In a tweet ostensibly designed to elevate his own legacy, former President Barack Obama on Monday assumed credit for the current economic boom:
Eleven years ago today, near the bottom of the worst recession in generations, I signed the Recovery Act, paving the way for more than a decade of economic growth and the longest streak of job creation in American history.
This claim is difficult to square with the evidence. In fact, it falls short of the predictions of his own administration. Let us recall that the architects of the Recovery Act, Obama administration economists Jared Bernstein and Christina Romer, assured us the $800 billion spending bill would prevent unemployment from surpassing 8 percent.
In fact, they warned that without it, unemployment would exceed 9 percent. Yet despite their assurances, unemployment peaked above 10 percent, and the economy recovered at its slowest pace since World WarII.
Of course, Obama defenders will insist his administration simply underestimated the severity of the crisis, and that without the stimulus bill, things would have been worse, to which there are two responses. First, such a claim contradicts what happened in major economic disruptions throughout history: The worse the recession, the stronger the bounce-back.
Second, the suggestion that “things would have been worse” is irrefutable, as it stands insulated from empirical evidence. No matter how high unemployment may have climbed, one could claim that “things would have been worse,” and there would be no way to disprove it.
That is why understanding the dubious premise behind the Recovery Act is as decisive as observing the evidence against it. Nor is understanding its rationale merely an interesting bit of history. Rather, it continues to inform our public policy.
Why Government Spending Doesn’t Fix the Economy
The basic idea behind it is that fiscal tinkering, i.e. government spending, can help smooth the business cycle. According to the theory, people spend money during good times, keeping the economy strong, and save money during bad times, perpetuating a recession. Therefore, if the government spends when people save and cuts when people spend, it can attenuate — if not eliminate — the boom and bust cycle.
It’s an attractive theory, but it suffers from a fatal flaw. Government spending must be financed, which involves a dollar-for-dollar tradeoff with private spending, meaning Uncle Sam’s spending habits are powerless to increase the overall output of the economy in the short term.
Consider: Any dollar the government spends into the economy must first be removed from the economy. That is, the government must take a dollar from Johnny Citizen — either through borrowing or taxation — before spending it. Government therefore displaces private spending dollar-for-dollar, meaning the net effect of, say, a budget deficit or a “fiscal stimulus” bill like the Recovery Act is at best zero (It is in fact worse than zero, but more on that below).
That is because had the government not borrowed or taxed his dollar, Johnny would have spent it on a good or service. Of course, Johnny might have chosen to save his dollar by putting it in the bank. But even in that case, the bank would have lent it to someone else to spend, meaning all dollars — even savings in the bank — contribute to the economy.
Thus government borrowing or taxation must necessarily trade off with the private sector. As economist Brian Riedl put it, believing that government spending causes growth is like believing that taking a bucket of water from one end of the pool and dumping it into the other end causes the overall water level in the pool to rise.
This helps explain why, especially in the short term, the effect of government spending is often worse than zero. By taxing or borrowing money out of the economy, government sucks resources away from where they would be used most productively in the private sector, which impedes economic growth. This explains in large measure our tepid recovery following the 2008 crash.
Nor does this fundamental analysis of government spending change much in the long term. Although it is possible for government initiatives to yield a positive long-term impact on economic growth, that does not mean those efforts are the best use of resources.
For example, if the government spends money to build a bridge that shortens people’s commute times to work, it could increase the amount of time people spend working rather than commuting, which would improve productivity and therefore fuel economic growth. But that investment takes time; building a bridge does not happen immediately. Therefore, any positive impact would not be felt until after the bridge is completed, months or even years down the line.
Furthermore, the cost-benefit analysis of government projects cannot ignore what those funds would have been used for had they remained in the private economy. For instance, a private firm may have used those funds to construct the bridge, and perhaps at a lower cost, allowing the firm to build two bridges as opposed to the one government-constructed bridge.
