You seem to weigh the decisions of 300 million Americans equally with the decisions of the 1%, who actually have the wealth.
Well that goes without saying, doesn’t it?
After a recession there is usually catch up growth as the economy reverts back to trend. In the previous eight recoveries economic growth has averaged over 15% for the three years after the end of the recession. In this recovery growth is about 6.5%. Unusually deep recessions also usually have quicker catch up growth, but this time growth has unusually slow even for a mild recession.
The economy has seriously underperformed expectations over the last three and a half years and that is why people disapprove of Obama’s economic performance.
Well, in the past we were heavy on manufacturing. Now a lot of manufacturing is outsourced. Can history really predict what a modern economy should be doing?
This is isn't really true for deep recessions because of financial crises. When the balance sheets of large sections of the economy are seriously damaged, it's very difficult to engineer a quick recovery. It's also very difficult to recover quickly when the economy is operating at the zero interest bound of monetary policy.
That is a crucial difference between this recession and the 81-82 one which was the last really big recession before this one. In many ways that was an artificial recession engineered by Volcker to squeeze inflation out of the economy. Once inflation was down, Volcker could lower rates and monetary policy proved a very powerful tool in creating a rapid recovery. This time Bernanke has run out of conventional monetary tools. He does have quantitative easing but he seems reluctant to use that in a sustained manner.
At a policy level there were two points at which Obama could have changed the course of the economy:
- Insisted on a much bigger stimulus, around 1.5 trillion when he entered office
- Replaced Bernanke with someone much more aggressive about monetary policy
I think either or both of these steps would have produced a much more robust recovery but neither was politically feasible. 1 trillion was probably the absolute limit on the stimulus and it’s doubtful whether Obama would have gotten anyone much better than Bernanke confirmed for the Fed Chair. Even if he had, it’s not clear the Fed Chair would have been able to impose his will fully on the rest of the committee.
Given the political and economic hand he was dealt with, Obama has done a good job. Considering the scale of the 2008 collapse, the economy recovered remarkably quickly in 2009 and 2010. The recovery spluttered in 2011 but that was inevitable given the limited stimulus, the drawdown of QE1 by Bernanke and the Euro crisis.
We had a year-over-year Real GDP decline of 3.1% from 2008 to 2009. The only other times in history we were over 2% were right after WWII and the Great Depression. The Average real growth year-over-year from 2009-2010 was 2.4%, which is better than the 2.2% annual average rate from 2001-2008.
GDP growth was not too special under Bush and the economic collapse was like none since the Depression. The economy has turned around and if the Republicans would stop trying to sabotage the progress then we could do even better. I mean honestly what…WHAT I ask would the epublicans have done or would they do to make it better? WHAT?
Well the previous recessions cover the period from 1948 to 2001, I would say that era saw more change to the composition of the economy than the era from 2001 to 2008.
It may be that the changing nature of the economy is to blame for the slow growth of the current recovery and Obama has little control over the economy, but to concede that would mean Bush does not deserve blame for the recession. This would mean that Obama was lying in 2008 when he promised to rebuild the economy and that people are right to hold him accountable for his lies.
Where is the first number coming from? GDP growth peaked at 9% following the early 80s recession and at just over 4% following the early 90s recession.
Growth was nothing special in the Bush era but after the mild recession of 2001 we had growth rates of 2.5, 3.1, and 4.4 percent over the next three years. That is typical of past recoveries in that you get catch up growth for a short time and then return to trend (3.2 percent in 2005, and 2006). Also note that the time period of 2001 to 2008 contains two recessions. It should be pretty easy for a recovery to beat the growth of a short period that contains two recessions. The economy is not only not having catch up growth, the growth is slightly under trend and is estimated to grow only 1.5% this year.
We had one recession and the real GDP growth rates for for the record, starting in 2001 - 1.1%, 1.8%, 2.5%, 3.5%, 2.1%, 2.7%, 1.9%, -0.3%. You know what the Real Growth rates were before Bush? starting in 1994: 4.1%, 2.5%, 3.7%, 4.5%4.4%, 4.8%, 4.1%.
You know what though, you are right growth should be better, but Obama is trying to rescue us from the ONLY current dollar GDP decline since 1950. Do you see how bad things were? Do you get it? It was a recession like any we had before, the economy was BROKEN. The fact that we are where we are is almost a miracle.
Obama could not have gotten rid of Bernanke since his term was not up until 2010, however there were two nominations to the Federal Reserve Board that Obama did not act on until 2010 and did not get approved until September 2010. If he filled those seats sooner he could have gotten a bigger monetary fiscal stimulus.
