President Barack Obama’s economic record is roundly criticized by Republicans. Considering he has outperformed any Republican president elected in the last 35 years, they should instead be learning as much as possible from him .
President Obama’s Economic Record
While President Obama made giant strides in reducing unemployment rates, Bill Clinton’s Administration is the Gold Standard in this area and all others. Obama has a little over a year left to match Clinton’s modern-day record unemployment rate drop.
|Unemployment Rate Changes During Various Administrations|
|Unemployment Rate (%)|
|President||First month in office||Last month in office||Change in Unemployment rate during term|
|George W. Bush||4.2||7.8||86%|
|Source: Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey. Unemployment Rate, 16 years old and over. September 2015|
|* President Obama’s term is not finished.|
Refusing to acknowledge the great progress Obama made putting our country back to work, Republicans claim huge numbers of discouraged workers quit looking for work and are not included in the unemployment rate data. According to them, this makes the above data useless.
These folks could use some remedial math. The U.S. Bureau of Labor Statistics provides a plethora of data, including the monthly number of “Discouraged Workers”. In January, 2009 when Barack Obama assumed the presidency, the Bureau of Labor Statistics reported that 154,210,000 people made up the Civilian Labor Force. This includes people with full or part-time jobs and people looking for work. The bureau also reported for the same month that 142,152,000 had jobs. Using the equation 1-(142,152,000/154,210,000), the Unemployment Rate is 7.8 percent.
Republicans are correct that Discouraged Workers are not included in the Civilian Labor Force and are not included in the Unemployment Rate calculation. To get an idea of the Discouraged Worker’s impact on the Unemployment Rate, we can fix this and add their total number to the Civilian Labor Force and get an Adjusted Unemployment Rate. In January, 2009 there were 734,000 Discouraged Workers. Adding them to the Civilian Labor Force gives us a total of 154,944,000 people who are employed, looking for work or who gave up looking for work. Using this adjusted labor force number 1-(142,152,000/154,944,000), we find this does increase the unemployment rate and we have an Adjusted Unemployment Rate of 8.3 percent at the start of Obama’s term.
In the most recent month data is available, the Bureau of Labor Statistics reported 156,715,000 people in the Civilian Labor Force and 148,800,000 people working. This works out to the 5.1 percent Unemployment Rate in Table 1. However, there are now 635,000 Discouraged Workers. Repeating the math above and including the Discouraged Workers, we have an adjusted Unemployment Rate of 5.4 percent instead of the 5.1 percent in Table 1. The equation is 1-(148,800,000/(156,715,000+635,000))
To calculate how much our adjusted Unemployment Rate has changed during Obama’s term with the new numbers that take the Discouraged Workers into consideration, we use the equation ((0.054-0.083)/0.083). This is the adjusted ending Unemployment rate minus the adjusted beginning Unemployment Rate divided by the adjusted beginning Unemployment Rate.
This works out to a -35 percent change in the Unemployment Rate (a 35 percent drop) during Obama’s term to date, exactly what we have in Table 1 using published unemployment rate data. The Discouraged Worker numbers are so small compared to the Civilian Labor Force that they are inconsequential. They are just a foolish Republican ploy to detract attention from Obama’s employment renaissance.
While Obama’s record in this area so far comes up short compared to Bill Clinton’s, he has outpaced any Republican elected in the last 35 years.
Stock market gains
Another metric for measuring economic policy is changes in stock market indices. A broad-based index such as the S&P 500 measures investor faith in a wide swath of the economy.
|S&P 500 Monthly Average|
|President||Start of term||End of term||Percent change during term||Annual percent change|
|George W. Bush||1386.01||825.88||-40%||-5%|
|* Term has not ended. End of term calculations are based on S&P 500 monthly average for September 2015.|
Bill Clinton’s policies resulted in the greatest investor confidence. However, Barack Obama’s 19% annual increase beats out any Republican president in the last 35 years.
Gross Domestic Product
Gross Domestic Product (GDP) measures overall output of goods and services.
|Annual Percent Real Gross Domestic Product Change|
|President||Average annual % change|
|George W. Bush||2.1|
|Source: Bureau of Economic Analysis, Table 1.1.1 Percent change from preceding period in real gross domestic product. October 14, 2015 http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&904=1980&903=1&906=a&905=2015&910=x&911=0|
While Obama has not performed to a high level here, much is due to a disastrous first term. In this writer’s opinion, the bulk of the problems for slow economic growth were Obama’s horrible decision to keep the George W. Bush tax cuts in place as well as adding some of his own. After Obama’s re-election in 2012, the Budget Reconciliation Act eliminated many of Bush’s tax cuts (and all of Obama’s). The deficit dropped by almost 40 percent and GDP output improved. The most recent quarter saw a 3.9 percent increase in Real Gross Domestic Product.
