The failed policies that got us into this mess: by the numbers
posted at 2:17 pm on August 5, 2012 by Howard Portnoy
On the campaign trail, President Obama continues to frame the election as a choice between competing visions. Every time there is a glimmer of good news on the economic front, he recycles a paragraph written for him in 2009 and that he has repeated countless times since. “The recovery is accelerating,” he tells audiences at rallies and fundraisers. “America is coming back—which means the last thing we can do is go back to the same failed policies that got us into this mess in the first place. And that’s what’s at stake in this election.”
It’s a convenient dodge against having to address his own record, which he’d be hard-pressed to run on. This is why he cites the cumulative number of jobs added instead of the unemployment rate, which has been above 8% for 42 consecutive months. By avoiding this troubling metric, he is able to divert attention from his boast in early 2009 that unemployment would fall to 5.6% as a result of passing his $862 billion stimulus package.
Technically, the term unemployment rate (singular) in the previous paragraph is inaccurate. In point of fact, the Bureau of Labor Statistics recognizes and computes six separate unemployment rates each month. Each of the rates, known as U-1 through U-6, uses an increasingly detailed data set. The rate we are most accustomed to seeing is U-3, widely considered to be the “official” unemployment rate. It is the proportion of the civilian labor force that is unemployed but actively seeking employment.
The other rates are as follows:
- U-1 : Percentage of labor force unemployed 15 weeks or longer.
- U-2 : Percentage of labor force who lost jobs or completed temporary work.
- U-4 : U-3 plus “discouraged workers,” people who have stopped looking for work because current economic conditions make them believe that no work is available for them.
- U-5 : U-4 plus other “loosely attached workers,” those who would like to work and are ablebodied but have not looked for work recently.
- U-6 : U-5 plus part time workers who want to work full time but cannot due to economic reasons.
The U-6 is perhaps the most comprehensive measure of labor resource unemployment and hence the strongest indicator of economic vitality. It is the one Obama would never dare mention because the numbers suggest that he’s done a worse job handling the mess he inherited than his much-maligned predecessor.
An examination of the line graph and chart indicate that the real unemployment rate, which is currently at 15%, began its climb into the danger zone (shown in red) in the closing months of the Bush 43 administration. The change reflects one of two messes that Bush inherited from his immediate predecessor, Bill Clinton. Clinton bequeathed to Bush the dot.com bubble, which burst on March 10, 2000, and the housing bubble, which Clinton himself inherited—from Jimmy Carter—but exacerbated. During his presidency, Clinton pressured lenders to make risky loans that would “make homeownership more affordable for lower-income Americans and those with a poor credit history.”
Although Bush 43 was not without fault (he compounded Clinton’s irresponsible financial policies with his own profligate spending and expanded government with the creation of the Department of Homeland Security), he did attempt to shrink the housing bubble. In 2003, his administration proposed a new agency to oversee the government-sponsored entities Fannie Mae and Freddie Mac, which had mismanaged their $1.5 trillion in debt holdings against interest rate increases. In response to this proposal, Democratic Rep. Congressman Barney Frank assured Americans and fellow House members:
These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis…. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.
The fact that it was later revealed that Frank personally benefited financially from both agencies is irrelevant. The situation reached a head during the final days of Bush presidency. On December 30, 2008 the housing bubble burst.
Enter Obama, who did inherit a mess as he has reminded the American tediously often. U-6 was at 15.1% at the end of Obama’s first full month in office. In May, the real rate entered the stratosphere (shown in purple) and remained there for the next 20 months. It is hard to say how much blame for the high unemployment rate rests with Bush’s and how much with Obama, but it remains a fact that Obama has been ineffectual at bringing it back down into the merely high orange range. In fact, from June through October of 2011, U-6 was back up in the purple, reaching a high of 16.4% in September. It is notable that during this period, he gave his “You should pass this jobs plan right away” speech in which he asked Congress to pass a second $447-billion stimulus package.
Which is what he hopes to do again if given a second term—that and raising taxes on job creators. His first stimulus did nothing to revive the economy or put Americans back to work, and raising taxes during an economic downturn is sheer folly by his own lights. Yet, that remains his prescription for the future. What he is essentially asking voters to do is give him a blank check to reprise his own failed policies, which have made any mess he inherited—and our lives—immeasurably worse.
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