Obama’s Spending Surge Bought a Feeble Economy

The First quarter 2012 GDP report was disappointing, yet again.  The economy grew a tepid 2.2% during the first quarter.  This was down from an already weak 3% in the fourth quarter of 2011.  We’re told by the political-media establishment that President Obama’s tsunami of deficit spending was a brilliant stroke that saved the economy.  Yet we’re suffering through the weakest economic recovery since the 1930s.

The Chart compares recent GDP growth with the recovery of the 1980s. [continued below the chart]

Historically, deeper than average recessions, such as we suffered in 1981-82 and 2008-09 spawned stronger than average recoveries.  Before 2008 the worst economic downturn since the 1930s had been the recession of 1982.  By some measures it was worse than than 2008-09.  The unemployment rate was higher and mortgage interest rates spiked as high as 16%, compared to 4% – 5% this time.  Similar to the current downturn, house prices plummeted and foreclosures soared.  

But the 1980s recovery was much more robust.  The big difference between the two recoveries has been  government action.  Presidents Bush and Obama responded to the downturn by launching several interventionist initiatives that enhanced the power and control of government over the economy with new regulations and bailouts of insolvent financial firms and unionized car companies.  President Obama, a disciple of Keynesian economic theory launched the largest non-military spending increase ever to “stimulate” the economy.  His supporters now say the economy failed to grow and create the millions of jobs, Obama had promised not because stimulus is a bogus economic theory but because Obama didn’t spend enough!

To satisfy their political supporters Obama and the Democrats scheduled several massive tax increases to begin at the start of 2013.  Businesses appear to be scaling back in anticipation of these new burdens but Obama does not seem inclined to do anything to prevent them.  In 1982 President Reagan responded to recession with historic tax cuts and by scaling back government regulation and intervention.

In 1984 President Reagan ran for reelection on his economic record of restoration, recovery and astounding job growth.  President Obama’s reelection campaign so far has been an effort to divert attention away from his record with divisive attacks on American energy companies and high income taxpayers, most of whom are small business employers.  Reagan won a second term in the largest Electoral College landslide in American history.  Obama will be lucky to win by 1%, if at all.

4 Comments so far

  1. email format on April 28th, 2012

    Hey, what exactly are the democrats doing now? Obama spent all of 2009 (the year where unemployment REALLY surged) trying to convince Americans to buy a healthcare plan that no one really wanted. He did nothing or spoke very little about the economy. The stimulus package is about to dry up. What is he going to do next, spend more money on public jobs. What about cutting corporate taxes like Clinton did? Also, during Clinton, we had BOTH houses controlled by the GOP. Both parties had to work together and those were the best years in a long time, with significant economic growth. The democrats are doing exactly what the GOP did for eight years, NOTHING. Nothing except create programs that nobody wanted or needed . GOP = war in Iraq , Patriot ACt, No Child left Behind, etc. Democrats = national health care.

    And yes maybe the NCLB was the brainchild of the Kennedies but Bush signed it through

  2. James77 on April 28th, 2012

    I thought Reagan ran huge deficits, bigger than Obama. Is that true?

  3. SenateStaff on April 28th, 2012

    GDP was down this quarter because the government sector has been shrinking for over a year now. Dirty secret is there is no spending surge.

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