The GOP Said Obamanomics Would Kill the Economy. It Didn’t. Now What?

 

The American economy in 2015 will probably pale in comparison to the big booms of the 1980s and 1990s. But thanks partly to the 50 percent drop in oil prices since summer, it may be the strongest year for growth since before the Great Recession.

The Two Percent Economy becomes the Three Percent Economy. Stagnation becomes acceleration. What Goldman Sachs recently told clients roughly reflects Wall Street’s consensus view:

The U.S. economy is likely to grow about 3 percent next year, almost 1 percentage point above potential. We expect further acceleration in consumer spending, mainly because of the positive impact of the oil price plunge on real income. We also expect the housing recovery to strengthen as household formation starts to normalize… Above-trend GDP growth should translate into continued brisk labor market improvement.[Goldman Sachs]

So bullish, but not totally bonkers. But this is still a political problem for Republicans heading into the 2016 election cycle.

The party’s messaging is built around blaming President Obama’s progressive policies — the Affordable Care Act (aka ObamaCare), the Dodd-Frank overhaul of the financial regulatory system, energy regulation, tax hikes on the rich — for the weak economic recovery. Some Republicans have gone even further in the past six years, predicting just-around-the-corner catastrophe — soaring interest rates, rocketing prices, a collapsing dollar — due to “Obamanomics.”

Such apocalyptic forecasts look silly in retrospect. The dollar is at a nine-year high, interest rates remain low, and inflation is still well below the Federal Reserve’s 2 percent target. The only thing that has collapsed is the annual U.S budget deficit, from nearly 10 percent of GDP in 2009 to under 3 percent last year. One reason: Non-defense discretionary spending is headed toward its lowest levels in modern history.

Republicans are on firmer ground with their more modest claim that Obama’s agenda slowed the recovery. While economists continue to debate the exact impact of the 2009 stimulus, it is tough to find an economic theory supporting the 2013 tax increases on the wealthy as good for growth.

Meanwhile, research suggests new financial regulations are particularly onerous to community banks, which provide nearly half of the loans issued to small businesses. (Of course, Team Obama would counter that the GOP’s push for spending cuts and the 2011 debt ceiling crisis did the economy no favors.)

But as campaign pros put it, if you’re explaining, you’re losing. Making the case that an improving economy would be improving even faster with smarter GOP policies isn’t as politically compelling as simply pointing to an economy in flames and blaming the guy in the Oval Office. Also, a lot harder.

What’s more, the GOP’s recent aversion to the Federal Reserve makes it tough to offer up active monetary policy as an alternate theory — despite its explanatory power — for why the U.S. is doing far better than other advanced economies right now.

It’s not just that Republicans need to offer a positive agenda; they also need one that goes beyond an obsession with deficits and debt and that tackles the everyday concerns of most Americans.

For instance: One big worry for many parents is that their kids will have less opportunity than they did. Upward mobility should be at the heart of a pro–middle class Republican platform. How interesting, then, to check out the mission statement of potential 2016-er Jeb Bush’s just-announced Super PAC Right to Rise. No mention of “taxes” or “debt” or “spending.” Instead, it acknowledges the problem of rising income inequality — from 2010 through 2013, median incomes rose for only the wealthiest 10 percent of households, according to the Federal Reserve — and increasing barriers to climbing the opportunity ladder.

Who knows how all that translates into specific policy. But it is a good start. The U.S. economy has plenty of pressing problems, just often not the ones Republicans have been most worried about.

Like this post? Want to comment? Join Ricochet’s growing community of conservatives and be part of the conversation. Get your first month free.

There are 37 comments.

  1. 1
  2. 2
  1. Profile Photo Member

    Maybe someone could explain to Jeb that one way to slow the rise of inequality would be for us to stop importing so much permanent poverty from the 3rd World. It wouldn’t solve the problem, but at least we could stop digging.

    • #1
    • January 7, 2015, at 12:10 PM PDT
    • Like
  2. Shawn Buell (Majestyk) Contributor

    Given how long it’s taken for the economy to return to where it is today, it’s hard to argue that Obamanomics DIDN’T kill the economy.

    Between sluggish overall economic growth, the decline in wages among the lower income cohort of workers, the draconian increases in healthcare costs and the collapse in the labor force participation rate, it’s difficult in my opinion to see anything but a disaster having followed in Obama’s wake.

