Obama Pledges to Improve Economy During His First Term
When President Obama took office in 2009, he said that he “will be held accountable” for his actions and their consequences. “If I don’t have this done in three years, then there’s going to be a one-term proposition,” he said.
Below Is a Snapshot of the U.S. Economy Under President Obama, As of September 2012
23,136,000 Americans are unemployed, underemployed, or have stopped looking for work.
8,031,000 Americans are underemployed, working part-time but seeking full-time work.
5,033,000 workers have been unemployed for 27 weeks or longer.
1,043,000 construction jobs have been lost since President Obama took office.
582,000 manufacturing jobs have been lost since President Obama took office.
The unemployment rate when President Obama took office was 7.8%. Under Obama, the country experienced 43 consecutive months of unemployment above 8% (though the administration predicted that the January 2009 passage of the stimulus bill would keep unemployment from ever reaching 8%, and would reduce it to 5.4% by 2012).
The nation's labor-force participation rate is 63.5%, the lowest level since 1981.
Had the labor-force participation rate remained steady since President Obama took office, the official unemployment rate would now be 11.2%.
The government's official unemployment rate does not include those unemployed individuals who have entirely given up looking for work (and thus have dropped out of the job market); nor does it include the underemployed—i.e., those with part-time jobs who rare seeking full-time employment. The most significant unemployment-related statistic, known as the U-6 figure, does factor these two important categories of individuals into the equation. When these workers are included, the U-6 un/underemployment rate stood at 14.7% as of September 2012.
Between January 2009 and September 2012, median gasoline prices nationwide more than doubled, from $1.84 per gallon to $3.85 per gallon. (Note: In 2008, Obama's energy secretary, Steven Chu, advocated steep rises in gasoline prices as a means of coaxing Americans into being more fuel-efficient and purchasing green energy cars: “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe”—i.e., approximately $10 per gallon. In March 2011, Chu reiterated his support for high gasoline prices.)
Throughout the 2012 presidential campaign, President Obama has claimed credit for “creating 4.5 million new jobs.” But “jobs created” is only half of the equation; the other half is “jobs lost.” When both figures are considered, the Obama presidency has overseen a net jobs gain of just 325,000. As Washington Post Fact Checker Glenn Kessler puts it, “Obama is on track to have the worst jobs record of any president since World War II.”
Weakest Economic Recovery Since the 1880s
In October 2012, economist John B. Taylor reported that of all the American economic recoveries that have followed previous financial crises, the current recovery is the weakest since the 1880s. The previous 7 recoveries during that 130-year time span were, on average, 4 times stronger than the Obama recovery.
In August 2013, the Weekly Standardreported: "New estimates derived from the Census Bureau's Current Population Survey by Sentier Research indicate that the real (inflation-adjusted) median annual household income in America has fallen by 4.4 percent during the 'recovery,' after having fallen by 1.8 during the recession. During the recession, the median American household income fell by $1,002 (from $55,480 to $54,478). During the recovery—that is, from the officially defined end of the recession (in June 2009) to the most recent month for which figures are available (June 2013)—the median American household income has fallen by $2,380 (from $54,478 to $52,098). So the typical American household is making almost $2,400 less per year (in constant 2013 dollars) than it was four years ago, when the Obama 'recovery' began."
Between Obama's Inauguration and 2012, the Following Economic Developments Took Place
The median number of weeks of unemployment for a jobless worker in January 2009 was 10.7. That figure reached a peak of 25.0 in June 2010. As of August 2012, it stood at 18.0.
The number of people participating in the Supplemental Nutrition Assistance Program (Food Stamps) in January 2009 was 31,983,716. By June 2012 it was 46,670,373.
Black Unemployment Under Obama
As of July 2012, the unemployment rate for black Americans stood at 14.4%, compared to 7.4% for whites and 11% for Hispanics. For black youth, ages 16-19, the unemployment rate was a staggering 39.3%—nearly double the 20.9% figure for whites in the same age group.
Obama Called President Bush's Debt “Irresponsible” and “Unpatriotic”
During the 2008 presidential campaign, Obama derided George W. Bush for having added, “by his lonesome,” some $4 trillion to the national debt during his eight years as president. “That's irresponsible,” he said. “It's unpatriotic”
Obama Pledged to Cut Annual Deficit in Half, but Instead Presided over Record Debt
During the 2008 campaign, Obama said, “We cannot and will not sustain deficits like these without end. Contrary to the prevailing wisdom in Washington these past few years, we cannot simply spend as we please and defer the consequences to the next budget, the next administration, or the next generation. We are paying the price for these deficits right now. In 2008 alone, we paid $250 billion in interest on our debt—one in every ten taxpayer dollars.... That's why today I'm pledging to cut the deficits we inherited by half, by the end of my first term in office.... I refuse to leave our children with a debt that they cannot repay. And that means taking responsibility right now, in this administration, for getting our spending under control.”
The annual deficit in 2008, the final year of the Bush administration, was $482 billion.