Consequently, even when government projects improve the economy long-term, that is by no means proof that resources went toward their most productive use. The relevant question is how private actors would have used the funds had government neither borrowed nor taxed them out of the economy.
Politicians Fail to Question Government Spending
Unfortunately, this basic sketch of the economy is routinely ignored. Instead, the fallacy that government spending does, and should, steer economic growth goes unquestioned by major writers, politicians, and policymakers.
Two examples from opposing ends of the political spectrum will illustrate the point. In explaining the strength of the current economy, New York Times columnist Paul Krugman recently wrote: “[I]t is indeed a strong economy. But if we ask what lies behind that strength, the main answer is an explosion in the federal budget deficit, which exceeded $1 trillion last year.”
Get off your high horse there Obama or’ll you’ll fall off and land on your pointed head
Obama’s “stimulus” failed at everything it was promised to accomplish. In fact, Obama later quipped that the “shovel ready jobs” were not a shovel ready as he thought (he’s 865 billion laughs). But, according to liberals, it saved the world.
No doubt that a series of public works projects would have employed people who would otherwise have been out of work, currently a lot of those jobs would go to illegal immigrants. Also, it simply never materialized; in fact, it was never even a serious consideration.
Let us recall that Obama put “sheriff” Joe in charge of making sure there was no waste. In light of what we now know, perhaps it should be investigated how much of that $865 billion went into the Biden coffers.
Most of the money went to propping up union allies and rewarding campaign contributors. It was merely a total waste of almost a trillion dollars. Only Democrats can waste taxpayer money on that scale.
Obama did two big things to try to make it appear that he was improving our economy:
1. Obama had all the employees hired for the 2010 Census counted EVERY time they were fired then re-hired which happened to each one several times.
2. Obama redefined “full-time employment as a mere 30 or more hours per week so ObamaCare could be avoided by employers.
Because of this policy, many individuals were counted twice or more as they held more than one so-called full-time job.
President Trump not only dropped the later policy and returned full-time to 38.5 hours/week but he instituted many pro business/employment policies that grew employment.
Just an observance Curt. The more unhinged and divorced from realty the Federalist becomes, the more they seem to be your go to reference.
@Ronald J. Ward: Regardless…. Obama had a totally failed recovery from a deep recession brought about by liberal social engineering policies and Trump totally revitalized it.
@Deplorable Me: What Ronnie cant do is actually read the article then debunk it he can only use the tattered worn out attack the source card. Yawwwwnnnn
If the liberals ran things so well why are people moving out of those areas in droves?
@kitt: Of course, what is amusing is that he denounces YOUR source, then uses “FactCheck.org” as a source. Children… what can you do?
@Deplorable Me: I have to confess I streamed the commie fest last night, I should have watched the rally 19% were democrats 26% never voted before. I hope the democrats go to a democrat rally and note differences, not just numbers of attendees but tone and feeling.
I didnt see anyone at the commie meeting that will pull down the votes to topple Trump.
@kitt: I watched parts; a person can only take so much. Watching them dance around with their hands raised like they want to go to the bathroom.
What stood out to me was Bernie attacking Bloomberg because he owns more than 135 million people own. And that’s not fair, you know. What Bernie and his other jealous leaches don’t realize is that Bloomberg didn’t TAKE that from anyone else; that was wealth that was generated. He and other wealthy people CREATE wealth and jobs, but Bernie thinks he has just as much right to the results as those who earned it.
What an explicit display of all that is wrong with this country.
@Deplorable Me: Welcome back, welcome back, well come baaaaack they were sweathogs https://www.youtube.com/watch?v=ju-lptJweTc
@kitt:
The Federalist is simply a propaganda arm of today’s Republican/Russian Party.
Of course Obama and Democrats deserve credit for fixing the GWB & Republican/Russian Party’s mess because they did just that.
And I can’t think of a single legislation or act of government from the Trump & Republican/Russian Party that has actually benefited the economy while there are many that has hurt and is pointing to disaster.
