What if we had an economic recovery and nobody noticed?
Last week’s jobs numbers basically said that 227,000 people noticed the improvement. They got jobs. But 12.8 million didn’t notice. They are still out of work. It’s an improvement, but it’s not nearly enough.
Don’t take my word for it. Paul Krugman, leftist econo-pundit extraordinaire, described the economy in a recent column in the New York Times as “deeply depressed.”
As Mr. Krugman pointed out, given an honest appraisal, one finds “every silver lining comes with a cloud.” What could justify Mr. Krugman’s gloomy assessment? Look at the cloud. Compare the most recent recession and recovery with the recession from 1981 to 1982, and subsequent recovery through the lens of the “output gap” - the gap between the economy’s potential and its actual level of output.
Potential output is simply what the economy could produce at full employment. The Congressional Budget Office (CBO) provides a reasonable past estimate and future projection for potential output. Using this series compared with actual output and the CBO’s projections yields the neighboring graph of the comparable output gaps today and 30 years ago.
Remarkably, the 1980-81 recession looks a lot like the 2008-09 recession. Both featured sharp contractions, and the total contraction was similar. But there the similarities end. Once the economy bottomed in 1982, it recovered almost as rapidly as it had contracted. After two years, the economy was almost back to full employment.
Under President Obama, instead of a strong, sustained recovery, we closed the gap some initially, but not much since. The CBO forecast for 2012 and 2013 shows precious little improvement on the horizon.
Yes, the economy is growing. But coming out of the last comparably deep recession, it grew at an average annual rate of 6.5 percent for the first two years of recovery. The economy now has grown for 10 straight quarters - but at a pedestrian rate of 2.4 percent. That’s too slow.
And yes, the economy is creating jobs. But at the current rate, it will take more than four more years to return to full employment. That’s way too slow.
To be fair, the economy faces some exceptional head winds, such as a housing industry stuck in a rut despite a plethora of targeted Obama policies. But the economy faced more daunting challenges in 1981, including high and accelerating inflation followed by a wrenching disinflation, stifling tax rates, a Cold War that was heating up and a general Carteresque sense that America’s best days were behind us.
The real difference is that President Reagan’s policies unleashed some Washington shackles. In contrast, President Obama has added more shackles - more government debt and more regulations and threats of higher taxes. He says he wants the economy to create more jobs, and then insists on raising taxes on America’s biggest job creators - small businesses.
Washington should seek simply to do less harm, but Mr. Obama’s policies most often would do more harm. Despite it all, the economy recovers, employment rises. To paraphrase another Illinoisan president, Abraham Lincoln, you can hold down all of the American economy some of the time, and you can hold down some of the economy all of the time, but even President Obama cannot hold down all of the economy all of the time.
Sen. Lloyd Bentsen, when he was running for vice president with Michael Dukakis in 1988, famously turned to opponent Sen. Dan Quayle in a debate after Mr. Quayle had referenced John F. Kennedy, noting, “Jack Kennedy was a friend of mine. Senator, you are no Jack Kennedy.” Is it unfair to point out that Mr. Obama is no Ronald Reagan when it comes to economic policy and results? No, it’s precisely the point, and unfortunately, America’s workers and families are suffering the consequences.
J.D. Foster is the Norman B. Ture senior fellow in economics of fiscal policy at the Heritage Foundation
First appeared in The Washington Times