Post by the Scribe on Feb 9, 2024 9:11:25 GMT
REPORT
JUN 1, 2017
Obama’s Legacy on the Economy Is Anything But a Mess
www.americanprogress.org/article/obamas-legacy-economy-anything-mess/
The economy and the labor market experienced long periods of stable growth during Barack Obama’s presidency, laying the foundation to address remaining issues in the Trump administration.
AUTHORS
Christian E. Weller
Brendan Duke
Building an Economy for All, Restoring Social Trust in Democracy, Economy, +5 More
Former President Barack Obama smiles during a speech at a town hall with the Young Leaders of the Americas Initiative in Lima, Peru, November 19, 2016. (AP/Esteban Felix)Former President Barack Obama smiles during a speech at a town hall with the Young Leaders of the Americas Initiative in Lima, Peru, November 19, 2016. (AP/Esteban Felix)
The economy improved markedly under former President Barack Obama, from the start of 2009 through the end of 2016. Faced with the specter of another Great Depression in winter 2009, President Obama enacted a series of policies that helped the economy avoid that fate. The economy was growing again by the second half of 2009, and jobs followed suit by early 2010. Economic growth continued apace for the rest of President Obama’s time in office, and job growth logged its longest expansion on record by early 2017, dating back to 1939.1 Employment opportunities improved, the unemployment rate fell, wages eventually increased, and household debt dropped sharply.
While things could have been better—faster growth, more jobs, and less inequality, for instance—the economic situation at the end of President Obama’s second term does not resemble “a mess” or a uniquely poor performance, as the Trump administration likes to portray it.2
Instead, President Donald Trump inherited a solid economy after years of improvements, with the economy and the labor market headed in the right direction on all key economic indicators. The real danger at this point comes from the policy directions sketched out by the Trump administration. The policies that President Trump and his administration have advanced so far endanger economic and job growth by creating massive uncertainty for businesses. Trump’s policies are likely to worsen inequality by weakening wage and benefit growth for middle-class Americans and possibly undoing the progress of the past few years.
The data for President Obama’s two terms show unambiguously good trends on all key economic indicators:
Economic growth accelerated over time. The U.S. economy was shrinking when President Obama took office in the first quarter of 2009.3 By the end of his presidency, the economy was growing at about 2 percent in inflation-adjusted terms. In fact, President Obama’s second-term economic growth per person was higher than the growth of several previous presidents, specifically President George W. Bush in both his terms, President George H.W. Bush in his term, Presidents Richard Nixon and Gerald Ford in their combined term, President Nixon in his first term, and President Dwight D. Eisenhower in his second term.
Job growth logged its longest winning streak. The economy lost close to 800,000 jobs in January 2009, when President Obama took office. The job market started to expand by early 2010. And it consistently added jobs from October 2010 to January 2017, when President Obama left office; it continued to do so during the first months of President Trump’s term. There has not been a consistent job market expansion on record, dating back to 1939, that lasted longer than the current expansion of 79 months.4
Employment opportunities expanded. The share of people working expanded as the economy added new jobs. That is, job growth was faster than population growth—a key measure of a healthy job market expansion. When President Obama took office in January 2009, 77 percent of people between ages 25 and 54 had a job. This share dropped to 74.8 percent in the aftermath of the Great Recession by December 2009, before climbing to 78.2 percent in January 2017, when President Obama left office.5
Wages and incomes have been on the upswing. The typical weekly pay of U.S. workers has been increasing since early 2013 and reached its highest level on record, dating back to 1979, at the end of 2016.6 Household incomes, while still relatively low, have also experienced an upward trend since 2014.7
Household debt levels have been falling as employment opportunities and wages have gone up. Household debt fell relative to after-tax income during both of President Obama’s terms. Total debt amounted to 105.9 percent of after-tax income, the lowest level since mid-2002.8 The massive and rapidly rising household indebtedness that characterized the years before the economic and financial crisis of 2007 to 2009 are behind us.
The passage of the Affordable Care Act (ACA) in 2009 has greatly expanded health care coverage. The ACA made it possible for more than 20 million individuals to afford health insurance and decreased the share of Americans without health insurance to an all-time low. At the same time, it has increased the economic security of American families.