And in the mean time, let’s look at the Trump & Republican/Russian Party’s results:
1. U.S. Steel near Detroit announces 1500 layoffs. 1/30/2020
2. Wood-Mode announces closing, 250 layoffs 10/22/1019
3. GM announces 800+ layoffs 12/042019
4. AstraZeneca announces plant closing, layoffs 1/10/2019
5. Kennametal to start layoffs at Carbide plant 8/04/2019
6. Genesis Coal Mine of KY notifies 250 of closing 12/26/2019
7. Williamsburg of KY announces 425 layoffs 12/19/2019
8. Nally & Hamilton mining in eastern KY to layoff 170 11/06/2019
9. AK Steel in Ashland KY to close and layoff 260 9/04/2019
10. Alliance Coal of western KY closes with 600 layoffs 11/18/2019
11. CSX eliminates 113 in Russell KY 4/05/2019
12. Pennyrile Energy of McLean Co, closes with 169 layoffs 9/13/2019
13. Blackhawk Mining of Lexington KY 342 layoffs 10/08/2019
14. Tucking Co Jack Cooper of Kansas City lays off 400 4/21/2019
15. Siemens cuts 200 jobs at Houston plant 6/28/2019
16. Siemens closes Burlington plant 4/14/2018
17. John Deere lays off 163 due to trade war 10/01/2019
18. Caterpillar lays off 120 due to trade war 11/04/2019
19. Case-New Holland announces layoffs 11/23/2019
20. Kimberly-Clark cuts 5000 jobs 1/23/2018
21. Coca-Cola to cut 1200 jobs 3/25/2017
22. Coca-Cola to cut 350 jobs 2/28/2018
23. Durham School Services of IN closes, 524 layoffs 2/07/20
24. Ryder Logistics of IN closes 436 layoffs 5/17/2019
25. KGP of Warsaw IN lays off 300 2/15/2019
26. DHL Supply Chain of Greenfield IN lays off 511 5/04/18
27. BMO Harris of WI closes, 651 jobs 5/24/2018
28. Bon Ton Stores closes, 2255 laid off 4/06/2018
29. Gordy’s Chippewa Foods closes, 1008 laid off 8/29/2017
30. Appleton Coated LLC closes, 620 laid off 10/16/2017
31. Harley-Davidson plant closes, 800 laid off 5/23/2018
32. Georgia Pacific lays off 603 1/03/2019
33. Nix Home Care lays off 585 10/21/19
34. ABM Aviation closes 600 layoffs 10/17/2018
35. Davita Rx lays off 869 9/23/2018
36. XTO Energy of TX lays off 1200 1/07/2018
37. Bay Area Medical of TX lays off 956 5/04/2018
38. Hart-Hanks-Texarkana cuts 460 jobs on 4/19/2018
Should we talk about retail apocalypse? You know, Sears, K-Mart, Macys, 63 Sam’s stores closing, Toy’s R Us?
Trump’s great economy? The national debt topped $23 trillion for the first time, income inequality worse than ever, millions of Americans lost health insurance, manufacturing jobs have retracted, farm bankruptcies highest ever with Wisconsin dairy farms all but wiped out, the working man now paying more taxes than corporations, and economists predicting a recession within the next year.
It’s GWB & Republican’Russian Party era all over again.
@Ronald J. Ward: Layoffs are sometimes seasonal or temporary.
Toys r us big donors to planned parenthood killing off future customers is no way to run a business.
The Kmart here went out 15 years ago, all thats left is a weedy brokenup parking lot we have 2 newer Walmarts. On line shopping has put nails in many retail outlets coffins, Sears just another casualty, Many smaller hardware stores went under because of Menards and Home Depo too. Had nothing to do with the economy, its competition.