When Obama took office in January 2009, the national debt stood at $10.6 trillion. By the time of the Democratic National Convention in September 2012, it was $16 trillion. In short, under Obama's watch, the debt had grown by $5.4 trillion in three years and eight months.
According to the U.S. Treasury, America's government debt climbed by more than $1.2 trillion in fiscal year 2012, meaning that the federal government had borrowed an additional $10,855 for each household in the United States during the year. This brought the nation's total debt to approximately $136,690 per household.
For every $7 in federal revenues in 2012, the government spent $10.95.
In July 2012, the White House delivered its 10-year budget forecast to Congress. This forecast projected $42.6 trillion in spending over the ensuing decade, and a federal debt that would grow to $25.4 trillion by 2022 (nearly $1 trillion in additional debt, each and every year)
Treasury Secretary Geithner Acknowledges that Obama's Debt-Laden Budget Is “Unsustainable”
On February 17, 2011, Treasury Secretary Timothy Geithner confirmed to the Senate Budget Committee that President Obama's budget proposal would create a “very large interest burden and unsustainable obligations over time.” In the Budget Committee hearing, ranking Republican Senator Jeff Sessions asked Geithner about the effect of Obama’s newly proposed budget on the economy, specifically as it related to the increasing percentage of debt as related to gross domestic product. Geithner’s response was a stark contradiction of Obama's pledge that “we will not be adding more to the national debt.” Said Geithner: “You’re absolutely right that with the President’s plan, even if Congress were to enact it, and even if Congress were to hold to it and reduce those deficits to 3 percent of GDP over the next five years, we would still be left with a very large interest burden and unsustainable obligations over time.”
The Stimulus Bill's Massive Wastefulness
Just a few days after Barack Obama was elected President, the left-wing billionaire financier George Soros stated: “I think we need a large stimulus package which will provide funds for state and local government to maintain their budgets—because they are not allowed by the constitution to run a deficit. For such a program to be successful, the federal government would need to provide hundreds of billions of dollars. In addition, another infrastructure program is necessary. In total, the cost would be in the 300 to 600 billion-dollar range....” Soon thereafter, as one of the first priorities of his presidency, Obama pressured Congress to pass a monumental $787 billion economic-stimulus bill (the American Recovery and Reinvestment Act, or AARA) whose text was 1,071 pages long—and which few, if any, legislators in the Democrat-dominated Congress read before voting on it.
Obama stressed the urgency of passing this bill at the earliest possible moment, so as to forestall any further harm to the U.S. economy. But after the bill was passed by Congress on February 13, it sat on the President’s desk for three days before it was signed, as the Obamas were away on a family holiday.
Hoover Institution Fellow Thomas Sowell made the following observations about the hasty manner in which the stimulus bill was passed: “The urgency with which [the Obama administration] has rushed through a monumental spending bill, whose actual spending will not be completed even after 2010, ought to set off alarm bells among those who are not in thrall to the euphoria of Obama's presidency. The urgency was real, even if the reason given was phony. President Obama’s chief of staff, Rahm Emanuel, let slip a valuable clue when he said that a crisis should not go to waste, that a crisis is an opportunity to do things that you could not do otherwise. Think about the utter cynicism of that. During a crisis, a panicked public will let you get away with things you couldn't get away with otherwise. A corollary of that is that you had better act quickly while the crisis is at hand, without Congressional hearings or public debates about what you are doing. Above all, you must act before the economy begins to recover on its own.... That would undermine, if not destroy, a golden opportunity to restructure the American economy in ways that would allow politicians to micro-manage other sectors of the economy the way they have micro-managed the housing market into disaster.”
One of the stimulus bill’s most significant provisions was its repeal of the essentials of the Personal Responsibility and Work Opportunity Reconciliation Act, the welfare-reform legislation passed by the Republican Congress and signed by President Clinton in 1996, which reduced the welfare rolls by two-thirds. Robert Rector of the Heritage Foundation, who helped write the ’96 law, said that under the Obama plan “the federal government will pay 80 percent of cost for each new family that a state enrolls in welfare.” By promising bonuses to states that put more people on welfare, the Obama plan reversed the incentives created by the 1996 legislation.
According to a Heritage Foundation report, 32% of the new stimulus bill—or an average of $6,700 in “new means-tested welfare spending” for every poor person in the U.S.—was earmarked for social-welfare programs (e.g., Temporary Assistance to Needy Families; Medicaid; food stamps; the Women, Infants, and Children food program; public housing; Section 8 housing; the Community Development Block Grant; the Social Services Block Grant; Head Start; and the Earned Income Tax Credit).
Added the Heritage Foundation report: “But this welfare spending is only the tip of the iceberg. The bill sets in motion another $523 billion in new welfare spending that is hidden by budgetary gimmicks.... [T]he total 10-year extra welfare cost is likely to be $787 billion.... In the first year after enactment of the stimulus bill, federal welfare spending will explode upward by more than 20 percent, rising from $491 billion in FY 2008 to $601 billion in FY 2009. This one-year explosion in welfare spending is, by far, the largest in U.S. history…. Once the hidden welfare spending in the bill is counted, the total 10-year fiscal burden (added to the national debt) will [be] $1.34 trillion. This amounts to $17,400 for each household paying income tax in the U.S.”
