Courtesy of Occupy Democrats, with over 66,000 likes and 38,000 shares. This meme is a bit older, (published on January 15, 2016) but it’s still worth examining the economic record of Obama compared to Reagan, as it’s a common theme in memes.
It’s important to note that presidents don’t “create jobs”, with the exception of certain government jobs, nor do they increase the stock market. These are done primarily by private individuals and businesses in the marketplace. Generally, too much credit and criticism is given to presidents for the economy, as they play just one part in the many factors that influence the national and world economy. For this analysis, we’ll examine what happened to the economy under each president.
This meme claims that Obama created 14 million jobs in a 70 month stretch. To analyze this, we’ll use the standard metric, the Bureau of Labor statistics report of total nonfarm employees, seasonally adjusted. The table is shown below, starting in January 2009, the month Obama took office.
As we can see from the table, the last negative job report was on September, 2010. This means, as of August, there has been 70 months straight of positive job reports (although it was only 63 straight months when the meme was published, making their claim wrong). If we ignore the first two years under Obama when job growth was negative and start at October 2010, we get 14 million in job growth (but only 12.7 million when this meme was published). However, this is cherry picking to the extreme. Starting at the best possible starting point, while ignoring the previous job losses, is a misleading way to characterize an economic record. If we’re going to compare the two presidents, we should include their entire presidency. For Obama’s whole presidency, the number of jobs created drops to 9.6 million.
Now, let’s compare that to jobs created under Reagan. The BLS table for 1981-1988 is shown below.
The total job creation under Reagan was 15.9 million (16.1 million if you include January 1989, not shown on the chart), compared to 9.6 under Obama. Assuming job growth averages 200,000 per month for the remaining 5 months of Obama’s presidency, that would rise to 10.6 million by his term’s end. Considering the US population was only 226 million in 1980, compared to 308 million in 2010, this difference is even more significant. Since the population is about 37% larger today, the Reagan year’s proportional job growth would be 21.7 million jobs created, double that of Obama.
The 70 straight months of gains under Obama is significant, but the Reagan years saw much more robust growth. For example, there were 23 months under Reagan with monthly gains above 300,000 jobs per month, compared to just 7 months under Obama (again, a difference made more significant by population differences).
This meme claims that Obama reduced the deficit by almost $1 trillion in 6 years. This claim is true, but is quite underwhelming when more context is given, including the fact we are now on year 8, not year 6! According to White House figures, the budget deficit in 2009 was $1.412 trillion. By 2015, this dropped to $438 billion, which is almost $1 trillion less. However, they project a deficit of $615 billion in 2016, meaning the deficits are again rising, and no longer on a downward trend.
The budget Obama inherited, and that he willingly perpetuated for his first few years, were primarily a result of increased spending on stimulus programs, combined with decreased tax receipts resulting from the recession. As those factors went away, it would be expected that the deficits would return to pre-recession levels. Spending on just the TARP bailouts and stimulus programs totaled $2.8 trillion, so unless Obama and Congress kept passing giant stimulus and bailout bills, spending would naturally decrease.
A better gauge of Obama’s deficits would be to compare what they were under Bush pre-recession with under Obama post-recession. Here are the last few deficits under the Bush administration, according to the White House figures:
- 2004: $-412 billion
- 2005: $-318 billion
- 2006: $-248 billion
- 2007: $-160 billion
- 2008: $-458 billion
Even with the Iraq and Afghanistan wars, the deficits were around $400 billion, which means Obama’s “achievement” after the recession ended was to bring deficits back to similar levels. Levels which were already high, and are now increasing on his last year. More importantly, the national debt is substantially higher. When Obama took office it stood at about $10.6 trillion, it’s now over $19.4 trillion, larger than the entire annual GDP. This puts the government at a far more precarious financial position during the next economic downturn.
As far as Reagan, he “inherited” a $79 billion deficit in 1981, and left office with a $155 billion deficit. The national debt was about $935 billion when he took office, and skyrocketed to about $2.7 trillion when he left. This is certainly no proud achievement either. As far as the deficit or debt is concerned, neither Obama or Reagan should be applauded.
