Economic Outlook: Obama in the real world

By ANTHONY HALL, United Press International  |  Oct. 26, 2012 at 10:24 AM
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It is time to do a bit of counterfactual math.

OK, that term slipped by for a time but now, with a grasp on it, the long and the short of it is that President Barack Obama remains frustrated that the $830 billion American Recovery and Reinvestment Act of 2009 did something as laissez faire as save a whole bunch of jobs, rather than create new ones.

The frustration in the president's speeches at the time was palatable. One could make a case then (and many did) that $830 billion is a whole lot of money, forgetting that many analyses at the time figured it was not nearly what was needed to lift the economy enough for many to notice. The White House, it may be recalled, toyed with the idea of spending $1.3 trillion and by percentage of the gross domestic product even that would have been too small, some said.

But here's the first lesson in counterfactual perception: The percentage of something is harder to see than the bulk of something, so that it didn't matter that by percentage a stimulus-oriented economist would have said $830 billion was not nearly enough. There was the public perception that if you stacked all those bills up on the dining room table it would be a big pile of dough.

And Republicans reminded us that it looked that way. Not one GOP House member voted for the stimulus deal and only three Republican senators did.

Counterfactual frustration No. 2: If you bring the unemployment rate from minus 10 percent to minus 5 percent, nobody pats you on the back. Policies may have saved jobs, but minus is minus and that is an inescapable point when the average American just reads the headlines.

Of course, times being what they were, by percentage $830 billion was far less than was spent to stimulate the economy after the Great Depression, but by size alone a sum as large as $830 billion during the Great Depression could have possibly bought Europe.

Counterfactual perception No. 3: Many economists now say that it would take a sustained monthly gain of 350,000 jobs per month to lower the unemployment rate. The lower rate of 7.8 percent compared to a peak of 10 percent during the recession is a parlor trick, given more people are leaving the workforce each month than are finding jobs. As such, it is the definition of a hollow victory.

Again, nobody would argue that the current monthly rate of jobs added to the economy is paltry compared to what is needed. In September, 114,000 jobs were added to the economy and that's not a bad month of late.

To repeat: "We need to do a lot more," stirs no disagreement here.

But what if the United States was gaining 830,000 jobs per month? Boy, that would be something.

And, it turns out, the United States did gain 830,000 jobs in September -- just as right as rain.

In the three months before President Barack Obama's stimulus package was signed into law, the country lost an average of 726,000 jobs per month.

That makes an additional 114,000 jobs in September look very different. In real terms, 114,000 is not enough, but if a policy effectively added up to a swing of 830,000 jobs per month, that is a serious victory.

But, to quote President Obama, "It's very hard to prove a counterfactual, where you say, 'You know, things really could have been a lot worse."

He's pointing to the gains that fail to illicit much excitement -- the gains nobody notices.

In point of fact, March 2001 through December 2012, after former President George W. Bush's tax cuts were put in place, the country experienced the worse job growth in the post-war era, with the exception of the early 1980s' double-dip recession.

No counterfactual counting is needed there. In plain numbers, the era of former President Bill Clinton included an average gain of 178,000 jobs per month, while the Bush track record boasts an average addition of 68,000 jobs per month.

That's from a standing start, as if a president's first day in office reset all those statistic at zero.

But the first day in office is not a standing start, it's taking over from someone else, meaning the Bush track record in terms of the effect his policy's had on the economy includes a swing from 178,000 per month down to 68,000 per month, meaning the policy influence during the Bush era was a net loss of 110,000 jobs per month.

At one point, the Center for American Progress points out in a February 2009 report, Bush said, "It's hard to argue against 52 uninterrupted months of job growth as a result of tax policy." But the fact is, that's not true at all. It's extremely easy to argue against it when it's such a departure from the previous trend.

The country's gross domestic product is in the black -- 2 percent growth in the third quarter -- the Commerce Department said Friday.

But that same GDP was at negative 6.3 percent in the fourth quarter of 2008 before Obama took over the White House.

Sure, 2 percent growth is the poster child for an underachieving economy. But a GDP of 8.3 percent growth, which is the total effect of current policy on the nation's economy, that is something to brag about.

In the real world, the current administration has not gone from zero to 1.7 percent growth. It took the economy from minus 6.3 percent to 2 percent growth. And the real world is where it counts.

In international markets Friday, the Nikkei 225 index in Japan dropped 1.35 percent and the Shanghai composite index in China shed 1.68 percent. The Hang Seng index in Hong Kong lost 1.21 percent and the Sensex in India rose 0.26 percent.

The S&P/ASX 200 in Australia gave up 0.84 percent.

In midday trading in Europe, the FTSE 100 index in Britain was flat, dropping 0.01 percent while the DAX 30 in Germany gained 0.53 percent. The CAC 40 in France rose 0.63 percent and the Stoxx Europe 600 gained 0.14 percent.

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