rich but have done nothing for the bottom 20%.
NOW TURN TO FEDERAL DEBT. I mentioned that the federal debt has doubled under President Obama. When he began his first term, in January 2009, total federal debt was $10.6 trillion. When he leaves office next January, it will be over $20 trillion. In the entire history of our country until January 2009, we accumulated $10.6 trillion. In the last eight years, that figure will almost double.
However, it may not be a fair comparison to talk just about this figure. After all, the population has increased and inflation means a $1 of debt in Lincoln’s time is different from a $1 of debt in Obama’s time. Let us look at THE NATIONAL DEBT AS A PERCENTAGE OF THE SIZE OF THE NATION’S ECONOMY.
In 1966, total U.S. public debt was 40 percent of our Gross Domestic Product. In 2009, it was 77.35 percent of GDP. Now, the debt is greater than the entire GDP, about 106 percent of our entire GDP.
Now, let us look at the REAL MEDIAN FAMILY INCOME IN THE UNITED STATES, SINCE JANUARY 2009. One would think that if the federal government’s dramatic intervention in the economy were successful we would see improved real median income. That is where the rubber meets the road.
Here is the Federal Reserve chart since January 2009. In December 2008, while we were in the Great Recession, the median family income was $67,608. In 2014 (the last year during which figures are available), the median family income was $66,632.
That’s right. We add $10 trillion to the national debt, and the real median family income is lower now than it was during the Great Recession. Economists will not be calling this period the Great Recovery.
THE CIVILIAN LABOR FORCE PARTICIPATION RATE IS DOWN DRAMATICALLY. That means fewer people are working. In fact, so many have given up looking for jobs that the unemployment rate is down, but only because the government does not count people who are involuntarily fired, never find a job, and then give up.
The unemployment rate in August 2016 was only 4.9 percent. That is a marked improvement from December 2008 (just before President Obama took office), when the unemployment rate was 7.3 percent. However, many people have given up searching for jobs and dropped out of the labor market. In January 2009, the participation rate for the civilian labor force was 65.4 percent. Now, it is 62.9 percent.
To put that in perspective, you have to go back to the recessions of 1980 and 1981 to find a similarly low figure. However, we are not in a recession now; we are in a “recovery.” This “recovery” is worse than the recessions of 1980 and 1981.
Maybe the problem is not the fault of the federal government but the FEDERAL RESERVE, because it has been too tight with the money. Nice try, but that won’t work either. In January 2009, the total money base was $1.7 trillion. Now it is over $3.8 trillion.
Is there no graph that shows marked improvement over the last eight years? Surely, there is. The one example I found is PURCHASE OF ALCOHOL, for consumption off-premises. That means the people aren’t drinking at a restaurant. They are drinking at home, perhaps alone, thinking of better times in the good old days. In any event, alcoholic consumption is booming, up about 30 percent since January 2009.
The new Congress and president, when they assume office in 2017, may decide to pursue the government intervention we have witnessed over the last eight years. If so, it will be the triumph of hope over experience.