Government finances also improved during the Obama years. President Obama inherited a deeply distressed economy that necessitated a swift, decisive intervention, causing the deficit to rise to 9.8 percent of gross domestic product (GDP) in fiscal year 2009. By FY 2016, the deficit had fallen to less than one-third of that, at 3.2 percent of GDP.9
Measures to stabilize financial markets supported the economic recovery. Bank lending cratered during the financial and economic crisis and its immediate aftermath, but thanks in large part to stabilizing policies such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, it quickly returned to its previous high and kept on going. Fewer financial constraints for businesses then allowed them to expand and hire.
What makes President Obama’s economic record especially remarkable is that the economy faced major headwinds, particularly from slow growth overseas but also from tremendous domestic policy uncertainty and ill-timed austerity measures, such as budget cuts, that killed jobs and slowed wage growth.10
Contrary to the claims of President Trump and his officials, he did not inherit a mess on the economy. The economy has improved greatly since the dark days of the Great Recession, when President Obama took office. Moreover, the economy continues to be on a healthy trajectory thanks to a series of important policy interventions intended to strengthen economic growth; boost job creation; and protect consumers, for instance, from excessive and costly amounts of credit. By extension, a healthy economic trajectory also means that President Trump cannot take credit for the economy just continuing on its path.
However, a lot of work remains to be done. Economic growth is still fairly modest, making it more difficult to pay for the coming challenges of updating U.S. infrastructure and supporting an aging population. Widespread economic inequality by race, ethnicity, education, and geography leaves millions of middle-class Americans struggling with the high costs of housing, education, health care, and child care. This is especially true for single women, communities of color, those without a college degree, and much of rural America.11
The Trump administration and Congress would do well to build on the steady stewardship of President Obama on the economy, rather than undoing a wide range of sensible policies that helped stabilize and strengthen the economy and people’s economic situation for the past eight years.
The economic outlook brightens
President Obama’s first order of business when he took office in January 2009 was to save the economy from entering another Great Depression. The labor market was shrinking at a rate of around 700,000 to 800,000 jobs per month, economic growth had already declined in three out of four quarters of 2008, and the economy was still shrinking.12 Entire communities were decimated by a massive spike in unemployment and a wave of foreclosures, following the financial and economic crisis that started in late 2007.
To stimulate the economy, Congress passed the American Recovery and Reinvestment Act (ARRA) in winter 2009. The country avoided another Great Depression, economic growth quickly returned, and massive job losses subsided, turning into actual job gains by 2010. ARRA consisted of a series of targeted tax cuts, such as new homeowners’ tax credits, and of spending measures, such as higher unemployment insurance and Social Security benefits, in addition to a substantial infusion of infrastructure investments for a wide range of projects. These efforts were further aided by financial stability measures such as the Dodd-Frank Act, which helped establish the Consumer Financial Protection Bureau and included a number of measures to stabilize the banking sector after it cratered during the financial crisis of 2007 to 2009.13 Thanks to these substantial and expeditious interventions, the economy stopped shrinking by June 2009, ending the longest recession since World War II.
The economy subsequently entered a long period of expansion. The 31 quarters of economic growth from the second quarter of 2009, when the Great Recession ended, to the third quarter of 2017—including the first few months of President Trump’s term—marked the third-longest economic expansion since World War II.14
Growth during President Obama’s two terms was moderate, but not uniquely low, even though the beginning of his first term was overshadowed by the end of the Great Recession. Over the course of the first four years of Obama’s presidency, the economy expanded at an average annual rate of 1.3 percent, and it grew by an average of 2.2 percent during his second term.
The growth rate in President Obama’s second term was in fact faster than the average growth during President Dwight D. Eisenhower’s second term, President George H.W. Bush’s term, and President George W. Bush’s second term. And it equaled that of Presidents Nixon’s and Ford’s combined term.
