If nothing else, during their eight years in the White House George W. Bush and company became experts at deflecting blame. After all, the likes of Dick Cheney, Condoleezza Rice, and Bush himself all chanted that “nobody could have predicted” the Sept. 11 attacks, the devastation of Hurricane Katrina, and so many other disasters that occurred on his watch. But it was in explaining away his dismal stewardship of the American economy where Team Bush continued to deploy the same talking point even long after Dubya departed the scene: it was all Bill Clinton’s fault.
Even before Bush took the oath of office, Cheney, Newt Gingrich, Dick Armey, and Sean Hannity all falsely declared that his administration “inherited a recession.” Even after Barack Obama was sworn in on Jan. 20, 2009, Bush’s first press secretary Ari Fleischer and former Cheney aide Mary Matalin continued to parrot lines like “I was there, we inherited a recession from President Clinton.” In his final press conference, President Bush reduced the worst financial crisis since the Great Depression to a rhetorical book-end:
"In terms of the economy, look, I inherited a recession, I am ending on a recession. In the meantime there were 52 months of uninterrupted job growth.”
Eight years later, Donald Trump is trying to reverse Bush’s formula by claiming credit where he deserves none. Even before his inauguration last week, President-elect Trump was touting rising consumer confidence, jobs “saved” at Carrier Air Conditioning and Ford, as well as jobs created at GM. This week, he took to Twitter to cheer the Dow Jones breaking through the 20,000 barrier. Unsurprisingly, his water carriers in the media, many of them the same people who proclaimed the “Obama Bear Market” as far back as the summer of 2008, quickly announced the arrival of the “Trump Rally.”
Now, it’s no shock that a politician would try to appropriate someone else’s applause—especially a huckster like Trump who after the 2012 presidential election warned America faced “financial ruin” and who spent much of the 2016 campaign decrying “the total failures of the Obama-Clinton economy.” But on Jan. 20, President Trump didn’t just portray the U.S. economy as a blighted hellscape he deemed “American carnage.” Trump also promised 25 million new jobs and 4 percent economic growth, an average no President has hit since LBJ.*
Luckily for him, Donald Trump didn’t inherit a recession, but instead the Obama boom. By almost every indicator from job creation, GDP growth, income, and the unemployment rate to stock market performance, consumer confidence, health insurance coverage, and so much more, President Barack Obama handed off a far stronger economy than George W. Bush bequeathed to him eight years ago. And Obama produced this record not thanks to cooperation from Republicans in Congress, but despite unprecedented GOP obstruction that stretched across his two terms in the White House. Nevertheless, even in the face of that sabotage Barack Obama became just the latest occupant of the Oval Office to show that the U.S. economy almost always does better under Democratic presidents.
Consider Obama’s jobs record. During his two terms, the U.S. economy generated 11.3 million new jobs. (See chart at top.) Since the middle of 2010, the Obama economy produced 15.5 million new private sector jobs during 75 consecutive months of employment gains. That’s not only a dramatic turnaround from January 2009, when more than 800,000 workers were laid off in a single month, but significant improvement over the anemic 1.3 million jobs added under his Republican predecessor, George W. Bush. (It’s no wonder that the Wall Street Journal summed up Dubya’s jobs performance as the “worst track record on record.”)
The unemployment rate, too, has improved markedly since Barack Obama first took the oath of office. Already 7.8 percent then, the jobless rate hit nearly 10 percent in early 2010. But while 2012 Republican presidential nominee Mitt Romney promised a 6 percent rate by the end of his first term, Obama went far beyond that, leaving office with the unemployment rate down to 4.7 percent.
To put that performance in perspective, it’s worth looking back at the economic devastation President Obama inherited eight years ago. As bad as it was believed at the time the administration formulated its $787 billion stimulus program, it later became clear the situation was much, much worse. In 2011, The Economist described the context for the American Recovery and Reinvestment Act (ARRA) passed in February 2009:
The White House looked at the economic situation, sized up Congress, and took its shot. Unfortunately, the situation was far more dire than anyone in the administration or in Congress supposed.
