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.
SOURCE: U.S. Bureau of Economic Analysis, Shares of gross domestic income: Compensation of employees, paid: Wage and salary accruals: Disbursements: To persons [W270RE1A156NBEA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/W270RE1A156NBEA , September 6, 2016.
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.
SOURCE: U.S. Bureau of Economic Analysis, Government social benefits: To persons: Federal: Supplemental Nutrition Assistance Program (SNAP) [TRP6001A027NBEA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/TRP6001A027NBEA , September 7, 2016
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.
SOURCE: Federal Reserve Bank of St. Louis and US. Office of Management and Budget, Federal Debt: Total Public Debt as Percent of Gross Domestic Product, retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/GFDEGDQ188S , September 7, 2016.
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.
SOURCE: US. Bureau of the Census, Real Median Family Income in the United States [MEFAINUSA672N], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MEFAINUSA672N , September 7, 2016.
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.
SOURCE: U.S. Bureau of Labor Statistics, Civilian Labor Force Participation Rate, retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LNU01300000 , September 7, 2016.
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.
SOURCE: Board of Governors of the Federal Reserve System (US), Monetary Base; Total, retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/BOGMBASE , September 7, 2016.
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.
SOURCE: U.S. Bureau of Economic Analysis, Personal consumption expenditures: Nondurable goods: Alcoholic beverages purchased for off-premises consumption, retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DAOPRC1A027NBEA , September 7, 2016.
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.
Talk about cherry-picking figures! If you want to criticize the Obama administration, at least have the honesty to pick figures that cover that era – e.g., not starting with the debt in 1996, 12 years before Obama took office.
Professor, thank you for the conservative viewpoint. My take is the past 35 years have been basically a conservative agenda. The national debt quadrupled during the Reagan terms- about 3 trillion, ended up 50 percent more than that under Bush 1- about 4.5 trillion, President Clinton, enacted what conservatives proclaimed as the largest tax increase in world history and paid down on the national debt; handing a 1.3 trillion surplus to Bush 2 – who within 6 months squandered it in yet again another supply-side redistribution to the wealthy. Bush 2 then did not budget the wars, used the emergency funding process to cover up the disaster, and a second tax cut of 1.1 trillion; ballooning the debt to about 12 trillion. The interest on that amount has drained the economic growth potential through government stimulus while the debt has continued over the past 8 years; it is the massive interest payments that the conservatives created that have caused the shortfalls over the past years. President Obama has worked as hard as he could to get it under control; again the conservatives were only interested in thwarting his presidency not in governing in the best interest of the future prosperity of all. To the contrary. It is experience over the false promise of the conservative era. President Obama proposed many initiatives to stimulate
employment such as to refurbish America’s schools, rebuild
infrastructure- roads, bridges, water and sewage systems, build a hi
speed rail service, upgrade the power grid, improve airports, and
others; all of which the republicans blocked. Further, he sought to
address the debt by raising taxes to a prior rate, again blocked by
republicans. Healthcare can be contained by a national single payer
system, a consideration during the beginning stages of the ACA, as for
instance does Germany which provides everyone care at half the per
capita rate, again blocked by the republicans. So in no way has the
past eight years been an era of progressive policies that failed- those policies were never implemented.
Rather the republicans have thwarted the will of tne majority that twice
elected President Obama. and thus it has been more of a conservative
agenda which has failed to advance the standard of living of the
majority of Americans,
Can you imagine the size of our national debt had the Republicans gone along with Obama’s costly budget submissions? Had they passed his requested budgets (which even the Democrats voted against), Clowen-Pivens would be dancing on America’s grave!
Interesting information and analysis. It is great to see substantive numbers instead of the usual blather. Analysis of all of these elements of the national economic picture is a worthwhile exercise. It is especially noteworthy that incomes of the top 5% have increased by over 8%, while incomes in the lower 40% have grown more slowly, and not at all for the bottom 20%, which is also driving the high participation in welfare programs and low job participation noted by Professor Rotunda.
Professor Rotunda attributes this to “President Obama’s economic policies,” but our present economic policy is driven largely by the Republican-controlled House of Representatives, which has refused to raise taxes to address the deficit, and has imposed strict limits on federal spending, which has been used since the 1930s by both political parties to fuel recoveries. Professor Rotunda also does not mention the fact that this was the worst recession since the 1930’s, and that the economy is still suffering from the extent of the calamity. That is especially true for those in lowest 50%.
Readers who are Biblically-minded will remember the story of the Joseph’s advice to the Pharaoh, to lay up resources in the good years so that everyone does not starve when the lean years come. That also applies to the federal debt. History is not kind to either political party in this regard, but especially to the Republicans, whose tax changes in 2001 transformed the status of the government from a surplus to a deficit,who then financed two wars by “off-budget” borrowing, and whose refusal to increase taxes on the wealthiest individuals and corporations is contributing to present increases in the national debt.
What does appear to be obvious from the various graphs is that the top tiers on the income scale have benefitted more than most Americans from the expansionary economic policies adopted during the present administration, and are capable of paying more in taxes, while the lower tiers are not.
Americans are now faced with choosing between two candidates for president. One has embraced a vague economic policy, the only part of which has been fully articulated is substantial tax reductions for the wealthiest individuals and corporations. This policy is based on the premise that lowering taxes will encourage economic growth. Older Americans will remember that President Reagan employed the same strategy in the early 1980s, and was then forced to raise taxes numerous times when economic growth and tax revenues failed to meet expectations and the deficit ballooned. More recently, the governors of Kansas and Louisiana have adopted similar policies, with identical results.
The other candidate has embraced a policy of raising taxes and increasing spending. Not particularly promising, but I think that economic conservatives can count on Congress to prevent her policies from ever taking effect.
Obama’s inherited debt started at $10.6 trillion and he will have doubled it by the time he leaves office. The sad thing is that the $860+ BILLION STIMULUS bill is charged to Bush’s record — not Obama’s.