This is even clearer when one considers average per capita growth—the rate of economic growth relative to the growth of the population 16 years old and older. This is a more accurate measure for comparing presidents’ economic performance, since some of the recent slowdown in gross domestic product growth simply reflects slower population growth. Average per capita GDP growth in President Obama’s second term was higher than that of several previous presidential terms since World War II. (see Figure 1)
Presidents do not control all aspects of economic growth, but they can have substantial influence on how an economy performs during their time in the Oval Office as they shape fiscal and regulatory policies. President Obama encountered a particularly obstructionist Congress for most of his time in office and thus could not enact much of his economic policy agenda.
One is left wondering what growth would have looked like if President Obama had not faced as many obstacles to his policy agenda. President Obama, for example, proposed the American Jobs Act, which would have provided $447 billion in stimulus at a time when ARRA’s effects were beginning to fade.16 The passage of the American Jobs Act would have delivered even faster economic, employment, and wage growth. But the House of Representatives refused to even consider it, even though tax cuts made up more than half of the package. In fact, Congress used the threat of shutting down the government and refusing to raise the debt ceiling as leverage to enact ill-timed budget cuts starting in FY 2011 that slowed down economic, job, and wage growth.17
Put differently, President Obama’s track record on economic growth is particularly remarkable given that he faced an uncooperative Congress that pushed for economic austerity and cuts to key sectors of the economy, just as the economy started to regain momentum after the Great Recession.
The labor market goes on a record expansion
The labor market followed the economic trends, as is typically the case. Economic growth leads to more jobs, which then feed back into more growth through more jobs and ultimately higher wages. Job growth returned in early 2010, after economic growth had turned positive again. And from October 2010 to January 2017, the last month of the economy overseen by President Obama, the economy added jobs each month.18 This job market expansion continued into the first months of President Trump’s term, extending what was already the longest job growth streak on record, dating back to 1939.19
The long and steady growth of new jobs marked a remarkable turnaround from the depths of the Great Recession. When President Obama took office, the economy lost 700,000 to 800,000 jobs each month. (see Figure 2) During the first year of President Obama’s term, from January 2009 to January 2010, the economy lost an average of 354,000 jobs per month. During the subsequent 12 months, from January 2010 to January 2011, the labor market added 90,100 jobs per month. By 2011, the labor market had set into a pace of modest yet extended
MORE
JUN 1, 2017
Obama’s Legacy on the Economy Is Anything But a Mess
www.americanprogress.org/article/obamas-legacy-economy-anything-mess/
The economy and the labor market experienced long periods of stable growth during Barack Obama’s presidency, laying the foundation to address remaining issues in the Trump administration.
AUTHORS
Christian E. Weller
Brendan Duke
Building an Economy for All, Restoring Social Trust in Democracy, Economy, +5 More
Former President Barack Obama smiles during a speech at a town hall with the Young Leaders of the Americas Initiative in Lima, Peru, November 19, 2016. (AP/Esteban Felix)Former President Barack Obama smiles during a speech at a town hall with the Young Leaders of the Americas Initiative in Lima, Peru, November 19, 2016. (AP/Esteban Felix)
The economy improved markedly under former President Barack Obama, from the start of 2009 through the end of 2016. Faced with the specter of another Great Depression in winter 2009, President Obama enacted a series of policies that helped the economy avoid that fate. The economy was growing again by the second half of 2009, and jobs followed suit by early 2010. Economic growth continued apace for the rest of President Obama’s time in office, and job growth logged its longest expansion on record by early 2017, dating back to 1939.1 Employment opportunities improved, the unemployment rate fell, wages eventually increased, and household debt dropped sharply.
While things could have been better—faster growth, more jobs, and less inequality, for instance—the economic situation at the end of President Obama’s second term does not resemble “a mess” or a uniquely poor performance, as the Trump administration likes to portray it.2
Instead, President Donald Trump inherited a solid economy after years of improvements, with the economy and the labor market headed in the right direction on all key economic indicators. The real danger at this point comes from the policy directions sketched out by the Trump administration. The policies that President Trump and his administration have advanced so far endanger economic and job growth by creating massive uncertainty for businesses. Trump’s policies are likely to worsen inequality by weakening wage and benefit growth for middle-class Americans and possibly undoing the progress of the past few years.
