The Obama Boom
Do you remember the “Bush boom”? Probably not. Anyway, the administration of George W. Bush began its tenure with a recession, followed by an extended “jobless recovery.” By the summer of 2003, however, the economy began adding jobs again. The pace of job creation wasn’t anything special by historical standards, but conservatives insisted that the job gains after that trough represented a huge triumph, a vindication of the Bush tax cuts.
So what should we say about the Obama job record? Private-sector employment — the relevant number, as I’ll explain in a minute — hit its low point in February 2010. Since then we’ve gained 14 million jobs, a figure that startled even me, roughly double the number of jobs added during the supposed Bush boom before it turned into the Great Recession. If that was a boom, this expansion, capped by last month’s really good report, outbooms it by a wide margin.
Does President Obama deserve credit for these gains? No. In general, presidents and their policies matter much less for the economy’s performance than most people imagine. Times of crisis are an exception, and the Obama stimulus plan enacted in 2009 made a big positive difference. But that stimulus faded out fast after 2010, and has very little to do with the economy’s current situation.
The point, however, is that politicians and pundits, especially on the right, constantly insist that presidential policies matter a lot. And Mr. Obama, in particular, has been attacked at every stage of his presidency for policies that his critics allege are “job-killing” — the former House speaker, John Boehner, once used the phrase seven times in less than 14 minutes. So the fact that the Obama job record is as good as it is tells you something about the validity of those attacks.
What did Mr. Obama do that was supposed to kill jobs? Quite a lot, actually. He signed the 2010 Dodd-Frank financial reform, which critics claimed would crush employment by starving businesses of capital. He raised taxes on high incomes, especially at the very top, where average tax rates rose by about six and a half percentage points after 2012, a step that critics claimed would destroy incentives. And he enacted a health reform that went into full effect in 2014, amid claims that it would have catastrophic effects on employment.
Yet none of the dire predicted consequences of these policies have materialized. It’s not just that overall job creation in the private sector — which was what Mr. Obama was supposedly killing — has been strong. More detailed examinations of labor markets also show no evidence of predicted ill effects. For example, there’s no evidence that Obamacare led to a shift from full-time to part-time work, and no evidence that the expansion of Medicaid led to large reductions in labor supply.
So what do we learn from this impressive failure to fail? That the conservative economic orthodoxy dominating the Republican Party is very, very wrong.
In a way, that should have been obvious. For conservative orthodoxy has a curiously inconsistent view of the abilities and motivations of corporations and wealthy individuals — I mean, job creators.
On one side, this elite is presumed to be a bunch of economic superheroes, able to deliver universal prosperity by summoning the magic of the marketplace. On the other side, they’re depicted as incredibly sensitive flowers who wilt in the face of adversity — raise their taxes a bit, subject them to a few regulations, or for that matter hurt their feelings in a speech or two, and they’ll stop creating jobs and go sulk in their tents, or more likely their mansions.
It’s a doctrine that doesn’t make much sense, but it conveys a clear message that, whaddya know, turns out to be very convenient for the elite: namely, that injustice is a law of nature, that we’d better not do anything to make our society less unequal or protect ordinary families from financial risks. Because if we do, the usual suspects insist, we’ll be severely punished by the invisible hand, which will collapse the economy.
Economists could and did argue that history proves this doctrine wrong. After all, America achieved rapid, indeed unprecedented, income growth in the 1950s and 1960s, despite top tax rates beyond the wildest dreams of modern progressives. For that matter, there are countries like Denmark that combine high taxes and generous social programs with very good employment performance.
But for those who don’t know much about either history or the world outside America, the Obama economy offers a powerful lesson in the here and now. From a conservative point of view, Mr. Obama did everything wrong, afflicting the comfortable (slightly) and comforting the afflicted (a lot), and nothing bad happened. We can, it turns out, make our society better after all.