The success of Obamanomics

By a host of measures, the U.S. economy has done exceptionally well under President Barack Obama. So why does he receive such poor approval ratings, especially from the most prosperous and economically conservative Americans?

The investor class should be thrilled. Under Obama, the Dow has risen an astonishing 126 percent, to a record high of 18,030. Under President George W. Bush, the index fell by a quarter, from 10,587 to 7,949.

Corporate America should exult. Profits, both before and after taxes, have doubled since Obama took office in 2009.

Fiscal hawks should cheer, because the federal budget deficit is down from 10 percent of the economy in Obama’s first year to less than 3 percent in fiscal year 2015, which began Oct. 1. With continued job growth, this might even turn into a surplus before Obama leaves. And while Bush was a spendthrift, Obama has been the most tightfisted president in the last half-century in terms of discretionary federal spending.

Health insurance companies should be laughing all the way to the bank, because Obama ignored advice to pursue a single-payer system, which would have eliminated the industry, and instead won approval for the Affordable Care Act, which guarantees health insurers a lucrative future.

Wall Street banks should be exuberant for two reasons. First, Obama and his attorney general, Eric Holder, refused to prosecute easily proved crimes, including mail, mortgage, securities and wire fraud and commercial bribery. Second, this month Obama signed into law the CRomnibus budget bill, which approved derivatives gambling with taxpayer-insured bank deposits. Derivatives are the complex financial products that contributed to the 2008 financial crisis.

Big retailers, monopolists and manufacturers who moved production offshore should toast Obama, who has promised to expedite approval of the Trans-Pacific Partnership, which would insulate many big companies from the rigors of market competition and ease their path to greater offshoring and even bigger profits.

Consumers and energy-intensive businesses should be cheering now that gasoline prices are lower than Newt Gingrich said he would make them if he had been elected president in 2012.

Anti-government tea partyers should be pleased too. Since Obama took office, the federal workforce has shrunk 2.4 percent, taking the number of federal workers below where it stood when Bush took office almost 15 years ago. (Bush added federal workers.) State and local government workforces are also smaller under Obama, partly because of reduced federal revenue sharing.

Workers should be content too. In Bush’s last year, the country lost 4.4 million jobs, a scary trend that continued for another year. Since then, the U.S. has enjoyed a record 57 months of consecutive increases in private-sector jobs, though Obama gets little credit for that or the fact that we now enjoy not just a record 140 million jobs but also an accelerating rate of job growth.

So what’s not to like about the economic record of this president?

What most people know is that they are working hard and getting nowhere and that even if they perform well, their jobs can evaporate in an instant.

Median household income was $59,139 last year, about $4,500 below 2007 but up all of $189 from 2012. As I showed in a previous column, the median wage last year was at its lowest level since 1998, and the average wage remains below its 2007 peak. 

Therein lies a key to understanding dissatisfaction with Obama’s economic policies.  While about 10 million jobs have been added since the low point a year into his first term, wages have stagnated.

We could have had many more new jobs, perhaps another 4 million to 6 million, which would have drawn many people back into the labor force, reducing demand for food stamps and other government benefits as well as producing more tax revenues.

That in turn would have resulted in higher wages, more savings and less consumer debt relative to income.

Instead we got a drop in the labor force participation rate, which measures the population 16 or older working or looking for work. It peaked at 67 percent in 2000 and now stands just under 63 percent.

The aging population is the biggest single factor in this decline. But other factors include people’s choosing to retire, raise children and enjoy leisure time, all of which can be considered social goods.

We would also have more jobs but for corporate greed when it comes to the benefits of increased productivity. Historically workers shared in productivity gains, but with the government rules rigged against unions, the market for labor has become distorted. Power is almost entirely on the side of big companies and their shareholders, which refuse to share productivity gains with workers.

One-sided markets are not markets at all but exploitive systems that in the long run breed economic stagnation and social unrest.

Most workers have little understanding of how complex government rules harm their interests. A majority of Americans were born since the labor movement peaked in 1973, starting the long trend toward capital’s taking an ever-larger slice of the income pie at the expense of most workers.

Imagine how much better off we would all be but for a meeting of 14 top Republicans, 12 of them members of Congress, on the very day Obama was inaugurated six years ago. They agreed to oppose Obama’s economic policies, as Gingrich, a former speaker of the House, and others have boasted.

This approach stands in sharp contrast to the actions of Democrats eight years earlier, when Bush was inaugurated. Even though many Democrats felt his tax cuts would damage the economy, as they did, they agreed to approve his economic policies nonetheless.

The GOP decision six years ago to oppose Obama’s economic policies despite the Great Recession immediately harmed the economy. Congress enacted an economic stimulus bill that was much too small to counter the drop in private spending, though research has since shown it was key to reviving the economy and keeping America from falling into a much deeper hole.

The 2009 stimulus also included new tax cuts, which are inherently anti-stimulus. Yet Obama enabled his critics when he spoke in favor of those tax cuts.

Since then the Republicans have fought the Affordable Care Act, despite its success in enabling about 10 million more Americans to get health care while maintaining the private insurance system Republicans favor. They have done so because they are against whatever Obama favors, period.

Had congressional Republicans cooperated with the president, our economy would be larger by 3 percent, or about $529 billion, the St. Louis Federal Reserve and other researchers estimate. Unrealized economic output is a terrible waste, especially when it results from petty political animus.

Now that the economy is expanding at the fastest rate we’ve seen in more than a decade, public perception about Obama’s economic policies is beginning to improve. But whatever Americans ultimately conclude about Obama, they should view his economic policies in a light that balances his broad successes and failures with the declared determination of Republican congressional leaders to oppose Obama’s policies at all costs.