Apple. Total jobs reshored: 22,200. States benefiting: Texas, TBD. Industry: Computers, office …
General Motors. Total jobs reshored: 12,988. States benefiting: Michigan, New York, Tennessee, …
Boeing. Total jobs reshored: 7,725. States benefiting: Missouri, Montana, South Carolina. Industry: …
Ford. Total jobs reshored: 4,200. States benefiting: Indiana, Illinois, Ohio, Michigan, New York. …
Expect more to come from China who wants to expand where your workers drop dead from viruses, every year a new one.
Buy American!
Push your state and local governments to give big big tax breaks to businesses where the paychecks feed your neighbors.
Oh Appleton coated…papermill is very close to here https://www.postcrescent.com/story/news/2018/03/27/appleton-coated-comes-back-life
From November 2016:
“U.S.-based employers announced plans to cut 26,936 jobs in November, the lowest pace of the year, according to the monthly report released on Thursday by global outplacement consultancy Challenger, Gray and Christmas.
So far in 2016, American companies have announced 493,288 job cuts, a 5.5 percent decline from those recorded by this point in 2015.”
https://www.cnbc.com/2016/12/01/layoffs-fall-to-lowest-level-of-2016–and-only-just-above-16-year-bottom-challenger-report-shows.html
So in two years (2015 and 2016) over a million layoffs occurred.
Can anyone remember who was president in 2015 and 2016? Or Ward/AJ complaining about almost 1/2 million jobs lost in the first 11 months of 2016? Oh, and his #3 on the list? He fails to tell you that those 800 employees were offered jobs in other GM facilities. Oooops. Or that many of those manufacturing jobs were cut due to “automation”, i.e. robots.
All Ward/AJ knows to say is “but, but……………………….Trump.”
@kitt:
Sears has been on life support for years and Sears owns K-Mart. Toys-R-Us was a specialized market, now being put out of business by other chain stores and the internet via Amazon. Sam’s is being challenged by Costco. Nothing stays the same. Walmart has gone to internet shopping where they offer store pick-up or free two day shipping to your home and in-store shopping generally means self check out. (causing job loss for cashiers)
But remember, Ward/AJ seems to have failed Econ 101.
@retire05: Governor Evers is still trying to screw up the Foxconn deal here, I guess an empty field brings in more tax money than a factory that hires people to pay payroll taxes, then buy houses they will pay tax on, and the things they can buy to pay tax on…go figure.
Evers and AOC must have taken the same economics courses.
@kitt:
Evers is an idiot. Thank goodness I don’t live there.
@retire05:
The overall job performance of Obama is much better than Trump’s on every level.
Trump did not have to contend with an economy in ruin whereas Obama and Democrats did-which they brought back to life despite a defiant Republican/Russian Party hell bent on sabotaging it at any cost.
You can stomp your feet, throw sand in the air, or indoctrinate yourself in the confined parameters of Floppingaces, The Federalist, Fox News, ANON, Moonbattery.com, or any other rabidly gaslighting news sources but that’s just the way it happened.
@Ronald J. Ward:
Do you even know what “performance” means? Or are you taking your talking points from the mental midget, AOC?
You can shout it to the roof tops that Obama was a lightbringer when it came to the economy, but you are still wrong. Obama failed. End of story. He gave us the slowest, and lowest, economic recovery in our history (well, except for FDR). You give a list of layoffs, and added up by year doesn’t even begin to reach the level of layoffs in 2015 and 2016, after Obama had been in office at least six years. If Obama was so damn great, why was his forecast for the unemployment numbers a total bust? He spent over $800 billion on a farce.
The economy improved under Obama not because of Obama but in spite of Obama.
Foot stomping is all you know how to do, that and Russia, Russia, Russia!!! BTW, gaslighting in politics was created by YOUR side of the aisle, not mine, by Clinton under his administration. Remind me again, what Party did Clinton belong to?
As to all the sources you reject, you seem to have no problem rejecting those sources that affirm your own personal opinion. Your mind is a steel trap, closed to the op-eds written by anyone you don’t agree with. You fail to acknowledge that the legacy media is LEFTWING. End of story.