    • #2
    • January 7, 2015, at 12:27 PM PDT
    • Like
  3. Probable Cause Inactive

    James, you ask a good question. I don’t have an answer ready off the top of my head; this one needs some thought.

    However, I would be very hesitant to grant the premise that our main problem is income inequality. That’s agreeing to play the game on the left end of the playing field.

    • #3
    • January 7, 2015, at 12:39 PM PDT
    • Like
  4. KC Mulville Inactive

    I’m not sure that “income equality” is a bad concept for the GOP. After all, by many accounts, the reason why there is a gap in the first place is that we aren’t dealing with a single economy. We’re dealing with a one economy which makes its wealth through investments and property (and who are doing well), versus the middle and lower class economy, who depend on labor (who are not doing so well).

    Most of the indicators that are going up are focused in the investment and property market. The labor market isn’t doing so well, and is lagging behind. There have been some improvements, but much of the improvement is seasonal, and also helped by the disproportional number of people who simply dropped out of the work force.

    If I were a GOP strategist, I’d use “income equality,” not as a result in and of itself, but as proof that the jobs market … where most Americans live … is lagging behind. The argument is not that Obamacare kills “The Economy,” but that it drags down the ability to create jobs.

    So the rich people are making out better. Who cares? None of that matters to me unless those rich people invest in new businesses, which creates jobs – that’s what helps the rest of us. And that’s where Obamacare does its damage – it makes new jobs harder.

    • #4
    • January 7, 2015, at 12:57 PM PDT
    • Like
  5. Look Away Inactive

    Jim, when you come up with posts like this I cannot tell if you are being provocative or really believe what you hear from the likes of Goldman Sachs, et al. I mean I don’t see you pimping yourself to sell mutual funds and other investments like they and JPM do.

    When you take apart the 3rd quarter GDP numbers of 5% it is not too hard to come to the conclusion that the numbers were not as strong as they looked. For example in the that personal consumption figures, once you stripped out financing and insurance increases, personal spending was down 27bps from the prior quarter. One third of S&P capital spending has come from the energy sector along with much job creation. Still think those numbers will hold over the next two years, especially in light of another veto of the Keystone pipeline? I guess Tesla and solar panels will make up for it.

    And the bond market is really signaling that they accept the growth idea, right? The 10-year is under 2%. Oh that is right, it is due to the strong dollar which will have zero impact on exports. Looked at CAT’s stock price today?

    BTW, Listened to a JPM economist this morning saying that the labor utilization rate is not a problem, it is all structural? Baby boomers are retiring at record levels, didn’t say if that was by choice or not, and anyway I am sure they are enjoying all of the income from those ZIRP CDs and bonds. Also did you know that so many young men have felony records they can’t get jobs? and this is a main cause for structural unemployment? Also national average net worth is up 33%, so Americans are going to spend, spend, spend, the wealth effect at it height of folly.

    Rising US interest rates, in the face falling commodity and energy price, will really help those emerging market countries pay that $9Trillion in dollar denominated cross-bordered debt. Can you say default and liquidity crisis? Go take a look at how the emerging bond funds have done in the last 90 days.

    Jim, out of interest, as you see such a rosy world, how is your retirement account allocated? Not the dollars, but the percentage by asset class. If you show me yours, I will show you mine and we can determine if we are putting our money with our convictions.

    The fact is that I on’t know what is going to happen in the economy. But I have a large number of Clients in the red zone, 5 years before or just after retirement and I cannot base their treasure on hope.

    Cheers.

    • #5
    • January 7, 2015, at 1:03 PM PDT
    • Like
  6. Gary McVey Contributor

    When the middle class economy was booming, Paul Krugman and his pals said the fact that dot com zillionaires were doing even better should make me feel bad. It didn’t. With the six year collapse of the middle class economy, Paul Krugman and his pals (and some Rightys like Larry Kudlow) say that the fact that the zillionaires are doing great should make me feel good. It doesn’t.

    • #6
    • January 7, 2015, at 1:07 PM PDT
    • Like
  7. Stad Thatcher

    Given the number of people who can or want to work not working, and the incredible debt being racked up, and the propping up of the stock market by the Fed (hopefully being phased out), I’d say if Obamanomics hasn’t killed the economy, it’s still trying to, especially if the latest growth figures are due primarily to Obamacare costs.