In May 2011, university economists Timothy Conley and Bill Dupor published an exhaustive study concluding that that AARA (i.e. the stimulus bill) had “created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs.” Added the study: “State and local government jobs were saved because ARRA funds were largely used to offset state revenue shortfalls and Medicaid increases rather than boost private sector employment. The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services.”
In December 2009, Obama outlined yet another set of multibillion-dollar stimulus and jobs proposals while explaining that America must continue to “spend our way out of this recession.”
Contrast to President Reagan
In 1981 President Ronald Reagan also inherited a severe recession in which unemployment rose to 10.8% in November 1982. But as economist Peter Morici notes, Reagan “put in place a very different set of stimulus measures—emphasizing private-sector leadership.” In the fourth year of Reagan's first term (1984), the quarterly economic growth rates were 8.5%, 7.9%, 6.9%, and 5.8%—figures that dwarf the corresponding numbers under Obama.
Printing Money out of Thin Air: “Quantitative Easing”
In September 2012, the Federal Reserve announced that it would purchase each month some $40 billion of mortgage-backed securities bonds (in addition to $45 billion in Treasury bonds) under a new “stimulus program” known as QE3 (Quantitative Easing 3), and would continue to do so until the U.S. unemployment rate was reduced to 7%. Forecasts from 52 economists for the ultimate size of the program ranged from $250 billion to $2 trillion.
In two prior rounds of Quantitative Easing, the Federal Reserve purchased $2.3 trillion in mortgage and government debt in an effort to push down borrowing costs.
Quantitative Easing invariably erodes the value of the dollar and eventually results in steep inflation.
Credit Rating Agencies Downgrade U.S. Credit Rating
Dagong Global Downgrades U.S. Credit Rating: Based in Beijing, Dagong Global Credit Rating is a relative newcomer to the credit rating industry. In July 2010 it published its first report on global sovereign debt ratings, and assigned the U.S. a less-than-stellar rating of AA. In November 2010, after the Federal Reserve had launched its second round of quantitative easing—dubbed “QE2”—in which the Fed purchased $600 billion worth of treasury securities, Dagong, warning that QE2 would erode the value of the dollar, downgraded the U.S. credit rating again, to A+.
Weiss Ratings Downgrades U.S. Credit Rating: Weiss Ratings is a small credit-rating agency based in Jupiter, Florida. In April 2011 Weiss—critical of the Obama administration's inability to reduce the country's annual budget deficit—released its first-ever ratings of the sovereign debt of 47 countries, giving the U.S. a debt rating of C, or “fair.” In mid-July 2011, Weiss lowered that to “C-minus,” or the Standard & Poor's equivalent of one notch above “junk” status.
Egan Jones Downgrades U.S. Credit Rating: In July 2011, the independent credit-research firm Egan Jones (one of 10 firms the Securities and Exchange Commission recognizes as a rating organization) downgraded the U.S. credit rating from AAA to AA+, citing concerns over “the relatively high level of debt and the difficulty in significantly cutting spending.”
Standard & Poor's Downgrades U.S. Credit Rating: In August 2011, Standard & Poor's, one of the big three ratings firms, downgraded the U.S. credit rating from AAA to AA+, citing great concern over the country's skyrocketing national debt. “It’s always possible the rating will come back, but we don’t think it’s coming back anytime soon,” said David Beers, head of S&P’s government debt rating unit.
Egan Jones Downgrades U.S. Credit Rating Again: On April 7, 2012, Egan Jones downgraded the U.S. credit rating for a second time, from AA+ to AA, again citing concerns over the sustainability of America's public debt. The firm had previously reduced America from AAA to AA+ in July 2011, just before Standard & Poor's did the same. “Without some structural changes soon, restoring credit quality will become increasingly difficult,” Egan Jones warned. The firm added that there was a 1.2% probability of U.S. default in the next 12 months. It also cited the fact that America's total debt, which was equal to its total GDP, was rising and would likely reach 112% of the GDP by 2014.
Egan Jones Downgrades U.S. Credit Rating a Third Time: On September 14, 2012, Egan Jones downgraded its rating on U.S. government debt for a second time in 5 months, from AA to AA-, stating that the Federal Reserve's plans to try to stimulate the economy by purchasing mortgage bonds would weaken the value of the dollar and cause prices for oil and other commodities to rise.
Moody's Threatens to Downgrade U.S. Credit Rating: On September 11, 2012, Moody's Investors Service said that it would probably lower its AAA rating on U.S. government debt unless congressional leaders could strike a budget deal in the coming months to bring down the country's annual deficit. “If those negotiations lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed,” Moody's said in a press release. “If those negotiations fail to produce such policies, however, Moody's would expect to lower the rating, probably to Aa1.”