Progressive Pitchmen Hawk Imaginary Recovery

President Obama, the Democrats and their faithful, media cheer leaders have recently begun a virtual victory parade, claiming that the American economy has come back, and therefore their economic theories, implemented by the Administration, have been validated and vindicated. They hope to rehabilitate what has been the decaying reputation ObamaNomics.  But an objective review of the results finds ObamaNomics a spectacular failure.

Most Americans remember when the President  roared into office in 2009 with commanding majorities in both the Senate and the House.  We remember that he used that power to enact a massive spending increase called the “stimulus” – on top of a more modest spending increase already begun under President Bush – that he promised would “jumpstart job creation and economic growth.” 

The media excoriated Republicans as “wrong on the economy” for not joining the Democrat majority in voting for the stimulus.  The chart below compares the spending surge during the first two years of the 2008-09 recession with spending increases and decreases during each previous recession since World War II.  Spending-increases-10-recessions

The second chart shows what this record shattering surge in spending – entirely with borrowed money – bought, besides a stunning increase in government debt.GDP-to-2014-Q4

In 2009 the President and his supporters insisted that they “KNEW” that a spending surge would bring immediate results, that there were thousands of “shovel ready projects,” that America would quickly rebound from the recession into a new era of prosperity. 

They did not tell us to expect the weakest recovery ever recorded since the government began issuing quarterly GDP reports at the end of World War II.   The charts above show there is absolutely no correlation between an increase in government spending and subsequent economic growth.  If anything there is a negative correlation, evidence that increased spending retards growth.

Yet Democrats and media now claim the marginal improvement of the past few months is the big “comeback” we were promised.  This PR drive coincides with a modest upswing in Presidential opinion polls, probably due to increased oil production and the resulting drop in gasoline prices that he campaigned against and tried to prevent.

But Polls also show most Americans believe the economy is still unacceptably weak even though the recession ended sixty six months ago.  The Commerce Department just released it’s “advance estimate” of economic growth during the fourth quarter, ended December 31.  It confirms once again that Americans are justified in being skeptical.

Gross Domestic Product (GDP) grew at an annualized rate of 2.6% in the fourth quarter, about average for the past five years and not nearly enough to restore pre-recession employment and prosperity.

The American economy, while the most resilient in human history, struggles under the weight of decades of accumulated government intervention in the form of excessive regulation, taxation, and bureaucratic mandates, the most recent being Obamacare and the massive, Dodd-Frank financial regulation law.  These government intrusions into the private sector and the generally anti-business, anti-investment inclination of the Obama Administration discourage and deter entrepreneurs and investors, resulting in fewer of the business start-ups and expansions that create jobs and grow the economy.

America’s corporate tax code, the most confiscatory in the world, drives investment capital, the source of jobs and economic growth overseas.   Indeed, some American companies have had to “invert” or turn themselves into foreign corporations in order to facilitate investment in America!

Defenders of big government economic intervention say the current recovery is the weakest on record because the 2008-09 recession was deepest/worst on record.  But that isn’t consistent with the historical data.  The last time we suffered an exceptionally severe recession was 1981 when, like President Obama, President Reagan inherited an economy in crisis due primarily to huge losses and retrenchment in the financial sector.

Depending on which statistics one considers most important 1981 was either the worst or second worst recession on record.  Unlike Obama, Reagan faced historically high interest rates.  In 1982 Mortgage interest hit 15% compared to about 4.5% today. The prime rate, paid by the most credit worthy corporations was also in the teens, compared to about 3% today.  The unemployment rate spiked up to an even higher level in 1981 than in 2009.

Reagan’s approach was directly opposite Obama’s.  Instead of raising taxes and intensifying government interference in the private sector, Reagan deregulated and cut taxes. The chart above shows that at month 66 the Reagan economy had grown 30% vs 13% for the Obama economy.

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