    • #7
    • January 7, 2015, at 1:55 PM PDT
    • Like
  8. Fake John/Jane Galt Thatcher

    Oh wow, another “recovery” year.

    God I hope you are right and it does actually show up this time.

    I am tired of being stuck in nowhere job because other opportunities do not exist.

    I am tired of seeing my friends and family unemployed or underemployed, though we are told that unemployment numbers are better than ever.

    I am tired of spending more on stuff (though we are told there is no inflation) but not getting increases in pay.

    I am tired of paying higher premiums, higher deductibles for less and less insurance coverage. The cost is getting so ridiculous that we have considered dropping insurance altogether (but that is now illegal). I have friends exploring the option of getting a divorce to see if the mother and child can get cheaper insurance (subsidies) once the fathers income is not included in the calculations.

    But I suspect that this time next year I will be reading another post on how the economy in 2016 will finally take off and be the death of the GOP, again.

    • #8
    • January 7, 2015, at 1:56 PM PDT
    • Like
  9. JimGoneWild Coolidge

    It took 6 years and over a trillion extra dollars a year of spending by Obama to get this sad economic state. Record people not working and businesses sitting on tons of cash because their to afraid to invest–Maybe our definitions of ‘Kill’ are different.

    If it were not for fracking and a slow recovery of the dollar–both against his wishes–we would be miserable.

    • #9
    • January 7, 2015, at 2:13 PM PDT
    • Like
  10. Xennady Inactive

    “It’s not just that Republicans need to offer a positive agenda; they also need one that goes beyond an obsession with deficits and debt and that tackles the everyday concerns of most Americans.”

    When I think of Republicans like Jeb Bush the absolute last thing I think of is an obsession with debt and deficits, or any concern about everyday Americans.

    Excuse me for mentioning once again the economic collapse that occurred while Jeb’s brother was president. Or the relentless free-spending. Or the blunt refusal to enforce US law, and secure the US border. Or to deal with the trade policies that allowed foreign countries to bankrupt American businesses without response, or the policy that saw no difference between a job in the United States or a job elsewhere. Or the endless, bottomless, shameless crony capitalism that flourished while Bush was president.

    I was reminded of all that again, because I just read Jeb’s mission statement for his PAC. America’s opportunities have never been greater than they are now, by the way. Six years of lawlessness from Obama, with the state using the instruments of government to suppress dissent, endless tyrannical rules, Obamacare- and things have never been better.

    Betterer and betterer, each and every day, in every way, because Jeb’s an optimist. And apparently. those vile rethuglicans are the problem, because of their silly obsession with “taxes” and “debt” and “spending.” Or their silly plaints that Obama was bad for the economy, I suppose.

    I remember something Susana Martinez said, which I heard of because it was quoted at Ricochet 1.0- paraphrasing roughly from memory, “Republicans need to offer more than opportunity blather.”

    Jeb offered us opportunity blather sans pareil. Message: Jeb cares, you stupid rethuglican conservative raaacist.

    Jeb Bush I am not a fan. Susana Martinez, vastly better.

    • #10
    • January 7, 2015, at 3:05 PM PDT
    • Like
  11. AIG Inactive
    AIG

    James Pethokoukis: Such apocalyptic forecasts look silly in retrospect. The dollar is at a nine-year high, interest rates remain low, and inflation is still well below the Federal Reserve’s 2 percent target.

    Don’t you know, this is all fabrications and lies by the US government conspiracy.

    That was easy.

    But you’re right. The “Obama Derangement Syndrome” will backfire, just as it did for the Dems with Bush.

    This is why Republicans have to be careful not to make statements they know not to be true. The economy was going to recover no matter what. It was only a question of when. When they put themselves in an indefensible position, they are going to be stuck.

    wmartin: Maybe someone could explain to Jeb that one way to slow the rise of inequality would be for us to stop importing so much permanent poverty from the 3rd World. It wouldn’t solve the problem, but at least we could stop digging.

    http://www.nber.org/papers/w17570

    “Our findings show that for all plausible parameter values there is essentially no effect of immigration on native poverty at the national level.”

    Well, there goes that narrative!

