Now that the Obama presidency has come to an end, it’s important to judge his economic stewardship without falling into this trap, and, instead, to examine where things were when his administration started, the external constraints and obstacles it faced, and how much things got better or worse. I can hardly claim to be an independent observer: I was Obama’s National Economic Advisor from 2011 to 2014, and was part of the team at Treasury during the worst of the financial crisis. But, I believe the facts speak for themselves.
To be fair to President Obama, what he inherited in 2008 was less like Michigan’s 5-7 season in 2014 and more like my Detroit Lions’ historically miserable 0-16 record in 2008. For instance, while some analysts now consider it a disappointment if the economy gains only 150,000 jobs in a month, Obama inherited a labor market that was losing 750,000 jobs each and every month on average.
And while no one knew the true depth of the recession at the time, it has since been calculated that the economy was contracting at a stunning 6.8 percent in the six months making up the fourth quarter of 2008 and first quarter of 2009. The Dow had fallen over 40 percent before Obama took the oath of office, and deficits were rising to nearly 10 percent of GDP—even excluding the fiscal costs of the Recovery Act. Worse still, there was little certainty of rising demand that could potentially jumpstart a recovery anywhere in the global economy.
While the $800 billion American Recovery Act—and the financial and auto rescue—are often criticized from both right and left, what is not disputable is the speed and force with which the President acted. The American Recovery Act was signed into law on February 17th—less than one month after the inauguration. The fact that the economy rose out of recession by June 2009, and returned to job growth by March 2010, was far from automatic. Had Obama not pushed for such substantial policies, the Great Recession he inherited could easily have become a second Depression.
Few who remember those scary economic times of early 2009 can suggest with a straight face that they would not have been greatly relieved to learn that the economy would create nearly 16 million private-sector jobs in the less than seven years since March 2010, and that the unemployment rate would drop to 4.7 percent by 2016. Mitt Romney, admired for his skills as a businessman, made getting the unemployment rate down to just 6 percent by the end of 2016 his most ambitious economic goal of the 2012 campaign.
And while sustained and shared income growth for all income quintiles has been elusive over the last several decades (with the exception of the Clinton years), income growth has strengthened as the recovery progressed, despite the serious scarring of the labor market due to the depth of the recession. Since October of 2012, real wages for workers have grown over 5 percent cumulatively. Impressively, the last Census report showed real median household income rising a record 5.2 percent in 2015, with the highest growth among the bottom 20 percent.