The Obama Economy, pt. 1: Unemployment

The unemployment rate is one of the most persistent criticism's of Obama's economic management. The usual refrain goes something like this, "when Obama started, the unemployment rate was at 8.3 percent. Right now it's still there. What good has he done?" Technically speaking, the argument is correct; I guess people deserve some credit for not just making up statistics. But nonetheless, it's still a game of  shifting the goal post. Is there anything realistically feasible that a president can do in his first months to solve an economic crisis without passing legislation? I don't know, but I'd love to hear others' opinions.

Job losses continued throughout 2009, but the rate of losses bottomed out as soon as the stimulus was passed (February). Private sector job growth has remained positive since February 2010, but total job growth was negative in a couple months because government has been firing people for a couple years now. In fact, government employment has reduced more under Obama than under any president in the last three decades. Yes, that includes Ronald Reagan.

Unemployment peaked at 10 percent in October 2009, and it has declined by almost two percentage points since then. (Be sure to adjust the scale up to the last four years) There are certainly problems with how that is measured, since it's based on a survey of individuals actually seeking work, but it's hard to call that a complete failure.

I think a relevant comparison is Ronald Reagan, who was able to reduce unemployment from 10.8 percent to 7.4 percent in a similar period. (expand the time scale on the Google Public Data link to see this. The relevant period is 33 mos.) But before we starting singing hallelujah to the Gipper (again), let's keep these things in mind:

• Reagan's recession was started by the Federal reserve, which raised interest rates by 11.5 points (10% June 1981 to 21.5% June 1982). 
• Once Volcker had inflation contained, he was able to reduce interest rates basically back to where they originally were, increasing economic growth.
• Reagan was able to spend quite a bit more than Obama in order to further encourage economic growth.

These are very different conditions than what Obama inherited. Debt as a percentage of GDP was already high, so not much room for additional spending. The federal funds rate was already essentially zero, so you couldn't get additional economic activity through a rate cut. To top it all off, Obama's recession was the result of a financial crisis, which Harvard economists Reinhart and Rogoff point out are especially difficult to recover from. This is due to the huge amount of private debt left in the economy after the crisis.

So it would be hard to call this a "failed" presidency. It was the biggest economic crisis since the Great Depression. In some ways it was handled quite well, like with stopping the banking collapse, in other ways it wasn't, like solving the debt problem many homeowners still face. This is why the Economist, which is not a liberal publication, gave Obama relatively strong marks for his economic stewardship. This certainly isn't the way the Right wants to paint him, but that's mostly because it completely undermines their message in the upcoming election.