Monday, August 11, 2014

Last Refuges

“A conclusion is the place where you got tired of thinking.”
—Comedian Steven Wright

A Facebook friend of mine recently liked something posted by Daily Kos and, as a consequence, it showed up in my newsfeed.

The graphic was a brilliant and compact bit of rhetoric. Under the heading “5 Years of Obama,” there were two columns of economic data, one with the heading “Jan 2009” and the other with “Today.” Needless to say, the current numbers looked a heck of a lot better than the 2009 numbers. Underneath were the words “Oh, those pesky facts. Well done, Mr. President!”

You have to admire anyone who can muster enthusiasm for touting the current state of the U.S. economy. You would think the country would demonstrate its gratitude, when asked by pollsters, by giving the president a higher approval rating.

The brilliant thing about the chart, besides its simplicity and directness, is that if you eliminated the 2009 column and displayed only the current numbers, the 6.7 percent unemployment rate alone would be a devastating indictment of the administration’s economic management. I can remember a time when it was a given that a president was in political trouble any time the jobless rate was above five percent. But that was then and this is now. We’re in an era of dramatically lowered expectations.

The tactic of comparing the current numbers with the height of the 2008-2009 recession is a bit like saying, well, we’re certainly much better off now than we were during the Great Depression. But the chart is a useful reminder that the financial crisis that set off the recession was well under way before Barack Obama was elected president. So it is not fair to blame him for the recession itself—only for the quality of the recovery during his more than half a decade in office.

Let us note also that the “current” numbers are cherry-picked and, in some cases, already out of date. Let us further note that the dramatic drop in the GDP deficit is actually a by-product of the stubbornly sluggish economy and of the budget sequester, which the president strongly railed against. But the deficit, which can fluctuate quite a bit over time, isn’t nearly as important an indicator as the national debt. And that number has ballooned to more than $17.6 trillion under Obama. As a percentage of GDP, this is higher than at any time in the country’s history, apart from World War II. Not surprisingly, that particular number was left off Kos’s chart.

The top economic datum touted in the chart was the stock market as measured by the Dow Jones index. It has more than doubled under Obama. So, yes, if you are a serious investor, you have probably done very well under this president. But why has the stock market gone up so much during an under-performing economy? Because the Federal Reserve has been pumping up the stock market for years now with printed money, also known as quantitative easing. This amounts to a de facto wealth transfer from those holding cash to those buying and selling shares.

The president himself could be heard last week citing the stock market rise to The Economist as evidence of how good he has been for business. But he seemed more than a bit miffed that businesses were not more grateful. He and his surrogates have taken to calling companies that transfer their headquarters overseas unpatriotic. But companies wouldn’t be doing that if the U.S. didn’t have the highest business taxes in the industrialized world. Essentially, the U.S. tax code penalizes companies for creating jobs in the U.S. as opposed to doing it in other countries. Furthermore, money earned abroad gets penalized when it is brought into the U.S., giving additional incentive for investment abroad.

That is the key reason that the recovery has been so disappointing and only looks good when compared to the depths of the recent great recession. The administration has consistently prioritized the maximizing of federal government revenues over domestic job creation. Yes, you can blame companies for being logical and rational in their (completely legal) business decisions. And you can even attempt to pressure them by invoking “economic patriotism.”

But it is worth remembering the words of Samuel Johnson in April 1775. “Patriotism,” he said, “is the last refuge of the scoundrel.”

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