The Obama Stimulus: Month 15 Progress Report

Scroll for updates…

As the President and Congress continue to roll out the radical Obama agenda Liberty Works will continue to  hold them accountable for failing results.

The political-media establishment put on a happy face and proclaimed a “better than expected” jobs report Friday.  The welcomed good news was that private sector employers created 234,000 new jobs in April, the largest one month increase since March, 2006.  Government added 56,000 mostly temporary, census jobs bringing the total to 290,000 for the month.  On the negative side, the unemployment rate went up from 9.7% to 9.9%.

President Obama stepped in front of the cameras to take credit for the positive part of the report.

Yes, we’ve got a ways to go but we’ve also come a very long way and we can see the difficult and at times unpopular steps we’ve taken over the past year are making a difference.

To put the jobs report in perspective, these charts compare the two worst recessions since the 1930s, and the results of  two, directly opposite responses from Washington.Obama-Vs-Reagan

Predictably, the President is now trying to plant in the minds of the uninformed the notion that his “difficult and unpopular steps,” have been successful.

The stimulus, $787 Billion in extra borrowing and spending was Obama’s first monster-bill.  It was enacted during the third week of his presidency in an atmosphere of panicked urgency, by Senators and Congressmen who did not read it because it’s final draft had not yet been printed the day they voted.

Obama and House and Senate Democrats promised immediate results in the form of job creation .  They said urgent action was vital because more jobs would be lost each day enactment was delayed.

  • They did not promise that the unemployment rate, then at 7.7% would be at 10.1% nine months later and 9.9% fifteen months later. In fact, they promised the unemployment rate would never exceed 8% if the stimulus were enacted.
  • They did not promise that if the government borrowed and spent an extra $787 Billion dollars, 3.9 million more jobs would be lost over the next eleven months.

But now the President hopes you will be duped into believing that because employment is finally beginning to grow his stimulus is, in his words, “making a difference.”

The charts above show the different results from two very different government responses to a deep recession and massive job losses.

Thirteen months ago President Obama inherited a deep recession.  His response has been to:

  • Expand the bailout program begun under the Bush administration;
  • Enshrine as explicit government policy the theory that some companies and financial institutions are deemed too-big-to-fail and will always be rescued from the consequences of their own negligence, especially if their workforce is unionized;
  • Enact the stimulus, now 15 months old and nearly $800 Billion in extra borrowing and spending, hyped with the promise that it would, in Obama’s words “immediately jumpstart job creation;”
  • Subsidize blue-sky energy schemes that are too expensive and unreliable to survive in the competitive marketplace;
  • Enact a 2,500 page government take-over of health care and health insurance that will increase costs and, ultimately, ration care.
  • Introduce legislation that would cause an artificial, government imposed energy shortage and add a new tax on all energy consumption by businesses and households.
  • Schedule massive tax income increases on small businesses and investors to begin in 2011.
  • threaten to institute a value added tax.

Like President Obama, President Reagan inherited a deep recession as he took office in 1981. By some measures it was worse than the current downturn.  Reagan’s economic program, based on his commitment to liberty, was the opposite of Obama’s:

  • Reduce regulation and government intervention in the economy;
  • Cut taxes to leave capital in the hands of those who had earned it and were best equipped to invest in job creating enterprises;
  • Release the creative and productive energies of The People from the yoke of imperial government.

The upper chart shows the job market has just begun a tentative recovery after 29 months of Bush/Obama policies.  There are still 2.7 million fewer Americans now employed than when the stimulus was enacted in 15 months ago.

The results in the lower chart speak for themselves.  Reagan’s policies turned the job market around after 17 months of losses. The Reagan economy grew continuously for 90 months, creating a total of 21 million new jobs, for a 24% increase in the number of Americans who were employed.

Updates in response to comments:

The charts are called “incredibly misleading” and “a profoundly dishonest comparison.”   But they both start at the moment of record high employment, and then track the decline and eventual increase in jobs.    They simply present data from public record.

Bush took two actions against recession and the economic crisis: He persuaded Congress to enact “stimulus” consisting of small tax rebates and he began the T.A.R.P. bailout program.  Obama persuaded Congress to enact another, four times larger “stimulus.”  He put more than twice as much into T.A.R.P. bailouts as Bush did, and expanded the scope of T.A.R.P.  The Bush and Obama policies were more similar than different. In hindsight, Bush’s program turns out to have been “Obama light.”  The implication that Obama embarked on some radically different strategy is simply wrong.