    Stad: Given the number of people who can or want to work not working,

    vacancy rate

    • #11
    • January 7, 2015, at 4:05 PM PDT
    • Like
  12. John Walker Contributor

    James Pethokoukis: What Goldman Sachs recently told clients roughly reflects Wall Street’s consensus view:

    And what Goldman Sachs tells their “muppets” has been so accurate in the past…? Actually, what they’ve recommended has been quite accurate as indicating what the proprietary trading desk wishes to unload on the customers, but not what Goldman was doing for their own account.

    Disclosure: I was a Goldman Sachs customer from 1985 through 2011. Here is what was the last straw for this muppet.

    • #12
    • January 7, 2015, at 4:29 PM PDT
    • Like
  13. Xennady Inactive

    AIG:

    James Pethokoukis: Such apocalyptic forecasts look silly in retrospect. The dollar is at a nine-year high, interest rates remain low, and inflation is still well below the Federal Reserve’s 2 percent target.

    Don’t you know, this is all fabrications and lies by the US government conspiracy.

    That was easy.

    Do you do anything at this site other than shill for the Obama regime?

    Are you a paid shill? Or do you do it for free?

    Just wondering…

    • #13
    • January 7, 2015, at 4:42 PM PDT
    • Like
  14. Look Away Inactive

    Xennady:

    AIG:

    James Pethokoukis: Such apocalyptic forecasts look silly in retrospect. The dollar is at a nine-year high, interest rates remain low, and inflation is still well below the Federal Reserve’s 2 percent target.

    Don’t you know, this is all fabrications and lies by the US government conspiracy.

    That was easy.

    Do you do anything at this site other than shill for the Obama regime?

    Are you a paid shill? Or do you do it for free?

    Just wondering…

    Don’t forget the Faculty at Harvard.

    • #14
    • January 7, 2015, at 5:29 PM PDT
    • Like
  15. Ekosj Inactive

    The evonomy is recovering IN SPITE OF the Obama economic policies. Which is a testament to the resilience of American business. But some things, namely full time employment, are STILL below their prior peaks.

    Full time employment peaked over 7 YEARS ago in Nov 2007 at 121,875,000. The most recent BLS report showed full time employment at only 119,482,000. Over 2 million full time jobs short of where we were 7 YEARS ago!!!!

    • #15
    • January 7, 2015, at 5:46 PM PDT
    • Like
  16. AIG Inactive
    AIG

    Xennady: Do you do anything at this site other than shill for the Obama regime? Are you a paid shill? Or do you do it for free? Just wondering…

    What! I’m just pointing out what I hear here on Ricochet every-time someone tires to bring some facts into the discussion. They are told that such facts are manipulated and invented by the Obama administration.

    Am I to believe you have now changed your mind on this, and think the inflation numbers aren’t invented, after all?

    Ekosj: The evonomy is recovering IN SPITE OF the Obama economic policies. Which is a testament to the resilience of American business.

    Which would have been a great point to make around 2009 or so. Today it’s too late, after so many years of “conservatives” telling us that the economy was going to remain and remains in ruins.

    And that’s the problem here. The economy was going to recover, despite Obama. We all knew this, and yet for the purposes of cheap political points, we decided to take the approach of lying to the American people, just as Obama did.

    Politics is a dirty game. Don’t be offended if someone points out to you that you’re filthy.

    Ekosj: Full time employment peaked over 7 YEARS ago in Nov 2007 at 121,875,000. The most recent BLS report showed full time employment at only 119,482,000. Over 2 million full time jobs short of where we were 7 YEARS ago!!!!

    And in 2 or 3 years time, we’ll be at that level.

    What then?

    This is again the point: the US economy is a far bigger, far more dynamic and far more resilient machine that people in politics want to make it out to be.

    The economy will recover, and that’s the message the GOP ought to focus on. And it ought to recognize it, so that a few years down the line when it happens, it isn’t caught with its pants on fire.

    The GOP was so scandalized when Gruber called the public “stupid” (which, as evidence has suggested, he was pretty much right), and yet the GOP treats the public equally as being “stupid”.

    Apparently the American people are too stupid to realize that the economy will turn around, because the economy isn’t run by politicians. Instead, the GOP thinks the American people need to be told things will perpetually remain terrible, unless you elect us.

    Well…now what?

