You may have read an article recently titled, “Obama outperforms Reagan on Jobs, Growth, and Investing“, published by Forbes. Here I will explore whether this claim really is true. According to the author of the Forbes article: President Reagan has long been considered the best modern economic President. So we compared his performance dealing with the oil-induced recession of the 1980s with that of President Obama and his performance during this ‘Great Recession.’ As this unemployment chart shows, President Obama’s job creation kept unemployment from peaking at as high a level as President Reagan, and promoted people into the workforce faster than President Reagan. President Obama has achieved a 6.1% unemployment rate in his 6th year, fully one year faster than President Reagan did. At this point in his presidency, President Reagan was still struggling with 7.1% unemployment, and he did not reach into the mid-low 6% range for another full year. So, despite today’s number, the Obama administration has still done considerably better at job creating and reducing unemployment than did the Reagan administration. We forecast unemployment will fall to around 5.4% by summer, 2015. A rate President Reagan was unable to achieve during his two terms.” Here’s the thing, no serious economist takes the unemployment rate seriously since it excludes people who have stopped looking for work altogether. According to economist James Sherk, “The drop in unemployment since 2009 is almost entirely due to the fact that those not looking for work do not count as unemployed.” The author of this article knows this, and notes that the labor force participation rate has been declining since around 2000, which means that less people are trying to get jobs. He goes on to attribute this to the retirement of the baby boomers, stating: Now that ‘Boomers’ are retiring we are seeing the percentage of those seeking employment decline. This has nothing to do with job availability, and everything to do with a highly predictable aging demographic. I’ve got to say this is the most intellectually dishonest thing I’ve read in a while. In order to see if his statement is true, let’s see how the employment to population ratio, which is the percentage of working age people who are employed (age 16-64) has changed over time. This measure allows us to exclude retirees and gives us an accurate depiction of labor market conditions. In fact, according to Paul Ashworth, chief North American economist for Capital Economics, “The employment population ratio is the best measure of labor market conditions.” So how does Obama compare to Reagan when using the employment to population ratio? According to data from the Bureau of Labor Statistics, after the initial recession in the early 80’s the Reagan economy experienced rapid and sustained employment growth. When Reagan took office in January of 1981, the employment to population ratio was 59.1%, meaning 59.1% of working aged people had a job. When he left office in January of 1989 that percentage was 62.9%. On the other hand, in the Obama economy, there has been next to no recovery in employment since the employment to population ratio stopped falling in late 2009. When Obama took office in January 2009, the employment to population ratio was 60.6%, as of January 2014 that percentage was 58.8%, which means things have actually gotten worse since Obama became president. Thus, the claim that Obama beats Reagan in terms of job creation is a blatant lie. Winner: Reagan he author of the article talks about how stock market returns under president Obama have skyrocketed: A dollar invested when Reagan assumed the presidency would have yielded a staggering 190% return. Such returns were unheard of prior to his leadership. However, it is undeniable that President Obama has surpassed the previous president. Investors have gained a remarkable 220% over the last 5.5 years! This level of investor growth is unprecedented by any administration, and has proven quite beneficial for everyone. When we examine how private investment has changed over time, it is clear that stock market returns have increased more rapidly during Obama’s presidency than Reagan’s presidency. This increase is most likely not as a result of anything the Obama administration has done, rather, it is a result of policies undertaken by the Federal Reserve, such as quantitative easing. Winner: Obama According to data from the world bank, the average growth rate of real per capita GDP (the best measure of economic growth) was 0.44% for the five years of Obama’s presidency for which data is available (2009-2013). On the other hand, the average economic growth rate under Reagan (1981-1988) was 2.56%. Winner: Reagan Ultimately, it is clear that Obama does not beat Reagan in growth nor jobs, though the stock market has performed better under him than under Reagan, thanks to Federal Reserve monetary policies. The author of the Forbes article and the person he quotes are blatantly wrong.
Posted on: Mon, 08 Sep 2014 04:12:31 +0000
Trending Topics
Recently Viewed Topics
© 2015