The gist of it is that they present six graphs aimed at showing that some common claims about Obama’s economic policies (claims that paint Obama in a good light) aren’t true.
For example, the first graph seems to show that when the Bush tax cuts took effect, total jobs continued to go up for several years, which is put forward as evidence that Bush didn’t start the recession.
I can immediately dismiss one of the graphs–the fifth one (bottom middle) which purports to show that slow recovery wasn’t inevitable. It compares the Obama’s GDP forecast from 2010 with the actual GDP, and the actual GDP is found wanting. But comparing an administration’s forecast with the actual outcome seems to me to be completely unrelated to the question whether a slow recovery was inevitable.
With the first graph, I wonder if it’s sufficient to be just looking at job growth. Is there a clean relationship between job growth and the presence of a recession? And could it be that job growth went up for a while, but other factors which led to a recession later were put in place with the Bush tax cuts?
Anyway, I’m just looking for responses to the arguments implicit in the graphs.
Economic data is easy to manipulate to make an argument. The only chart that really convinces me is the 1st one, but then it’s debunking a very stupid claim: that tax cuts caused a recession. I’m not sure that’s possible according to any economic theory, Keynesian or Austrian or what have you.
I find #5 sort of convincing, simply because the administration can’t have it both ways. They claim that their economic assumptions were wrong about the current state of the economy in 2009, but then turned around and insisted that their policies made things better than they otherwise would have been. And then rewrote the history to claim that they always knew it would be a long and slow recovery.
Actually, it’s extremely important. The administration claims their models were wrong, that things were much worse than they imagined, but insist the models that measured the effect of the stimulus were right. There is no way to prove which was right and which was wrong. The fact that one of them had to be means that the other is equally suspect.
This is kinda stupid, because nobody thinks tax cuts are recessionary in the short term. Tax cuts, especially when funded by borrowing (like the Bush tax cuts) tend to be inflationary. There is more money to chase investments, so money flows to riskier and riskier assets, which get more and more overpriced. Eventually the price of the assets collapses.
Which leads to something like the current recession.
As Reno Nevada (and even adaher) have pointed out, the first graph and the text that goes along with it are a complete “straw man”. Nobody says that the tax cuts led directly to the recession. It is more an argument that they didn’t cause any particularly great economic growth and didn’t do anything to prevent us from falling into recession. (And, as Reno Nevada that they and other policies may have helped fuel the housing bubble that ultimately…several years later…led to the crash.)
Furthermore, the argument about deregulation applies specifically to the regulations related to the housing and financial markets that clearly were insufficient. I am not sure how much blame for this really falls on Bush’s shoulders since both Dems and Pubs were complicit in this…but the point is that the whole philosophy of the less regulation the better and that the market handles these things best by itself has been shown to be nonsense.
Finally, the claim that the housing bubble “was the result of a determined federal effort to boost homeownership by, among other things, pressuring banks to lower lending standards” is a conservative talking point basically devoid of any factual evidence to support it. All the evidence is that banks quite merrily gave out the loans that they did and (in fact, that they discriminatorily forced some people…often minorities…into higher-interest-rate subprime mortgages when said people really should have qualified for loans with more reasonable rates). And, they then of course repackaged these loans and sold them as securities that were stamped with the highest grades by the rating agencies.
Not that this disproves the charts, but Reason Magazine is a project of the Reason Foundation which, at least according to SourceWatch has ties to ALEC and the Kochs, so there may be a tendency to spin things in a certain direction.
The Koch-domination of Reason.com has become pretty sad. Hit & Run used to be a legit Libertarian blog attacking the statism of both major parties. Now it just takes the half-baked potshots at Obama that Fox News takes while ignoring Romney.
Good point…I didn’t notice that. And, of course they also cut off the downturn at the end of his Administration. Even with such cherry-picking, it is amusing that they laud the fact that over 8 million jobs were created in 4 years and yet attack Obama’s record, which is now something like 5.2 million private sector jobs over 30 months, which works out to about an identical rate of about 170,00 jobs per month!
Hacks and loons get a depressingly large share of attention.
With the charts, I’m not sure where to begin. I’ll start with the arguments closest to the truth.
“The slow recovery wasn’t inevitable”.
True, but your chart doesn’t show that. The stimulus package was too small to begin with, was predicted to be too small to begin with, and then it had the most effective parts stripped out of it by President Snowe (R, Maine). So what was the result?
Private employment is doing fine and so is private investment as it happens. What dragging the economy down is governmental employment (and residential construction), driven by cuts by state and local authorities. Now I don’t think classroom sizes were too small before the recession. So this sort of cutting hasn’t done wonders for the supply side. Furthermore, fired teachers and cops spend less, which drags the rest of the economy down.
The second thing to understand is that this hit was the worst since WWII. Calculated Risk has the classic chart:
It’s a recession born from financial crisis – they tend to be nasty.
Ok, cyclic issues aside, why do we have these big deficits? To answer that, you need to do a decomposition. Done:
It’s part Bush tax cuts, part war, and part the current recession. Existing recovery measures aren’t really a huge part of the story. In fact, we should be driving the deficit higher during recession as opposed to advocating tax cuts come rain, shine, flood or drought.
You can see the recovery in firm investment and the continued collapse in residential construction. The latter is a result of Geithner’s caution and the Tea Party. Brad DeLong: Housing construction is a big drag on the economy. Few people are willing to build houses because they fear when they try to sell them they will be competing with a new wave of forced foreclosure sales. The failure to rework and refinance underwater loans is the biggest source of slow recovery.
For this, blame Rick Santelli and the Tea Party–the fear that somebody might be getting something they don’t deserve has kept the government from doing its proper job to deal with the aftermath of the financial crisis, and paralyzed housing finance and housing construction for four years.
I already discussed how lower governmental purchases are dragging the economy down. Previously I showed employment. This chart shows it in terms of output, or rather deviations from output from the 2007 (smoothed) peak.