As Drew pointed out, the Reagan administration began in the midst of economic crisis.  Inflation was at it’s highest rate ever.  Interest rates were at an 80 year high.  The Federal Reserve, under Chairman Volker had embarked on monetary tightening.  The economy was being choked and job loss was inevitable. But even if one rejects the idea that Reagan inherited a recession, one still must acknowledge that Reagan’s recession-fighting strategies, tax cuts and deregulation, were directly opposite the Obama strategies.

Victor says job growth was somehow better in recent months than in 1983.  But, in the first four months of the recovery that began in January, 1983, 21% of the lost jobs were replaced.  In the first four months of the recovery that began in January of this year 12% of the lost jobs were replaced, and a quarter of those are temporary, mostly part time census jobs that will disappear later this year.

In 1983 all the lost jobs were replaced within ten months.  At the recent rate of growth it will take 34 months to replace the jobs lost in this recession.

Be Sociable, Share!

13 Comments so far

  1. Dkennedy on May 9th, 2010

    Incredibly misleading charts –

    Reagan came into office in Jan 81 – and what followed was a recession – nothing similar to our current one – your chart shows a loss of around 2.5 million jobs.. the recession was nowhere near as devastating as the current one.

    Obama came into office jan 09 – in the middle of the chart above -from his inauguration to the point of job creation was about a year – in a much deeper recession. (4x as many jobs lost – the charts are apples and oranges. although during the Reagan recession he actually reached a higher unemployment level than this one has)

    Reagan came in in 81 – months BEFORE the start of your chart above and as such completely OWNS his recession – as you noted – he lost jobs for 17 months before making any gains.. un a recession that was about a 1/4 as deep as this current one. I lived during the Reagan recession.. it doesn’t hold a candle to the Bush version.

  2. Victor on May 9th, 2010

    Jeff,

    If you look at the employment-to-population ratio for both recessions, you’ll see a much different picture:

    http://aconsideredargument.blogspot.com/2010/05/comparing-recessions.html

  3. Jonathan on May 10th, 2010

    How profoundly dishonest a comparison. Not only are you including a large portion of data that preceded Obama’s inauguration, much less his policy implementations, but you also falsely claim that “Reagan inherited a deep recession as he took office in 1981″, a claim directly contradicted by your own chart indicating the start of the jobs decline in August of 1981, 7 months AFTER Reagan’s inauguration. If you want to be taken seriously at all, at least give SOME credit to the intelligence of your readers.

  4. Drew on May 10th, 2010

    Frankly, I’m not sure what the comments are all about.

    Boomerjeff has consistently made two basic points about Obama’s claims for the fiscal stimulus package 1) it would work quickly, 2) it would prevent unemployment from increasing past a certain point. From where I sit, he has been correct on both counts.

    Dkennedy is just talking nonsense. Obama took office in the face of declining equity and housing market (wealth effect) dynamics, plus a liquidity crunch. Reagan took office in the face of a vicious fight to stamp out inflation started by Paul Volker, which he endorsed. This stuff about Reagan “owning the recession” is just crap.

    The two President’s (and Fed) responses have been quite different. Reagan adopted fiscal stimulus primarily in the form of tax cuts to offset monetary tightening. It worked. Obama has adopted, primarily, a fiscal program characterized by spending, and has had the Fed working in sympathy with practically free money. It is not yet clear that it has worked.

    I’m really not sure what point victor is trying to make with his chart overlay at his link. The “Reagan line” turned upwards sooner, surpasses its starting point, and increases for years thereafter.

    The Obama line turns upward further into the recession, and hasn’t even approached its starting point. And who knows where its going to go?

    So what’s the beef with Boomerjeff??

    The key point that people are missing right now is that spending is being propped up by the feds (unsustainable), people drawing down savings (unsustainable), free money (unsustainable) and a feeling that 401K plans are fairly well recovered. Only time will tell on the last one, but I’m not so sure. Lastly, we’ve got some tax hikes coming along – and at Obama’s own Christie Roemer 3 multiplier that sure won’t be stimulative.

    So employment rate, unemployment rate, EMratio’s etc. Pick what you like. I can’t see anything but an L recession, and Boomerjeff’s points to continue to be correct for quite some time.

  5. Drew on May 10th, 2010

    You should listen to your own words, Jonathon, and stop parsing others.

    First, Ronald Reagan inherited an economy in a mess. And one where the Fed was in full throttle breaking the back of inflation. To deny that, or claim that somehow he was responsible as a dishonest commenter did here is, well, dishonest. His policy responses and the result is in the records books.

    Second, no one has claimed Obama caused this recession. Rather, the point Boomerjeff has been making here for months is that the results do not match Obama’s rhetoric.

