This Is the Obama Recovery

July 18, 2012 - 4:44 AM
President Barack Obama speaks of his own presidency as a rough patch in our nation's history.

"I don't need to tell you what we've been through over the last three and a half years because you've lived it," Obama said in Roanake, Va., last week. "Too many folks lost jobs. Too many people saw their homes lose value. Too many folks saw their savings take a hit."

The first lady last week described the bad times marking Obama's term in office as some sort of inevitable legacy he took on from his predecessor. "That's what he inherited," she said.

The truth is: We are in the Obama recovery now. If history is a guide, these are the best of the Obama times.

The next presidential term — no matter who serves in the Oval Office — is likely to see another recession.

The National Bureau of Economic Research (NBER) — the definitive determiner of when recessions begin and end — declared that the last recession ended in June 2009. We have been in what counts as an economic expansion for more than 36 months.

It doesn't matter if real gross domestic product only grew at 1.7 percent in 2011 and at annual rate of 1.9 percent in the first quarter of this year. It doesn't matter if unemployment has remained above 8 percent in every single month since the last recession ended. This is what Obama's expansion looks like.

According to NBER, there have been 33 business cycles in the United States since 1854. On average over that period, recessions have lasted 17.5 months and expansions have lasted 38.7 months. Since World War II, the recessions have tended to be shorter — lasting an average of 11.1 months — and the expansions longer — lasting an average of 58.4 months.

The last three expansions have been particularly long — running 92 months (from November 1982 to July 1990), 120 months (from March 1991 to March 2001) and 73 months (from November 2001 to December 2007).

But the post-World War II era has also seen some short-lived expansions. The recession that ended in November 1970, for example, led quickly into another that began in November 1973 — leaving only 36 months of economic expansion in between. The recession that ended in July 1980, when Jimmy Carter was still president, gave way to an expansion of only 12 months, with a new recession beginning in July 1981.

That recession ended in November 1982 with President Ronald Reagan's income tax cuts starting to take effect — which led to nearly eight years of economic expansion.

If Obama's expansion were to last as long as the post-World War II average of 58.4 months, the next recession would hit in about 21 months — or in the spring of 2014.

Are the policies being pursued and promised now likely to suddenly propel the current sluggish expansion into a long-term growth cycle like those in the 1980s, 1990s or 2000s?

Federal Reserve Chairman Ben Bernanke does not seem confident that will be the case. As slow as the economy grew in the first quarter, Bernanke told the Senate Banking Committee on Tuesday he thought it grew even slower in the second quarter.

The Fed, he told the committee, expects GDP to grow 1.9 percent to 2.4 percent this year and 2.2 percent to 2.8 percent next year.

"These forecasts are lower than those we made in January, reflecting the generally disappointing tone of the recent incoming data," Bernanke said in written testimony.

Bernanke predicted the unemployment rate would still be "7 percent or higher" by the end of 2014 — or, in other words, past the time when the average post-World War II expansion would have given way to a new recession.

Obama has made chronically high unemployment a new feature of the American economic growth cycle.

Bernanke cited what he called two main sources of risk: "The first is the euro-area fiscal and banking crisis," he said, "the second is the U.S. fiscal situation."

"As is well known, U.S. fiscal policies are on an unsustainable path, and the development of a credible medium-term plan for controlling deficits should be a high priority," said Bernanke. "At the same time, fiscal decisions should take into account the fragility of the recovery."

President Obama's submitted a budget for fiscal 2013 that does not anticipate balancing the budget any time in the next decade. His plan for dealing with the impending fiscal apocalypse is to increase taxes and move ahead with the new entitlement and regulatory programs of Obamacare.

Obama's current tax plan envisions that on Jan. 1, 2013, the income tax rates will increase for every American individual and small business owner earning more than $250,000, and, then, on Jan. 1, 2014, income tax rates will increase for everybody else.

Obamacare not only mandates that by 2014 every individual must buy health insurance, it also effectively mandates that small businesses must buy insurance for their employees once they hire their 50th worker (or pay a penalty) and that taxpayers must subsidize the health insurance premiums for people earning up to 400 percent of the poverty level.

Yes, today we are in the Obama recovery. Sooner than they think, Americans may inherit the Obama recession.