    • #16
    • January 7, 2015, at 5:49 PM PDT
    • Like
  17. civil westman Inactive

    Glad to hear the economy is still alive. Like a cadaveresque ICU patient, it is hard to tell with all the adjustable tubes & wires connected, pumping who knows what. Oh, the brain is dead? Who knew? Just glad those guys behind the curtain are so skilled with smoke & mirrors.

    • #17
    • January 7, 2015, at 5:57 PM PDT
    • Like
  18. AIG Inactive
    AIG

    civil westman: Just glad those guys behind the curtain are so skilled with smoke & mirrors.

    That sort of “everyone’s lying to us” rhetoric has already run out of steam.

    Gonna need something better from now on. Or, if may suggest a better alternative to dismissing reality out of hand and creating excuses in its place: some self-reflection might be good.

    • #18
    • January 7, 2015, at 6:13 PM PDT
    • Like
  19. civil westman Inactive

    OK. You’re right. Everything’s fine. Manageable debt, no mis-allocated capital, no bankrupt municipalities, countries. Sound currencies. I’ll sleep better.

    • #19
    • January 7, 2015, at 7:16 PM PDT
    • Like
  20. Big Green Member

    You do realize that your snide attempt to refute another poster’s assertion about the I portation of 3rd world poverty and inequality provided no facts whatsoever to refute said assertion, right? I have no idea if the assertion is true or untrue (although I would tend to support your side of the debate), but you should focus on the word “native” in your repsonse and you will understand. Entirely possible that the importation of poverty results in greater inequality in the country but does not impact the inequality of the “native” population. Your over eagerness to refute any and all things said on this site leaves you with your pants down on occasion.

    • #20
    • January 7, 2015, at 7:21 PM PDT
    • Like
  21. iDad Inactive

    AIG:

    Xennady: Do you do anything at this site other than shill for the Obama regime? Are you a paid shill? Or do you do it for free? Just wondering…

    What! I’m just pointing out what I hear here on Ricochet every-time someone tires to bring some facts into the discussion. They are told that such facts are manipulated and invented by the Obama administration.

    Am I to believe you have now changed your mind on this, and think the inflation numbers aren’t invented, after all?.

    http://www.forbes.com/sites/perianneboring/2014/02/03/if-you-want-to-know-the-real-rate-of-inflation-dont-bother-with-the-cpi/

    And you upbraid others for not knowing the “facts.”

    • #21
    • January 7, 2015, at 7:57 PM PDT
    • Like
  22. Brian Watt Member

    These numbers are not important. Everything is fine. Nothing to see here. Move along.

    NotImportant

    • #22
    • January 7, 2015, at 9:31 PM PDT
    • Like
  23. Z in MT Inactive

    It doesn’t matter what the economy is going to do, because the 2016 election – despite what we think now – will be decided by foreign policy, not domestic policy. On that front Obama is quickly setting up the conditions for extreme conflict with Russia, Iran, and North Korea in the next couple years.

    • #23
    • January 7, 2015, at 10:10 PM PDT
    • Like
  24. ToryWarWriter Thatcher

    I think that if the poster wanted to have an honest conversation about changing the Republicans messaging on the economy, then he should have made such a post and included that in his title.

    Instead we have a title deliberately designed to enrage the trolls and make the poster look like the victim.

    Cheap straw men stunts come out of the playbook of the left and make the poster look small, petty and mean.

    It’s a shame though. The poster had a reasonable point buried in his post. But he lost it.

    • #24
    • January 8, 2015, at 6:32 AM PDT
    • Like
  25. Ekosj Inactive

    I’ll reiterate. While the economy is growing in spite of the Obama economic policy.

    Imagine what could be accomplished if the Administration actually supported American business instead of vilifying it.

    As I referenced above, we are currently short over 2 million full time jobs from the peak of November 2007!!!

    And no one bats an eye. 2 MILLION full time jobs!!!! Poster AIG waves it off saying “in two or three years we’ll be back at that level…” If he is right then what we will have is a Lost Decade!!! 2 million Americans who should gave soent a decare earning full time pay… Earning benefits…. Starting families …buying houses …. All wasted by an Administration that sees business as the root cause of many of America’s problems instead of the root cause of most of America’s greatness!