    No one here is claiming Obama wasn’t dealt a bad hand. But policy actions do have consequences, and it is not at all clear that what he is doing is helpful. In fact, for me, a person who deals with small business owners all the time, I can tell you that a majority have absolutely crawled up into a little ball because of fears about taxation, regulation and the generally anti-business environment. Only time will tell, but I don’t think we will get below Obama’s promised maximum unemployment rate for quite some time.

  6. Victor on May 10th, 2010

    Drew,

    The point of looking at employment-population ratios is to provide a better apples-to-apples comparison of the two recovery periods.

    After each recession ends, employment in both periods continues to fall for about five months, then turns upward again. Right now, the curves are tracking each other pretty closely. If we moved the curves so that both endpoints overlapped (instead of both starting points), you’d see that EMRATIO looks better on the blue curve than the red: the numbers are getting better, sooner.

    Boomerjeff says that the stats he’s citing are evidence of “failing results” – but that’s not quite the case. As measured by EMRATIO, the situation is improving faster now than back in the Reagan era.

  7. Drew on May 10th, 2010

    Victor –

    I understand your point, but reject it entirely.

    Boomerjeff’s fundamental point is the failure of policy to match the advertisement.

    Second, policy has effects over time, not just at inflection points. You have chosen to focus on a very limited period in time (and specifically the declared end of recession) and not the full period of recession, to measure policy effects. Reagan’s results took hold earlier; they lasted a long time.

    Further, this is a nacient recovery, supported by one of the biggest blasts of fiscal and monetary stimulus we have ever seen. Those blasts are both unsustainable and will have costs down the road. (and not that far down the road)

    In the end only time will tell. The American economy is an amazing, self healing thing. But it neads to be able to breath. I have yet to see a cogent argument about how the massive sell off of household wealth, declining lifecycle spending patterns of the baby boomers, impending tax increases, anti-small business sentiment etc translates into anything but a floundering GDP growth rate over the next 5 years. (And to be specific, I’m not a doom and gloomer; never have been, but I’m talking about GDP fits and starts of 1.5-2.5% growth, and unemployment above 8% as far as the eye can see.) That’s not what one would call robust.

    For all the poor souls out there un or underemployed I’d love to be wrong. I really would. But I bet I’m not.

    I’m with Boomerjeff. Some Reaganite policy, as opposed to government intervention could do us good.

  8. Victor on May 11th, 2010

    Drew,

    First, regarding policy and advertising, this quote from Joe Biden in July 2009:

    “The truth is, we and everyone else misread the economy,” Biden said. “The figures we worked off of in January were the consensus figures in most of the blue chip indexes out there. … And so the truth is, there was a misreading of just how bad an economy we inherited. Now, that doesn’t — I’m not laying — it’s now our responsibility.”

    source: http://www.politifact.com/truth-o-meter/statements/2009/jul/09/eric-cantor/Cantor-and-other-republicans-say-obama-promised-s/

    Read through the PolitiFact article: its point is that the “promise” of an 8% unemployment rate was a projection, not a promise, and one that came with a goodly amount of disclaimers. As you see in the example above, the Obama Administration admitted they underestimated the unemployment situation, but to call 8% a broken promise or “the failure of policy to match the advertisement” is to misread the facts.

    Second, regarding time frames:

    Boomerjeff is comparing the Reagan and Obama administrations, but there’s a problem with the timing. The 1981 recession started six months after President Reagan took office. By contrast, the latest recession began 13 months before President Obama took office. The disparity leaves us with two choices: either restate the argument to compare Reagan on one side and Bush and Obama on the other, or look at the dates in which the Obama Administration was in position to address the issue, and compare them to their counterpart dates during the 1981 recession. I chose that latter option because ARRA was signed into law in January 2009. Start the comparison any earlier than that, and we’re not looking at the Obama Administration any more.

    When you say that Reagan’s efforts took hold sooner, that’s not quite correct. Again, to be fair, we’d have to combine Bush 43 and Obama to really look at the numbers, but if ARRA was signed in January 2009, and the recession ended in June 2009, that’s six months from the day the ink dried on the stimulus bill to the time GDP recovered. Admittedly, NBER hasn’t declared the recession over, but if you measure by GDP growth, it ended last June.

    Third, regarding sustainability:

    The entire political spectrum seems to agree that we need to know where that $2 trillion in Federal Reserve emergency loans went – and when is the last time everyone has been in such close agreement? As for ARRA, it wasn’t meant to be “sustainable” – it was meant to be a two-year plan.