This meme claims the stock market nearly tripled under Obama. The day Obama took office, the Dow Jones stood at 8,281. On his inauguration, it cratered down 4%, and continued to spiral down, hitting a low of 6,547 on March 9, 2009. This was the lowest close since April, 1997, and a 54% drop from the high under Bush of 14,164. Using this low point would be cherry picking of the highest order. If we begin from when he took office, the markets did not “nearly triple”. Tripling 8,281, would be 24,843. As of January 15 (when this meme was published), the Dow closed at 15,988. Not only is this not “nearly tripling”, it wasn’t even doubling. The S&P performed slightly better, but still not tripling (beginning at 850 under Obama, to 1,880 when this meme came out). Since then, the markets have rallied, but still nowhere near tripling. Dow is currently at about 18,500, and the S&P at 2,180.
While the market rally since 2009 has been significant, neither the collapse nor the rally likely had much to do with the president. The Federal Reserve had a much more powerful influence. Not only did they lower interest rates to an unprecedented 0% during the recession (where it’s essentially remained for 8 years), they engaged in “quantitative easing” (QE), a policy of creating money out of thin air to buy mortgage securities and treasury bonds. This may sound dull, but $4.5 trillion was created to purchase these. To put that in perspective, the Fed bought less than $1 trillion of these investments from 1913-2008! This newly created money goes right into certain privileged financial institutions, which is generally invested and has the effect of inflating the stock market. In fact, former Fed Chairman Ben Bernanke has even said that QE was designed to raise stock prices.
What about Reagan? When Reagan took office on January 20, 1981, the Dow was at 970. When he left on January 19, 1989 it closed at 2,239. As with Obama, the markets more than doubled, although the context was different. The markets hadn’t cratered 50% right before Reagan took office. While both presidents inherited a bad economic situation, Obama began as the markets were bottoming from the Great Recession, with the lows coming less than 2 months after he took office. Reagan’s lows came a year and a half into his presidency. Additionally, there was not unprecedented low interest rates or quantitative easing by the Federal Reserve under Reagan. In fact it was the opposite. To fight the high inflation of the 1970’s, the Fed raised interest rates up to 20% while Reagan was in office. Throughout his presidency, rates never went below 5%, nor were there any massive quantitative easing programs to goose the stock market. In this sense, some would view this economic growth as more “real” and sustainable.
Other Economic Factors
This meme picks just 3 economic data points, which can be quite misleading. There are many other considerations to paint an economic picture besides jobs, deficits and the stock market. Here are some things this meme left out that aren’t as favorable:
- GDP- The Reagan years saw an average GDP growth of 3.5% and a peak of 7.6% in 1984. Through 2015, the Obama years averaged just 1.4% growth, and there hasn’t been seen a single year of growth above 3%, which is fairly remarkable considering how severe the recession was. Considering the first half of 2016 has only yielded 1% growth, it appears this won’t be improving.
- Real Median Family Income- The Reagan years saw this number jump from $55,938 to $63,093, an increase of over 10%. The Obama years have essentially flatlined, and real family median income is still not only below 2007 levels, but 1998 levels!
- Labor Force Participation- Despite the job creation under Obama, the labor force participation rate has continued to fall during his presidency to levels not seen since the 70’s, back when many more women were not working. Reagan saw rates increase from 63.9-66.5%, while Obama has seen rates decrease from 65.8-62.8%. See chart below (source: BLS)
- “Breadwinner Jobs”- What’s often left out of the jobs numbers is what kinds of jobs were created or lost. Saying “10 million jobs created” makes no distinction between good or bad jobs, so a worker could potentially lose a high paying manufacturing job and get two low paying part-time jobs and it would be considered positive job growth. Economist David Stockman compiles “breadwinner jobs”, which are good paying jobs that one could support a family on. While slightly positive under Obama, there are still less of these jobs than before the recession, and even before 2000! Considering the population growth, this implies that many of the jobs created under Obama are low paying.
This is confirmed when we look at low paying service sector employment, which has increased rapidly.
- Home Ownership Rate- This has dropped from 67.4% when Obama took office, to 63.1%.
- Productivity- US productivity has fallen for 3 straight quarters now, the longest streak since 1979. Job growth combined with falling productivity is not a healthy economic sign, as it means productive (i.e. wealth creating) employment is not increasing.
This meme is not completely wrong with its statistics, but it cherry picks a few data points to mislead its viewers. With context, it’s clear that job growth was much better under Reagan (16 million vs. 10 million), and both have poor records on debt and deficit. The stock markets have risen substantially under Obama, but that’s likely due to Fed policies and the cyclical nature of dips and rises during a recession. When more economic data points are looked at, the economy is anything but boastful, considering how much money has been spent and the debt has grown.