No one cares what you think as you are not an honest player. You’re simple just another purveyor of left wing propaganda, i.e. Comrade Greggie.
@retire05:
The impossibility of rationalizing with a Trump cultist has gone to new levels.
The economy was in shambles on Jan 20 2009, the day Obama took office.
The economy had seen a 7 year steady job growth on Jan 20 1917, the day Trump took office.
The economy is now slipping with manufacturing jobs retracting and the deficit spiraling out of control at the fastest rate in history with more Americans slipping into poverty and losing their health insurance than ever before.
The only source that indicates or claims a robust economy is coming from Trump and then parroted by his cultists. To be clear, Trump is an obscene liar and his cultist are no more than blind sheep dancing to his piper.
@Ronald J. Ward: The hollowing out of America’s industrial base, and the loss of the highly paid jobs for the high-school educated that went along with them, goes some way to reflect the tectonic shifts in U.S. politics that set the stage for the election of President Donald Trump and his brand of populism.
Bad trade deals, theft of intellectual property, high taxes and regulations.
The Great Recession officially ended in June 2009, six months into former President Obama’s first term. The economy continued to shed jobs until the following March. Manufacturing was particularly hard hit, with almost 2.3 million manufacturing jobs—some 1 in 6—lost between January 2008 and March 2010.
Comparing the last 21 months of the Obama administration with the first 21 months of Trump’s, shows that under Trump’s watch, more than 10 times the number of manufacturing jobs were added.
We shall see if the trade deals with China, if signed the tarriffs will lift, can finally return America to its rightful place.
If its so horrible here under Trump when will you move away? If you are are in the States at all.
The last admin sold us out, both the President and vice now multi millionaires living in luxury.
Trump came from luxury his kids from luxury and in 5 years know how to make a buck without selling out America to China. With record low unemployment those layed off can go find another job.
@Ronald J. Ward:
I guess you think by insulting those you disagree with, you’re making brownie points. You’re not. You’re only showing what a radical left winger you are. No point in reminding us of that fact. We are already aware of your radical leanings.
And the reason for that would be? Or do you not know what brought on the train wreck that was our economy at the time?
Let’s take a look at reality, shall we?
When Obama took office (January 2009) the employment totals were 142,152,000. By the time Obama had held office for three years (January 2012) the employment totals were 141,584,000. 568,000 LESS than when he assumed office. No wonder you don’t count 2009 in your calculations. In his entire reign of error, the employment total went to 152,129,000 in January 2017. That is a 9,977,000 increase in jobs IN EIGHT YEARS.
There is so much b/s in that statement that there must be a whole herd of cattle under it.
So let’s go back to the first three years of Obama’s job creations to the first three years of Trump’s job creation. January 2017, employment totals 152,129,000. January 2020, 158,714,000. First three years; Obama – 568,000 jobs LOST. First three years – Trump; 6,585,000 lobs GAINED. In three years, Trump has seen jobs increase by 2/3red of Obama’s entire reign of error.
Let’s talk unemployment, shall we? January 2009 – 7.8%. That number continued to INCREASE until September 2012, almost four years after Obama took office and after he saddled us with $814 BILLION in debt for the non-stimulating Stimulus Bill.
And one other fact you ignore; when Obama assumed office, the debt ratio to the GDP was 68%. When he left office, the debt ratio to the GDP was 104%
Well, again you feel the need to be insulting toward those who differ from you politically. So be it. Paybacks can be a b!tch. At least Trump supporters are not drooling down their chins at the Grecian columns.
You want to talk about lies? Just for a start, how about:
shovel ready jobs
if you like your health insurance, you can keep your health insurance. If you like your doctor, you can keep your doctor.
Trump will need a magic wand to bring manufacturing jobs back.
Benghazi was the result of a video.
He learned about Fast and Furious from a newspaper article. (Obama seemed clueless as he only learned what was going on in his administration from newspaper articles)
Sorry, Ward/AJ, numbers don’t lie. But obviously, you do.
