On Inauguration Day, 2009, President Obama seemed so politically blessed by the timing of developing economic trends. I expected that based on American economic history, recovery from the recession should have occurred some time during 2009. Even the longest previous recession since the Great Depression would have resulted in a recovery in summer 2009, as the recession began in December 2007.
In America, the economy does not fall into stagnation and just lie there for years, which is the narrative of the Obama Administration, thinking the American people are too stupid to know their own country. Our economy has periodically fallen into recessions, but recovers to show robust economic growth within a year or two. That is why chief White House economist Austan Goolsbee, who does know better, is playing with us when he says as he did last Friday in response to the May jobs report, “there are always bumps on the road to recovery, but the overall trajectory of the economy has improved dramatically over the past two years.”
While the Reagan recovery, a real recovery from a similarly deep recession, averaged 7.1% real economic growth over the first 7 quarters, the Obama recovery has produced less than half that at 2.8%, with the last quarter at a dismal 1.8%. While the Reagan recovery produced nearly 20 million new jobs, and civilian employment rose by almost 20%, today America still suffers 6.8 million fewer jobs than when the recession started over 3 years ago. The labor force participation rate has fallen to its lowest level almost since the Reagan recovery started over 25 years ago. As the Wall Street Journal explained on Monday:
This is an important economic measure because it reflects the opportunities that Americans perceive in the marketplace. In the long boom from the Reagan years through 2000 or so, the labor force participation rate took a historic leap upward as women, immigrants and others entered the job market…. It has now fallen off a cliff, and we doubt that is what Mr. Goolsbee means when he hails the “trajectory of the economy.”
This happened because Obamanomics doggedly followed the opposite of Reaganomics in every detail. The centerpiece of Obamanomics was the old-fashioned Keynesianism that was a proven failure and left for dead 30 years ago. That was reflected most of all in Obama’s February 2009 trillion dollar stimulus package. That didn’t work because borrowing a trillion dollars out of the economy to spend a trillion dollars back into the economy does not add anything to the economy on net.
The only way to get off this bullet train to oblivion is to radically reverse Obamanomics in dogged detail. The American people get one more chance to do that in 2012.