The data for President Obama’s two terms show unambiguously good trends on all key economic indicators:
Economic growth accelerated over time. The U.S. economy was shrinking when President Obama took office in the first quarter of 2009.3 By the end of his presidency, the economy was growing at about 2 percent in inflation-adjusted terms. In fact, President Obama’s second-term economic growth per person was higher than the growth of several previous presidents, specifically President George W. Bush in both his terms, President George H.W. Bush in his term, Presidents Richard Nixon and Gerald Ford in their combined term, President Nixon in his first term, and President Dwight D. Eisenhower in his second term.
Job growth logged its longest winning streak. The economy lost close to 800,000 jobs in January 2009, when President Obama took office. The job market started to expand by early 2010. And it consistently added jobs from October 2010 to January 2017, when President Obama left office; it continued to do so during the first months of President Trump’s term. There has not been a consistent job market expansion on record, dating back to 1939, that lasted longer than the current expansion of 79 months.4
Employment opportunities expanded. The share of people working expanded as the economy added new jobs. That is, job growth was faster than population growth—a key measure of a healthy job market expansion. When President Obama took office in January 2009, 77 percent of people between ages 25 and 54 had a job. This share dropped to 74.8 percent in the aftermath of the Great Recession by December 2009, before climbing to 78.2 percent in January 2017, when President Obama left office.5
Wages and incomes have been on the upswing. The typical weekly pay of U.S. workers has been increasing since early 2013 and reached its highest level on record, dating back to 1979, at the end of 2016.6 Household incomes, while still relatively low, have also experienced an upward trend since 2014.7
Household debt levels have been falling as employment opportunities and wages have gone up. Household debt fell relative to after-tax income during both of President Obama’s terms. Total debt amounted to 105.9 percent of after-tax income, the lowest level since mid-2002.8 The massive and rapidly rising household indebtedness that characterized the years before the economic and financial crisis of 2007 to 2009 are behind us.
The passage of the Affordable Care Act (ACA) in 2009 has greatly expanded health care coverage. The ACA made it possible for more than 20 million individuals to afford health insurance and decreased the share of Americans without health insurance to an all-time low. At the same time, it has increased the economic security of American families.
Government finances also improved during the Obama years. President Obama inherited a deeply distressed economy that necessitated a swift, decisive intervention, causing the deficit to rise to 9.8 percent of gross domestic product (GDP) in fiscal year 2009. By FY 2016, the deficit had fallen to less than one-third of that, at 3.2 percent of GDP.9
Measures to stabilize financial markets supported the economic recovery. Bank lending cratered during the financial and economic crisis and its immediate aftermath, but thanks in large part to stabilizing policies such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, it quickly returned to its previous high and kept on going. Fewer financial constraints for businesses then allowed them to expand and hire.
What makes President Obama’s economic record especially remarkable is that the economy faced major headwinds, particularly from slow growth overseas but also from tremendous domestic policy uncertainty and ill-timed austerity measures, such as budget cuts, that killed jobs and slowed wage growth.10
Contrary to the claims of President Trump and his officials, he did not inherit a mess on the economy. The economy has improved greatly since the dark days of the Great Recession, when President Obama took office. Moreover, the economy continues to be on a healthy trajectory thanks to a series of important policy interventions intended to strengthen economic growth; boost job creation; and protect consumers, for instance, from excessive and costly amounts of credit. By extension, a healthy economic trajectory also means that President Trump cannot take credit for the economy just continuing on its path.
However, a lot of work remains to be done. Economic growth is still fairly modest, making it more difficult to pay for the coming challenges of updating U.S. infrastructure and supporting an aging population. Widespread economic inequality by race, ethnicity, education, and geography leaves millions of middle-class Americans struggling with the high costs of housing, education, health care, and child care. This is especially true for single women, communities of color, those without a college degree, and much of rural America.11
The Trump administration and Congress would do well to build on the steady stewardship of President Obama on the economy, rather than undoing a wide range of sensible policies that helped stabilize and strengthen the economy and people’s economic situation for the past eight years.