@Ronald J. Ward: For some, Obama caused so much damage they couldn’t recover.
When you decide to visit rationality, you be sure to let us know. That might be a real treat.
@kitt: I guess AJ never heard of Amazon and the internet. The big stores and the mall here in town shut down… under OBAMA. Hilarious to see the loss of coal jobs blamed on Trump. But, have you ever heard anyone accuse lying liberals of possessing an inordinate level of logic or intelligence?
@retire05: No doubt Trump and the Russians were conspiring to cause all those layoffs.
Americans wont just accept that the only jobs to be had are part time, service jobs, no benefits, as the new norm.That loads of debt from a useless degree is the way forward. To be lead by arrogant, ignorant, elite that ran once great cities into the dirt.
There are solutions, they will shock and offend some snowflakes that want the nanny coddling of safe spaces and twisting the english language.
The numbers tell it all they failed.
@retire05:
And you feel, I’m trying to impress,,,,you? Deplorable? Kitt? Nathan or the whoevers and how manys the other 2 or 3 are?
I don’t believe your unsubstantiated nonsense any more than I believe the the constant lies of the goddamn sexual predictor, rancid racist and the disgusting excuse for a human being in the White House you idolized.
I really don’t know how to be more clear.
@Ronald J. Ward:
I don’t think you are trying to impress anyone but yourself.
The stats I gave you are not unsubstantiated. They come directly from the Federal Government. Of course, I could not give you lay off stats as Obama shut that portion of the BLS website down in 2013. No doubt we all know why.
As to your foul mouth; you continue to prove just how low you on the left are willing to go. Also, I idolize no one except my spouse and my children, unlike you on the left who idolize Obama who will go down in history as one of the worst presidents this nation has ever had to endure. He’s right up there with Woodrow Wilson and Jimmy Carter. But then, you seem to like Socialists.
@Ronald J. Ward: What is a sexual predictor?
Seems you are getting a bit flustered when your lies are debunked by multiple sources.
You melt down into meaningless name calling, some fool sky screaming. You should understand that when name calling it only hurts if it fits.
I would call you an ignorant parrot of debunked propaganda, that fits.
As none of us worship the president that has no effect, as none of us do.
The facts on comparison between Barrys failed and destructive economic policies is proven.
Where Trumps policies show little improvement is where Democrats still cling bitterly to the failures and lower standards to gaslight those that wont fact check themselves but rely on biased websites. NY and California they double down and their people flee.
No you certainly do not impress any of us, you never have.
Fact: 3/9/2020 DJI closes 23,877, down approximately 5,200 points from the high 1 month ago. This is because:
1. Corona virus was the trigger
2. Trump’s unsustainable policy of boosting a healthy economy with massive tax cuts to corporations that used extra funds to not hire or grow but to buy back stock to inflate share price giving executives a bigger bonus when they cash in their options and intern cutting government operating revenue thereby inflating the deficit to over a trillion and the debt to over 23T.
3. Trumps idiotic policy of boosting a healthy economy by keeping interest rates near 0 so there is nothing left to combat a downturn like corona virus and acclimating institutions to “free money” such that they cannot operate in a real world environment where borrowing actually requires paying significant interest so our financial system is sustainable and not volitile.
Just like everything Trump does, this economy is a big sensational scam that eventually turns to shit.
@Smedly Butler:The coronavirus is there, but the trigger is Democrats whipping up and spreading fear and panic as much and as quickly as they can. They even came out in the midst of the drop yesterday and fanned the flames. Democrats obviously have no concerns with how such incompetent irresponsibility affects those lower and middle class people they pretend to care so much about.
Trump’s tax cuts were across the board, with greater percentages benefitting the lower end of the economic spectrum more than the upper. However, tax breaks to small businesses (aka “the evil wealthy”) is what boosts the economy. Cutting taxes to businesses reduces their costs and, thus, prices.
Trump doesn’t control the interest rates. In fact, the interest rates have been jacked up since Trump took over.