However your comment about the recovery sputtering is instructive. The whole idea of stimulus is a short term boost to the economy to get it back to trend. If all a stimulus is money spent to goose the GDP figures in the short run and does not get the economy started again it is just borrowing GDP from the future and not actually helping the economy. The fact that without the stimulus the economy is doing poorly again either means that stimulus does not work or this one was poorly designed. Given that he had full control of the house and senate when the stimulus passed he has to take responsibility for the failure of the stimulus.
Yes I meant replace Bernanke in 2010 with someone who would immediately push for more aggressive monetary policy especially in 2011. And it’s extremely unlikely that moving faster on the other Fed nominations would have made a significant difference while Bernanke was still Fed Chairman.
As for the optimal size of the stimulus, it obviously depends on type and magnitude of the recession. This was the worst financial collapse since the Depression. It left the balance sheets of much of the private sector economy in tatters. That means it was always likely to be a slow recovery which made it all the more important to support spending through a big fiscal stimulus. Secondly the economy was clearly operating at the zero bound which means conventional monetary policy is largely useless. This is pretty much new territory for the post-war US economy. Qualitatively and quantitatively there has not been any other recession like this. That's why it required a bigger stimulus than what Congress was prepared to accept. This isn't an argument after the fact. Krugman made the case repeatedly and loudly even before Obama entered office.I think this [[id]=GDPC1&s[1][transformation]=pc1"]chart](Federal Reserve Economic Data | FRED | St. Louis Fed[1)does a useful job of putting this recession in context. First of all it shows that there was in fact a V-shaped recovery quite similar to several recoveries from the 50-90 period. It’s just that the low point of the V was just so much lower than earlier recessions. And as mentioned none of those recessions were caused by a financial collapse even remotely like 2008 and in none of those cases was conventional monetary policy largely ineffective. In that context it was a pretty impressive recovery.
We have had recessions like this before, just not recently. The contractions in 1937, 1907, 1893, and 1920 were all bigger than the current one. Growth after the those recessions was significantly higher than in the current recession. Only the great depression is comparable in terms of how long it has taken to bounce back.
Sure, but under Obama there have been no outbreaks of the Spanish Flu.
You say conventional monetary policy was useless, well then why not try unconventional monetary policy. Was he waiting for things to get bad? Especially if fiscal stimulus is not politically feasible.
The idea that this was always likely to be a slow recovery is revisionist history. In Obama’s first budget they were projecting the growth rate for 2010 to be 4 percent. The aforementioned Krugman said in 2009
The best that can be said of Obama is that he misunderestimated how bad the economy was and what needed to be done to fix it. The worst is that he misdiagnosed the problem and made things worse. Either way it is appropriate to disapprove of his job handling the economy,
People want what they want - NOW !
They have no patience, it seems to me. I mean the man repeatedly told them, ‘it’s going to take some time’. And, though a free fall into a true depression was averted, the world economy still teeters.
I hope that intuitively, people would prefer to vote for someone they respect. And that the answer lies in slow steady gains, not ill defined, promises of magic bullets like tax breaks for rich guys. They may not be able to sort through the rhetoric and misrepresentations, but I think people know this in their gut.
I also think a dog would pick Obama, in a heartbeat, for the same reason almost; gut feeling.
You do realize that Obama doesn’t control monetary policy right? The first opportunity he had to influence this was at Bernanke’s reappointment. And like I said I haven’t seen anything to suggest that appointing someone significantly more dovish than Bernanke was politically feasible. It was simply not on the agenda even among most Democratic economists and commentators. Even Krugman wasn’t openly calling for Bernanke to be replaced.
As for Krugman what he says is that “we can expect fast growth if and when that capacity comes back into use”. I agree with that. The problem is that after a financial collapse this can only happen with a massive monetary and fiscal stimulus. The first was not in Obama’s hands and on the second Obama got about as much of a stimulus as you could expect given the political reality of Congress.
Here’s Krugman’s very latest thinking on this issue. Krugman has argued that we could have done better but all in all he did reasonably well. But, of course, such a question is largely irrelevant when the election is not between Obama and Krugman but instead between Obama and people whose economics ideas have no relation to reality, fact, or anything other than extremely rigid ideological dogma.
If voters disapprove of Obama’s not doing as much as he could have, they should overwhelmingly vote to kick the Republicans out of Congress in addition to denying them the White House, so that Obama can do more to help the economy and the Republicans can do less to sabotage it.
Isn’t that oversimplifying it? Obama made the decision to bail out the auto industry and the banks, against pressure even from some of his advisors. Maybe there were problems with administering the bailouts, but without keeping those industries afloat, the U.S. and the world be in much worse shape than it is today. Not giving him credit for the bailouts, and concentrating only on how they could have been better, shortchanges the job he’s done.