Obama’s secret formula – Frugality
Elect a Republican to the White House and watch spending go out of control. Elect a Democrat and watch annual spending stay close to the estimated inflation rate. Unfortunately, today’s liberal, big government Republicans have not learned that government spending does not build real wealth in an economy.
|Average Change In Federal Government Spending During Presidential Term|
|President||Beginning Spending ($billions)||Ending Spending ($billions)||Total Spending Change (%)||Average Annual Spending Change (%) **|
|George W. Bush||1,944.0||3,388.4||74.3%||7.2%|
|* Term to date
** Calculated by averaging each year’s spending change.
|Source:Bureau of Economic Analysis,Table 3.2 Federal Government Total Receipts and Expenditures-Annual, Line 42, September 28, 2015, http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&904=1980&903=87&906=a&905=2015&910=x&911=0|
For true conservatives, Table 4 is the holy grail for measuring presidential performance. Small spending increases show a commitment to smart government. While hypocritical Republicans predicted Obamacare would bust the federal budget, the reality is it has had virtually no impact.
Because of inflation, it is inaccurate to simply compare government ending spending balances over a 35 year period. Instead, we can get a more accurate picture measuring what the federal government’s annual ending balance is compared to the economy’s annual output of goods and services, or GDP. Therefore the ending balance is a percent of that year’s GDP.
For those of us true conservatives, a negative balance as a percent of GDP is a bad thing. A large negative number indicates the government uses up available domestic lending capacity and has to borrow from foreign interests to cover debt. For comparison, since 1981, the average government spending balance as a percent of GDP is -3.5 percent.
|Federal Government Spending Balance as a Percent of GDP per Presidential Term|
|President||Annual budget balance as a % of GDP prior year before taking office||Annual budget balance as a % of GDP last year in office||Average budget balance as a % of GDP|
|George W. Bush||1.5%||-4.3%||-2.4%|
|* Term not completed|
|Source:Bureau of Economic Analysis,Table 3.2 Federal Government Total Receipts and Expenditures-Annual, Line 42, September 28, 2015, http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&904=1980&903=87&906=a&905=2015&910=x&911=0: Bureau of Economic Analysis, Table 1.1.5 Gross Domestic Product-Annual, Line 36 September 28, 2015 , http://www.bea.gov/iTable/iTableHtml.cfm?reqid=9&step=3&isuri=1&904=1980&903=5&906=a&905=2015&910=x&911=0|
President Clinton lost his congressional majorities in the next election after Democrats passed the major tax increase he asked for. However, the economy flourished like nothing seen before, for all income groups. In contrast, President Obama experienced huge $multi-trillion deficits during his first term due to continuing the George W. Bush tax cuts and adding his own. Thankfully, he eliminated many of the tax cuts and the budget deficit is heading back down to historical levels
Table 6 should give every Republican that believes budget deficits don’t matter something to consider. Notice how the Employment Rate (1- Unemployment Rate) is almost a mirror image of the government spending balance as a percent of GDP. In other words, if the federal government’s spending deficit rises compared to that year’s GDP, a lower percent of people are employed. Conversely, during the Clinton years when we had government surpluses instead of deficits, the percent of people employed went up to record high levels.
Using a two tailed t-test, the relationship between the two data lines in Table 6 are highly significant (p<0.01). Although these numbers are closely related, the data here doesn’t tell us if one causes the other. This is investigated more thoroughly in http://www.frugalron.com/frugal-ron/tax-cuts-employment-and-economic-growth/.
Evaluating any president’s performance invites the question, “Compared to what?” When we compare President Obama’s economic record to Republicans, he shines. When we compare him to Bill Clinton, some of the luster is gone.
For true conservatives, Table 6 tells it all. When liberal, big spending Republicans are in office combining huge spending increases and insane tax cuts for the rich, we have large government spending deficits and lower employment. In other words, the economy tanks. When a President Obama combines low spending increases with insane tax cuts, the economy is better but never really gets its footing until many of the tax cuts are eliminated and the budget deficit drops. It took Obama four years to figure this out. Slow learning Republicans still haven’t figured this out after 35 years of failure.
When you have a President Clinton that combines small spending increases and budget balancing tax increases that eventually result in government surpluses, the economy flourishes. Clinton got the government out of the credit markets and his small spending increases lowered the government’s impact on the overall marketplace. His resulting record of success speaks for itself. Again it would be wonderful if Republicans paid attention.
Conservatism isn’t about shafting the poor, old or sick. In a macroeconomic sense, it is all about knowing where capitalism falls short and identifying where government can create a greater good for the majority of its citizens. After making these decisions, conservatism is about keeping out-of-the-way of citizens and the marketplace.