Saturday, 10 April 2010

The Facts Show (and Businessweek Agrees) Obama Plan is Working

A lot has happened this week, both locally (a great Democrats Abroad health care celebration!) and back home (Justice Stevens is retiring!) but I wanted to take a moment now to write about the economy. Specifically, the improvement in the economy.

Businessweek magazine, hardly a bastion of economic populism, has just published an interesting article about how not only are the markets recovering, but they are doing so because there appears to be a solid grounding of underlying economic improvement. And they attribute this to directly to Obama's efforts:
Little more than a year ago, financial markets were in turmoil, major auto companies were on the verge of collapse and economists such as Paul Krugman were worried about the U.S. slumbering through a Japan-like Lost Decade. While no one would claim that all the pain is past or the danger gone, the economy is growing again, jumping to a 5.6% annualized growth rate in the fourth quarter of 2009 as businesses finally restocked their inventories. The consensus view now calls for 3% growth this year, significantly higher than the 2.1 % estimate for 2010 that economists surveyed by Bloomberg News saw coming when Obama first moved into the Oval Office. The U.S. manufacturing sector has expanded for eight straight months, the Business Roundtable's measure of CEO optimism reached its highest level since early 2006, and in March the economy added 162,000 jobs—more than it had during any month in the past three years. "There is more business confidence out there," says Boeing (BA) CEO Jim McNerney. "This Administration deserves significant credit."

It is worth stepping back to consider, in cool-headed policy terms, how all of this came to be—and whether the Obama team's approach amounts to a set of successful emergency measures or a new economic philosophy: Obamanomics.
But this doesn't need to be a question of  interpretation. The facts on the ground are very clear - on almost every measure, bar unembployment - which is only just starting to recover, with our first month of positive jobs news just reported - the economic situation has grown better under Obama's presidency.

I'm going to just flagrantly steal some charts from Ezra Klein's blog, but as usual you really should read it yourself.

Here's a chart showing job growth:

And yes, the blue bits are the Obama Presidency and the Red bits are Bushville. Spotted a pattern? Hmmm....

Here's a chart showing house prices. (Hint, remember Obama was inaugurated in Jan 2009...)

Here's a chart showing the Dow Jones Industrial average under the Obama Presidency:

This is fun. I could do this all day.

Here's one showing GDP growth under Obama - remember, the first quarter of his Presidency would have been reported in April 2009, so that's the first point of measure the chart uses:

 Now, the news is not all unmixed joy. It's true that in order to achieve these results, Obama has allowed the deficit to continue to rise (worth noting that the biggest chunk of the deficit still came under Bush - but also worth noting that Obama CHOSE to let it continue going up).

Ezra, and most professional economists, argue convincingly that it was this counter-cyclical spending and the increased deficits that they caused which made it possible for the other measures to go up. They further argue
that the deficit would also have continued to go up if the economy (e.g., GDP growth) had failed to grow, since tax revenues would have continued to plummet. I find all that convincing.

There's another point as well - it's possible Obama was just plain lucky. Maybe he just happened to be inaugurated at the peak moment of the recession and it would have naturally turned around even if he had done nothing. I don't think that's the case, and there's plenty of evidence to suggest that the direct job creation and protection (a lot of firefighters and teachers were due to be laid off without the stimulus) led to real growth. But it's theoretically possible.

What I DON'T think you can now argue, even as a hypothetical, is that anything Obama and his team did in any way slowed down of prevented a recovery. So the source of the anger and economic populism that springs from much of the right appears tome (how shall I put this delicately) to spring from factors other than a purely fact-based analysis.

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