Output in the third and fourth quarters fell by 3.7% and 8.9%, respectively, not at 0.5% and 3.8% as believed at the time. Employment was also falling much faster than estimated. Some 820,000 jobs were lost in January, rather than the 598,000 then reported. In the three months prior to the passage of stimulus, the economy cut loose 2.2m workers, not 1.8m. In January, total employment was already 1m workers below the level shown in the official data.
Nevertheless, the February 2009 stimulus had a tremendous impact in driving economic growth and job creation. As then-director of the nonpartisan Congressional Budget Office (CBO) Douglas Elmendorf explained in June 2012 to Republicans claiming “Obama made the economy worse:"
Most economists not only think it should have worked; they think it did work, Elmendorf replied. CBO's own analysis found that the package added as many as 3.3 million jobs to the economy during the second quarter of 2010, and may have prevented the nation from lapsing back into recession.
As the Center on Budget and Policy Priorities summed it up, “The economy began growing in 2009, and has averaged 2.1 percent annual growth since then.” Economists Alan Blinder and Mark Zandi, who by 2011 concluded that federal intervention to save the economy “averted Great Depression 2.0,” went even further in 2014. The combined federal efforts to rescue the American economy from its greatest collapse since 1929 "dramatically reduced the severity and length of the meltdown that began in 2008; its effects on jobs, unemployment, and budget deficits; and its lasting impact on today's economy." The impact of the measures taken in 2008 and 2009, including the Troubled Asset Relief Program (TARP), the $800 billion Obama stimulus program, Obama's auto bailout, and the Federal Reserve's "quantitative easing," is simply staggering. Without those policy responses—almost all of which were opposed by Congressional Republicans—Blinder and Zandi estimate:
- The peak-to-trough decline in real gross domestic product (GDP), which was barely over 4 percent, would have been close to a stunning 14 percent;
- The economy would have contracted for more than three years, more than twice as long as it did;
- More than 17 million jobs would have been lost, about twice the actual number.
- Unemployment would have peaked at just under 16 percent rather than the actual 10 percent;
- The budget deficit would have grown to more than 20 percent of GDP, about double its actual peak of 10 percent, topping off at $2.8 trillion in fiscal 2011.
That said, while the economy added over 2 million jobs annually for each of President Obama’s last six years in office, the number of manufacturing jobs has not returned to its pre-recession levels. In addition to that net 300,000 job loss, the workforce participation rate has dropped from its 2007 rate of 66 percent to around 63 percent now, a level not seen since the late 1970s. The aging population might explain between one-third to one-half of that loss. The rest reflects those who have simply dropped out of the workforce and are now looking for a job.
That is just one of the prices Americans paid because the recovery from the recession that began in December 2007 was slower and smaller than it could have—and should have—been. If anything, Barack Obama has been a tax-and-not-spend liberal. (Adjusted for inflation, federal spending is lower now than when Obama first became president.) After all, stimulus spending largely ended by 2011. More than 40 percent of that $800 billion program was tax cuts. Annual deficits have been slashed by two-thirds during Obama's presidency. The good news is that the higher income and capital gains tax rates on the rich that Obama signed into law in 2013 have refilled the United States Treasury, while as predicted had no negative impact on economic growth and job creation. But as has been documented elsewhere, the recovery from the Great Recession would have been quicker and more robust if the federal government had spent more to offset the "anti-stimulus" of shrinking state and local governments. By May 2013, the Hamilton Institute estimated those austerity policies cost 2.2 American million jobs and resulted in the slowest recovery since World War II.
As the Economic Policy Institute lamented in a recent analysis, it is that austerity which has made the recent recovery the slowest in four decades:
Nevertheless, the U.S. recovery from the global economic calamity of late 2007 through mid-2009 was still impressive, especially compared to other leading economies. Since 2007, American GDP growth has been higher than Germany, France, the UK, and Japan.
