The Worst Five Years Since the Great Depression
This column by ACRU General Counsel and Senior Fellow for the Carleson Center for Public Policy (CCPP) Peter Ferrara was published February 7, 2013 on Forbes.com.
In February, 2009, I wrote for the Wall Street Journal an article entitled “Reaganomics versus Obamanomics.” The article explained that the emerging Obamanomics was pursuing exactly the opposite of every policy of the enormously successful Reaganomics, and predicted that it would produce exactly the opposite results.
Well, the results are in, and under President Obama the American people have now suffered the worst 5 years since the Great Depression, as first explained by Steve McCann of the American Thinker on January 25. McCann writes,
“From 2009 through 2012, the Obama cabal, and their allegiance to statist policies, has been in charge for four years. The global financial crisis took place in the previous year, 2008 [remember the Democrat majority Congress was elected in 2006], and based on the historical pattern of American economic recovery since the depression years, the United States should have been experiencing broad and significant economic and job growth by year three at the latest.”
Instead what America got by year five was fewer jobs than before. Even though the employment age population has increased by nearly 12 million since January, 2008, there are now 3 million fewer Americans working, with employment declining from 146.3 million in January, 2008 to 143.3 million in December, 2012. If America enjoyed the same labor force participation rate as in 2008, the unemployment rate in December, 2012 would have been 11.4%, compared to 4.9% in December, 2007, under President George Bush and his “failed” economic policies of the past. We won’t see 4.9% unemployment in America again until the statist takeover of America is purged.
As I have previously recounted here, before this latest spooky downturn, since the Great Depression recessions in America have lasted an average of 10 months, with the longest previously at 16 months. The latest recession began in December, 2007. Yet here we are 62 months after the recession began, and there is hardly any recovery at all.
I have explained in previous columns that the financial crisis was caused by government, not Wall Street, which was just another victim of bad government policies. Those policies began in 1995 with President Clinton and his Executive Branch, regulatory, National Home Ownership Strategy, which was to sold as a program to expand home ownership without costing the taxpayers a dime. The regulations imposed under that strategy effectively looted the banks by trashing traditional lending standards, in the name of “fairness” of course (can’t exclude those not creditworthy from home ownership). That is how the subprime mortgage market exploded from 5% of all mortgages in 1994 to half of all mortgages by 2007.
President Bush exacerbated the problem, further pumping up the housing bubble with his cheap dollar monetary policy, under the illogical, outdated, Keynesian thinking that a cheap dollar expands the economy by promoting exports. These real causes of the financial crisis have now been well documented, in such books as The Great American Bank Robbery, by Paul Sperry, Reckless Endangerment, by New York Times reporter Gretchen Morgenson, Getting Off Track, by Stanford Economics Professor John Taylor, The Financial Crisis and the Free Market Cure: Why Pure Capitalism is the World Economy’s Only Hope, by Cato Institute President John Allison, and Bad History, Worse Policy: How A False Narrative About the Financial Crisis Led to the Dodd-Frank Act, by Peter Wallison, Senior Fellow for Financial Policy Studies at the American Enterprise Institute.
The National Bureau of Economic Research officially scored the recession as ending in June, 2009, still the longest recession since the Great Depression at 18 months. President Obama’s responsibility was to adopt the pro-growth policies that would generate a timely, robust recovery. But he has consistently followed the opposite, anti-growth policies, producing the worst recovery since the Great Depression, as economist John Lott originally noted.
No, Obama apologists can’t say the recovery has been so bad because the recession was so bad, as the American historical experience is the worse the recession the stronger the recovery. Obama was poised to be a national hero given his perfect timing, with the typical post recession boom starting in his first year. Obama and his people were expecting to ride that glory, with their statements regarding a supposed recovery summer in 2010, and Obama himself saying on national TV in 2009 that if he didn’t get the recovery going within 3 years, he would be a one term President. They knew the history.
And, no, you can’t say this time was different because it was a “financial crisis.” Every recession involves a financial crisis, and still the worse the recession the stronger the recovery. That financial crisis excuse is just boob bait propaganda for the gullible. Every other recession and recovery in America since the Great Depression has followed the above described patterns. But not this time, because Obama was busy transforming America from the most prosperous nation in the history of the world, into another banana republic.
That is why last month, 61 months after the recession began, unemployment was still rising, even while record numbers continued to drop out of the work force. The unemployment rate for blacks was still well into double digits at 13.8%, for Hispanics still nearly double digits at 9.7%, for teenagers, continued depression at 23.4%, for black teenagers, a genocidal 37.8%. The official U6 unemployment rate, counting those who were working part time because they couldn’t find full time work, and those marginally attached to the work force who wanted and were available for work for up to a year, was 14.4%.