The economic outlook brightens
President Obama’s first order of business when he took office in January 2009 was to save the economy from entering another Great Depression. The labor market was shrinking at a rate of around 700,000 to 800,000 jobs per month, economic growth had already declined in three out of four quarters of 2008, and the economy was still shrinking.12 Entire communities were decimated by a massive spike in unemployment and a wave of foreclosures, following the financial and economic crisis that started in late 2007.
To stimulate the economy, Congress passed the American Recovery and Reinvestment Act (ARRA) in winter 2009. The country avoided another Great Depression, economic growth quickly returned, and massive job losses subsided, turning into actual job gains by 2010. ARRA consisted of a series of targeted tax cuts, such as new homeowners’ tax credits, and of spending measures, such as higher unemployment insurance and Social Security benefits, in addition to a substantial infusion of infrastructure investments for a wide range of projects. These efforts were further aided by financial stability measures such as the Dodd-Frank Act, which helped establish the Consumer Financial Protection Bureau and included a number of measures to stabilize the banking sector after it cratered during the financial crisis of 2007 to 2009.13 Thanks to these substantial and expeditious interventions, the economy stopped shrinking by June 2009, ending the longest recession since World War II.
The economy subsequently entered a long period of expansion. The 31 quarters of economic growth from the second quarter of 2009, when the Great Recession ended, to the third quarter of 2017—including the first few months of President Trump’s term—marked the third-longest economic expansion since World War II.14
Growth during President Obama’s two terms was moderate, but not uniquely low, even though the beginning of his first term was overshadowed by the end of the Great Recession. Over the course of the first four years of Obama’s presidency, the economy expanded at an average annual rate of 1.3 percent, and it grew by an average of 2.2 percent during his second term.
The growth rate in President Obama’s second term was in fact faster than the average growth during President Dwight D. Eisenhower’s second term, President George H.W. Bush’s term, and President George W. Bush’s second term. And it equaled that of Presidents Nixon’s and Ford’s combined term.
This is even clearer when one considers average per capita growth—the rate of economic growth relative to the growth of the population 16 years old and older. This is a more accurate measure for comparing presidents’ economic performance, since some of the recent slowdown in gross domestic product growth simply reflects slower population growth. Average per capita GDP growth in President Obama’s second term was higher than that of several previous presidential terms since World War II. (see Figure 1)
Presidents do not control all aspects of economic growth, but they can have substantial influence on how an economy performs during their time in the Oval Office as they shape fiscal and regulatory policies. President Obama encountered a particularly obstructionist Congress for most of his time in office and thus could not enact much of his economic policy agenda.
One is left wondering what growth would have looked like if President Obama had not faced as many obstacles to his policy agenda. President Obama, for example, proposed the American Jobs Act, which would have provided $447 billion in stimulus at a time when ARRA’s effects were beginning to fade.16 The passage of the American Jobs Act would have delivered even faster economic, employment, and wage growth. But the House of Representatives refused to even consider it, even though tax cuts made up more than half of the package. In fact, Congress used the threat of shutting down the government and refusing to raise the debt ceiling as leverage to enact ill-timed budget cuts starting in FY 2011 that slowed down economic, job, and wage growth.17
Put differently, President Obama’s track record on economic growth is particularly remarkable given that he faced an uncooperative Congress that pushed for economic austerity and cuts to key sectors of the economy, just as the economy started to regain momentum after the Great Recession.
The labor market goes on a record expansion
The labor market followed the economic trends, as is typically the case. Economic growth leads to more jobs, which then feed back into more growth through more jobs and ultimately higher wages. Job growth returned in early 2010, after economic growth had turned positive again. And from October 2010 to January 2017, the last month of the economy overseen by President Obama, the economy added jobs each month.18 This job market expansion continued into the first months of President Trump’s term, extending what was already the longest job growth streak on record, dating back to 1939.19
The long and steady growth of new jobs marked a remarkable turnaround from the depths of the Great Recession. When President Obama took office, the economy lost 700,000 to 800,000 jobs each month. (see Figure 2) During the first year of President Obama’s term, from January 2009 to January 2010, the economy lost an average of 354,000 jobs per month. During the subsequent 12 months, from January 2010 to January 2011, the labor market added 90,100 jobs per month. By 2011, the labor market had set into a pace of modest yet extended
MORE