Helping fuel that American rebound was the rapid turnaround of the U.S. auto industry. By the fall of 2008, General Motors and Chrysler were on the brink of collapse. Without the infusion of cash by the Bush administration in December 2009 and the major rescue package President Obama put in place the next spring, both companies would have failed, as would the supply chain of parts makers.
The decision to rescue GM and Chrysler, derided by Donald Trump, Mike Pence, and Mitt Romney, had an outsized impact, and not just for states like Michigan, Indiana, Ohio, and Wisconsin. Ultimately, the federal government spent almost $80 billion to save the two companies. But after selling off its remaining shares, the price tag was much lower at $9.3 billion. But as the Center for Automotive Research documented in December 2013, that sum may have been the best investment Uncle Sam ever made:
Had GM and Chrysler failed altogether, the result could have been 4.1 million jobs lost across the U.S. economy in 2009 and 2010, with federal transfer payments and $105 billion in lost income and payroll tax revenue for the U.S. Treasury.
As the Center's chief economist Sean McAlinden put it, "This peacetime intervention in the private sector by the U.S. government will be viewed as one of the most successful interventions in U.S. economic history."
How successful? These pictures of auto industry jobs and auto sales tell the tale:
Despite all of the Republican fear-mongering over “job-killing” Obamacare and tax increases “crushing job creators,” the number of full-time jobs continues to expand even as part-time work remains relatively constant. Poverty dropped sharply in 2015, while median household income and wages grew at the strongest clip since before the recession.
Meanwhile, Obamacare has reduced the uninsured rate to its lowest level on record even as it has improved household finances. Together with the Obama administration’s economic stimulus measures and tax hikes on the wealthy, income inequality has started to decline from its recent record highs.
All told, these developments have improved the outlook both on Wall Street and on Main Street. Despite Donald Trump’s braggadocio, the stock market was already flourishing under Barack Obama. The Dow Jones jumped by 11,450 points, or 138 percent, during Obama’s time in the White House.
Consumer confidence, too, was ramping up long before Trump pulled off his surprise victory in November. One notable downturn came in the spring and summer of 2011, when Republican debt ceiling hostage-taking took a toll on both job creation and consumer confidence.
But that wasn’t the step that the Kamikaze Conservatives took to undermine the American economy, and with it, Barack Obama’s presidency. From literally the night he was sworn in, Obama's Republican opponents engaged in an unprecedented campaign of sabotage designed to derail the economic recovery and his presidency. They didn't just oppose the stimulus (more than 40 percent of which was comprised of tax cuts), but the Fed's quantitative easing program and the White House's auto bailout which saved Detroit—and millions of jobs—as well. The GOP filibustered his American Jobs Act of 2011 and his plans for an infrastructure investment bank. Not content to rest there, Republican leaders threatened to trigger a default by the United States by refusing to raise the debt ceiling, something they had routinely done 17 times for Reagan (who tripled the national debt) and seven more for George W. Bush (who doubled it again).
Yet in face of it all, the 44th president produced an economic record that helped earn him recognition as “the most successful Democrat since FDR.” And thanks to Barack Obama, the 45th president of the United States enters office at a time of American renaissance, not American carnage. Job No. 1 for Donald Trump is to stop bragging about the Obama boom he is inheriting. Given Trump’s good fortune, job No. 2 is simply not to blow it.
* Since 2000, GDP growth has averaged a little less than 2 percent a year. Since the Great Recession of 2008 hit, labor productivity has expanded by less than 1 percent a year. As Neil Irwin explained in the New York Times in August, that means Trump can't get there from here. Our aging population and his planned crackdown on immigration mean a return to the boom days of 1950 to 1973 simply isn't in the cards:
Add it all up, and is Mr. Trump's promise of 25 million new jobs over the next decade and 3.5 percent annual economic growth possible? Only if a burst of innovation arrives that makes every worker's labor go further, and if millions of new immigrants arrive from overseas or the ratio of American adults who want to work rises far higher than it has ever been. Absent all that, the math just doesn't work.