Obama constantly proclaims himself the champion of the middle class. But that is just more Saul Alinsky strategy, enact socialism while proclaiming you are doing it for the middle class (which is actually getting taken). During the last 5 years, real median household income has declined nearly 9%, from $54,489 at the end of 2007, to $50,020 at the beginning of 2012. That was the most precipitous plunge on record, with a greater fall after the recession ended than before, which is unprecedented in American history. McCann adds, “While American incomes were rapidly eroding, the cost of living continued to rise as the commodity price index (basket of food, fuel and other essential commodities) rose 20% from December 2007 until September, 2012.”
We know Obama loves the poor, because he has created so many of them. Poverty has soared under Obama, with the number of Americans in poverty increasing to the highest level in the more than 50 years that the Census Bureau has been tracking poverty. Over the last 5 years, the number in poverty has increased by nearly 31%, to 49.7 million, with the poverty rate climbing by over 30% to 16.1%. Obama has also been the food stamp President, with the number on food stamps increasing during his Administration to an all time record high of 47.7 million, up 80% over the past 5 years.
This is all because there has been no real economic growth under President Obama, even though America was coming out of the recession in his first year, and so economic growth should have been higher than normal. Economic growth is the foundation for job creation, and is far more beneficial than redistribution for the middle class and the poor, who will never gain when there is a shrinking pie. Over the last 5 years, the economy has grown at an average annual rate of 0.6%, less than one fifth the long term American growth rate.
Sure there was a recession in 2008-2009. But the economy is supposed to come booming out of the downturns, averaging back out to the long-term American growth rate. But that hasn’t happened under Obamanomics. That is the core failure of President Obama.
Instead, in the fourth quarter of 2012, 5 years after the recession started, the economy was contracting again, with negative growth. One more quarter of that, and we will be back in recession, with the Fed already laying the groundwork for worse after that. The supposedly progressive Obama is leading us back into an historical reenactment of the 1930s.
Yet, while the economy has not been growing, government spending has been booming. Federal spending has increased by 41% over the last 5 years, with total government spending at all levels increasing by nearly 27%, to an all-time high of $6.2 trillion. The Democrat party controlled press told us the economy contracted in the fourth quarter because of government spending cuts. But there have been no government spending cuts. The government in the fourth quarter was spending more than ever before in world history.
Finally, despite all of President Obama’s prattle about inequality, inequality is actually worsening under his Administration. Obama said in his second inaugural address, “our country cannot succeed when a shrinking few do very well and a growing many barely make it.”
As Investors Business Daily (IBD) responded on January 23, “But that’s precisely what’s happened over the past four years, as Obama’s economic policies left the majority of Americans falling behind while the wealthy few got further ahead.”
The Census Bureau publishes the Gini Index, which is the official measure of income inequality. That index has climbed every year President Obama has been in office. It was flat during the 8 years under President Bush (which means inequality did not increase).
Inequality is increasing under Obama because the incomes of the top 20% of income earners are increasing, while the incomes for everyone else have been declining. That is right, Progressives, what all your huffing and puffing has achieved is the rich getting richer, and the poor getting poorer. That didn’t happen under Reagan, where the rich got richer, and the poor got richer. After 1983, the poverty rate declined every year under Reagan, and incomes grew for every income quintile.
Quite to the contrary, Census reports that in 2011 the average incomes of the top 20% of income earners rose, while incomes for the bottom 80%, declined. Under President Obama, as IBD reported on January 23, “average incomes among the poorest households fell nearly 8%, back to levels not seen since the 1980s.” Real median household income, reflecting the incomes of the middle class, has declined throughout Obama’s Presidency, totaling a loss by now of one month’s income a year. You see what I mean when I say that economic growth is far more beneficial for the middle class and the poor than redistrubution?
IBD adds, “[T]he only ones doing well in Obama’s economy have been the ‘shrinking few’ Obama complains about. Wall Street investors have benefitted from a rising stock market – with the Dow now at 5 year highs – and corporate chiefs have seen profits climb 58% since June, 2009.”
“Barack Obama and the Democrats have signaled they intend to do nothing to alter the course the nation is on; in fact they intend to accelerate it. Without any firm and viable political opposition, wealth and job creation will further deteriorate with the second term implementation of Obamacare, higher taxes, ever increasing government expenditures, and the mushrooming debt, continued erosion of the value of the dollar and its potential demise as the world’s reserve currency, as well as a Niagara Falls of new regulations. The American people…will be worse off in four years than they were at the end of 2012…and a majority of the citizenry will increasingly experience the malaise and suffering of those who lived through the 1930s….”
Congratulations, Progressives. You have proven the truth of Winston Churchill’s observations, “The great vice of capitalism is the unequal sharing of blessings. The great virtue of socialism is the equal sharing of misery,” and, “If you are not a socialist at 20, you have no heart. And if you are not a capitalist at 40, you have no brains.”