    Finally, a word on Reaganite policy:

    President Reagan had a different set of tax policy tools in his belt than we do now: he could take a 70% individual tax rate and lower it to 28%. We can’t do that today. Instead, we’re already seeing the lowest Federal income tax rates in some 60 years. (source: http://www.usatoday.com/money/perfi/taxes/2010-05-10-taxes_N.htm) In response to the increasing deficit, President Reagan raised corporate taxes by $100 billion in 1982: trying that today would be inviting a literal Tea Party revolution, because we’ve been “taught” that corporations don’t pay taxes: their customers do. President Reagan cut taxes where he could, and spent where he could. He added to the deficit, and he kept job growth in line with population growth – that darn EMRATIO again :)

    ARRA does, in large part, just what President Reagan did: one part tax cuts, two parts spending. The ends of both recessions are currently showing similar behaviors: continuing job losses followed by the upturns. To say that one is “Reaganite policy” and successful, while the other is “government intervention” and failed, just doesn’t square with the numbers.

  9. KeithCu on May 11th, 2010

    Reagan’s tax cuts were implemented over years. The dems slow-walked his policies so they could beat him up over the bad economy in the meanwhile.

    If Reagan had the Congressional majorities Obama had, we would have bounced out of the recession faster and more sharply.

  10. Drew on May 12th, 2010

    victor –

    C’mon. There are no promises in life, or economics. So to parse “projection” and “promise” is just silly. If these guys want the job, and if they want to prescribe and pass policy based on their own “projections,” they need to act like adults and take the responsibility if it doesn’t work out. And there is no misreading of the facts. The facts are that the unemployment rate is higher than projected. Real people make decisions and take actions – and live with the results – based upon judgments and projections every day. Biden did a nice slight of hand with his – “I’m not laying” – but the fact is this Administration has gone to absurd lengths to lay off any responsibility on its predecessor, while jumping on any glimmer of hope as their own doing. I understand its the nature of politics, but that doesn’t mean you should fall for it.

    By the way, just yesterday it was reported that the ObamaCare plan already was projected to be $115 billion over budget. What are you going to tell me “oopsey, but hey, it was just a “projection,” not a “promise?” Just like the stimulus, it was bald faced lies to get the policy desires through, then worry about the reality later.

    On timing:

    I happen to agree with the thrust of BoomerJeff’s points, in part because I am a first hand witness to the problems with Obama policies in my role as an investor in small to medium sized businesses. However, I have said to him that he may have opened himself up to criticism with statistics that may be too precisely compared over time in a dynamic and multi-variable economy. An economy is not a controlled lab experiment.

    “The entire political spectrum seems to agree that we need to know where that $2 trillion in Federal Reserve emergency loans went – and when is the last time everyone has been in such close agreement?”

    I’m not exactly what your point is, or its relevance here.

    “As for ARRA, it wasn’t meant to be “sustainable” – it was meant to be a two-year plan.”

    And that would be really scary. This is all we got for the expenditure??!! GDP growth at half of a “V” recession. Unemployment rigid near 10%?? What next? On our way to Greece? And what about the costs for a two year orgy?? A University of Chicago Roundtable discussion made the point perfectly: any economist would look not just to the benefits, percieved or real, of such a stimulus package, but also the costs. Costs like this every two years has me fearing the showers.

    On your last point I again must say, “c’mon.” First, Comparing marginal rates with deductions at the time vs effective rates ect becomes very, very difficult over time. We can come back to this if you like, but our total taxation levels are hardly low. Further, under current policy and deficit projections, they will go to levels never seen in the US.

    But the real point is that we absolutely have and had a tax tool kit. But it is deemed unavailable by some because they will not come to grips with spending desires or reductions. Obama’s own Christie R did the work. Tax multiple of 3. I’ve never seen anyone with a spending multiplier over 1.4 (Valerie something (Jarred??) at a California school.) If you start with a premise that both tax reductions and spending increases create deficits then which fiscal tool do you choose at the cost of deficits? The robust one, or the non-robust one? I’m shocked. Shocked!! That Democrats chose door #2. But I’m sure we’ll get those huge deficits and tax increases – 3x multiplier and all – later.

    And lastly, lastly: my problem with your ENRatio point was that you just took one aspect – the current slope – while not discussing timing or recovery to the levels existant at the time of the start of all this. Further, you obviously assume things will keep going well. Do you have a view on looming tax increases, interest rate hikes etc and their impact on the economy??

    Regards

    PS – Please keep in touch with Liberty Works. We have some good posters, and some others, like Dead Flowers whose main MO is to drive by and give Obama a good firm one and move on. We need more thoughtful people like you here.

  11. Occupational Therapy on May 14th, 2010

    Keep up the good work, I like your writing.

  12. forex robot on May 14th, 2010

    nice post. thanks.

  13. forex robot on May 19th, 2010

    found your site on del.icio.us today and really liked it.. i bookmarked it and will be back to check it out some more later