Many conservative economic pundits, including Republican nominee Mitt Romney, have been staking the claim that the Obama Presidency has been an economic calamity.
Standing in front of a closed gypsum plant in Lorain, Ohio back in April, Mitt Romney asserted, “had the president’s economic plans worked … it would be open by now, but it’s still empty, and it underscores the failure of this president’s policies with regards to getting this economy going again.”
Yet the facts do not support such rhetoric; Romney and other conservative politicos are absolutely off the mark. If we compare Barack Obama’s first term to conservative icon Ronald Reagan’s first term, the Obama administration outperforms Reagan’s on most key economic measures.
Many Americans are too young to remember, or perhaps have forgotten, how frenetic President Reagan’s first term was.
Reagan, like Obama, inherited an economic mess from his predecessor (Carter), and was so beleaguered by the economy that as late as August of 1983, when unemployment stood at 9.5%, he did not believe he would be re-elected. Reagan’s objective was to implement his theory of “Reaganomics,” which was based on stimulating the economy with tax cuts, tax credits and accelerated depreciation (supply-side economics).
Reagan’s primary catalyst to achieve this objective was the passage of the Economic Recovery Tax Act (ERTA) in July of 1981, which introduced phased-in reductions in marginal tax rates that were substantial. ERTA was however a “bridge too far” and failed miserably creating massive budget deficits and weakening the economy, culminating in a severe recession which lasted through 1982.
Luckily Reagan saw his error, and with the passage of TEFRA (Tax Equity and Fiscal Responsibility Act) in September of ‘82, the economy began to get its footing back. TEFRA became the remedy to ERTA. In fact, TEFRA wasthe largest peacetime tax increase ever signed into law by any of our presidents, and ironically it was a Republican, Ronald Reagan,who signed it into law.
TEFRA kicked off one of the most substantive bull cycles in our financial history: one that endured for more than five years. Reagan deserves credit for backing TEFRA and for its powerful economic result. However, few realize it was Democrat Pete Stark of California who sponsored TEFRA. Had it not been for Reagan’s pragmatism and ability to work across the aisle with Democrats like Stark, Speaker of the House Tip O’Neill, and other members of Congress, TEFRA would not have happened and Reagan would likely have been a one-term president.
Barack Obama inherited the worst economic disaster of any president since FDR acquired the debacle from Hoover as he entered the White House in 1933. One of Obama’s first acts as President was to sign the American Recovery and Reinvestment Act. The ‘Stimulus,’ as it is called, established a floor for the financial markets so they wouldn’t decline further. Many forget that in the last 17 months of George W’s tenure, the stock market saw an historical loss of 58% from peak to trough. This was worse than any rolling 17-month period during the Great Depression.
Under President Obama’s tenure, to date, we have seen an impressive recovery in the equity markets,making up most of the losses accrued under Bush. Today we stand only 877 points from the highpoint of the DOW of 14,156.53 set on October 9th, 2007.
Barack Obama surpasses his 13 predecessors, including Bill Clinton and Ronald Reagan, relative to the stewardship of our financial markets and most economic indicators. The average annual compound returns for the Dow, S&P500, and NASDAQ have been 17.2%, 25.3% and 31.7% respectively in Obama’s first 3.3 years. This compares to Reagan’s first term results (for the same indices and time period) of 6.86%, 6.16%, and 7.02% respectively.
As for months of recession in their corresponding first terms, Reagan presided over one of the longest recessions (16 months) in our history. In contrast, the recession under Obama lasted five months in 2009. We have seen positive job growth for 26 consecutive months under President Obama, and although it has been painful, one needs to realize we are crawling out of a very deep hole. For ten of the 16 months in the Reagan recession, the unemployment rate exceeded 10%, reaching a high of 10.8% for two months in late fall of 1982. The highest unemployment rate under Obama was one month of 10% in late 2009.
Today our unemployment rate stands at 8.2%; Reagan at this same point had a rate of 7.8% in April of 1984. By Election Day that year, unemployment had fallen to 7.4% and he won by a landslide because there was a sense things were improving, and they were. Even after Reagan was reelected, it took two more years, until November of 1986, for the unemployment rate to finally fall below 7%.
If one looks at returns in the stock market, months of recession, average unemployment, inflation, income inequality, industrial production and after-tax corporate profits, Obama outperforms in all of these categories compared to Reagan’s first term.
The challenge will be whether Obama can match Reagan’s fourth-year job growth which spiked to almost 3.9 million new jobs in the private sector in 1984. That may be a stretch, yet it remains to be seen how this year will play out. Obama’s results to date exceed Reagan’s in ten of12 major economic data points. Not too shabby for a man who has been falsely accused by Mr. Romney and other pundits as an economic novice.
The question is: What would these same critics and pundits have said about Ronald Reagan’s first term, given the actual facts?
This begs another question: When did it become an American value to heckle, play “Monday morning quarterback” and root for our president to fail? The 24/7 phenomenon of playing the role of cynic and heckler against our president, which President Reagan did not have to endure when he was struggling in his first term, needs to be eradicated. Ronald Reagan and Tip O’Neill worked as a team for the betterment of our country.
During the 1980s, there was the notion we were all in this together and a sense that our leaders were statesmen. Our country needs a return to the days of Reagan and O’Neill where statesmanship and compromise were customary and considered paramount. We need to focus on actual results — not rhetoric and hyperbole.
In the meantime, President Obama should be applauded for the results of his first term as steward of our economy and the applause should come from both sides of the aisle.
Bob Deitrick is the co-author of Bulls, Bears and the Ballot Box, coming out on July 1, 2012. He is the co-owner of Polaris Financial Partners.