How to evaluate the economic record of Barack Obama? To even begin answering, it’s necessary to go beyond just counting the number of jobs created during his presidency (10 million) or calculating the average growth rate (1.5%) or even looking at something more wonky like the labor force participation rate.
First, a president’s policy actions may take years to play out. Reaganomics didn’t move the needle on productivity growth during the 1980s. But maybe they helped set the stage for the 1990s boom. The US economy is a complicated piece of business. Its deeper structural components are altered neither easily nor quickly. Will universal healthcare — or whatever form it morphs into under the GOP — make us healthier, or promote entrepreneurship? Will Dodd Frank prevent future financial crises or constrain lending or both?
Second, even evaluating policies meant to have immediate impact is hard. Consider the ongoing debate about the 2009 stimulus plan. Sure, there are models purporting to show this or that many jobs created or GDP percentage points added. But there was also a lot else happening back then, including unorthodox monetary policy and a dramatic regulatory expansion.
Third, there are also long-term macroeconomic trends to consider. Demographic factors suppressing GDP growth today and nudging down labor force participation rates didn’t emerge in 2009. Likewise, weak US productivity growth — as official measured — also predates the Obama years. These observation has given rise to various flavors of theory that the US economy is suffering from chronic “secular stagnation.”
Fourth, there’s the rather large matter of the Great Recession and Financial Crisis. Obama inherited a nasty economic mess. But so did other presidents, such as Ronald Reagan. Was there something special about the Great Recession and Financial Crisis that probably precluded a more robust recovery? That would seem a pretty important determination to make.
Example: Research from my AEI colleague Robert Barro suggests severe downturns — even when accompanied by financial shock — are typically followed by stronger recoveries. Others disagree. Economists Carmen Reinhart and Kenneth Rogoff argue recessions accompanied by systemic shocks to the banking and housing systems tend to be followed by painfully sluggish recoveries. It was a “crisis greatly amplified by financial market breakdown,” Rogoff has written. And from that perspective, “the post-2008 U.S. recovery has not been unusually weak or prolonged,” argues Goldman Sachs.
Yet from either perspective, policy was likely suboptimal. For his part, Barro thinks the recovery could have been faster had there been more pro-productivity policies reducing “constraints” on market activity: deregulation, tax reform, infrastructure upgrades, freer trade. And as Rogoff sees it, “more vigorously pursued debt write-downs” and even more aggressive monetary policy would have been helpful. Even so, the role of the Bernanke Fed is often downplayed by those crediting Obamanomics from preventing an even worse downturn.
For now, at least, I prefer to learn what I can from the Obama years and focus on the challenges at hand to expand work and boost productivity to create sustainable growth benefitting the broad swath of Americans. Growth can be faster, mobility higher, opportunity greater.