    • #25
    • January 8, 2015, at 8:02 AM PDT
    • Like
  26. AIG Inactive
    AIG

    iDad: http://www.forbes.com/sites/perianneboring/2014/02/03/if-you-want-to-know-the-real-rate-of-inflation-dont-bother-with-the-cpi/ And you upbraid others for not knowing the “facts.”

    I’m sorry, a Forbes article is now “the facts”?

    Ekosj: And no one bats an eye. 2 MILLION full time jobs!!!! Poster AIG waves it off saying “in two or three years we’ll be back at that level…” If he is right then what we will have is a Lost Decade!!! 2 million Americans who should gave soent a decare earning full time pay… Earning benefits…. Starting families …buying houses …. All wasted by an Administration that sees business as the root cause of many of America’s problems instead of the root cause of most of America’s greatness!

    I’m not waving it off. I agree with you. But what you’re making is a different argument from what the ‘conservatives” have been hammering everyone for the last few years.

    Saying the economy will recover, things will get back to normal, but slower than they should because of Obama...is not the same thing as saying that things are headed into disaster and things are terrible and the economy is in the toilet.

    These are completely different points. I agree with the first, I disagree with the second.

    Big Green: You do realize that your snide attempt to refute another poster’s assertion about the I portation of 3rd world poverty and inequality provided no facts whatsoever to refute said assertion, right? I have no idea if the assertion is true or untrue (although I would tend to support your side of the debate), but you should focus on the word “native” in your repsonse and you will understand. Entirely possible that the importation of poverty results in greater inequality in the country but does not impact the inequality of the “native” population. Your over eagerness to refute any and all things said on this site leaves you with your pants down on occasion.

    1) My comment wasn’t in the least bit snide. Snide is in making an assertion, and not bothering to provide any evidence to back it up.

    2) What’s the “native population”? Maybe you can read the paper I linked to to see how they define “native”.

    • #26
    • January 8, 2015, at 10:29 AM PDT
    • Like
  27. AIG Inactive
    AIG

    Brian Watt: These numbers are not important. Everything is fine. Nothing to see here. Move along.

    These numbers are important. But they are not the whole picture, or even the most important numbers.

    Debt only matters in relation to the interest you have to pay on it.

    Given that the interest rate right for US government bonds is pretty much…zero…or rather negative.

    If the US government didn’t increase its debt in such times, it would be a criminal offense. That’s like a bank coming to you and saying “I’ll give you this money at 0% interest. In fact, I might even pay you to take my money. Do you want it?” Hmm…yeah.

    • #27
    • January 8, 2015, at 11:21 AM PDT
    • Like
  28. The Dowager Jojo Member

    When interest rates are higher than inflation then you can talk about an economic recovery.

    • #28
    • January 8, 2015, at 12:53 PM PDT
    • Like
  29. Gary McVey Contributor

    The White House takes actions that greatly influence the economy, and encourage or discourage investment. A president can help create or destroy the basis of growth. We all know that, that’s why we’re on this site.

    But AIG has a point, as does James: the economy isn’t as simple as a jumbo jet that the president pilots, choosing either to fly straight and level or dive it into the ground. That’s the way the Left talked about George W. Bush after September 2008, as if he controlled the whole thing and chose to crash us into Great Depression Lite. Unfortunately, like all political parties and movements we tend to forget that when it’s the other guy. Of course the economy was likely to rebound even despite discouragement; a long term bet against America usually fails. We got back up after Carter. We’ll get back up again.

    I disagree with AIG about immigration. I’m not a rabid restrictionist; I’m also not a gloppy sentimentalist as so many of the WSJ crowd tends to be. Without litigating the whole issue, already the subject of many spirited Rico threads, I’ll just say that the evidence submitted here is reasonable, but not game changing, let alone game ending. Most of it also relates to pre-2009, when the working class economy went slack. Sure, when things are humming along and labor markets are tight, immigration doesn’t cost much.

    You really think that’s the situation when you look out the window?

    • #29
    • January 8, 2015, at 1:01 PM PDT
    • Like
  30. AIG Inactive
    AIG

    Gary McVey: Unfortunately, like all political parties and movements we tend to forget that when it’s the other guy. Of course the economy was likely to rebound even despite discouragement; a long term bet against America usually fails. We got back up after Carter. We’ll get back up again.

    Yep! Agreed 100%

    • #30
    • January 8, 2015, at 1:45 PM PDT
    • Like
  1. 1
  2. 2