Barack Obama: job destroyer

The president tried to run some victory laps on Friday after the official unemployment rate fell to 8.1 percent. This is a bit like the guy who came in last claiming he won. Let’s take a look at the real numbers.

Below is the labor force participation rate. This is the percentage of the population that works. You will see that it is at historic lows. When the economy grows, new jobs are created, and people who wouldn’t work otherwise go find work. When the economy is in a recession (or depression), people stop looking for work and drop out of the labor force. Based on the labor force participation rate, which of the two things is happening, a growing economy or a receding economy?

Just to drive home the point, here is a graph showing the number of people who have abandoned the workforce altogether.

What are these people doing? They are staying on unemployment, they are living off of savings or they are a husband and/or wife who would normally work and cannot find a job. This is what happens during a depression.

Speaking of depression, what is even worse is that a record number of people are filing for disability insurance, whether they need it or not. In a flush economy, these people would find jobs, but because the economy is falling to pieces, they have given up and turned to the government.

The typical retort is: Obama inherited a bad economy. But our president adopted policies that made a weak economy even worse. Take a look at the Obama recovery compared to all other recent recoveries.

Bottom line: Obamanomics do not work. The recession is deep and not recovering. You can best compare the Obama stimulus plan to the last two lost decades in Japan, where there has been trillions of stimulus spending with nothing to show for it. What does work? Massive cuts in government spending. After World War I and World II, we cut federal government spending in half. This freed up capital for the private sector, which invested it and created jobs. Take a look at this chart, which shows government spending as a percentage of GDP:

After World War I, we cut government spending, and we had a massive economic boom. After World War II, we did the same thing, and we had a boom that lasted more than two decades. I would even point out for Clinton Democrats out there, that spending also went down in the late 1990s, and the economy boomed. Clinton rightly declared that the era of big government is over, but unfortunately many people didn’t get the message. The solution is clear: do the exact opposite of what the Obama administration wants to do, ie, cut spending, and the economy will begin to heal.

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About Geoff B.

Geoff B graduated from Stanford University (class of 1985) and worked in journalism for several years until about 1992, when he took up his second career in telecommunications sales. He has held many callings in the Church, but his favorite calling is father and husband. Geoff is active in martial arts and loves hiking and skiing. Geoff has five children and lives in Colorado.

18 thoughts on “Barack Obama: job destroyer

  1. These are great points Geoff. Do you have a source or link for the second to last chart comparing the recoveries? Thanks.

  2. In the United States today, we pay people to stay unemployed. Makes sense, right?

  3. What part of the jobs lost are unproductive work aka government jobs? How many unproductive jobs were created during the Bush administration? How many in the Obama administration?

  4. Cbiden, I am hoping you are the brother of Joe Biden. Anyway, I don’t have exact figures on that, but I do know that a LOT of unproductive government jobs were created during the Bush years, on a federal, state and local level. There has not been a significant decrease in federal employment, in fact I believe it is still climbing. However, some states and counties and cities have had to tighten their belts, which is a good thing. I’d be interested in seeing some figures, and if I spot some I will post them here.

    Btw, Bush sucks. Obama is worse, but they both are horrible. Clinton was an OK president in my book, especially in hindsight and compared to his successors. So, if you want to get into a Republican vs. Democrat fight, well, I mostly care about results and ideology. I would take Clinton over either Bush any day.

  5. Having keen memories of the Clinton years, I never thought I would say this: I, too, wish for the Clinton years.

  6. What proof do you have that post-war growth comes because the government cut backs? It seems to me that the consensus of most economists would be the opposite. The growth comes because of the enormous government investment in the economy in the years preceding the post war growth. The war is the cause of economic growth. The government gives the economy a huge jump start with war spending of that magnitude.

    It’s easy to praise Clinton economics because he succeeded in balancing the budget. But it also should be noted that the circumstances he was working in were entirely different than those of Obama. With a roaring economy, he had the luxury of a great amount of political and economic mobility. Plus, people on the right like Gingrich, deserve a lot of credit for keeping pressure on Clinton to balance the budget at the expense of his philosophical desires for greater government spending.

    If Clinton were in Obama’s shoes, he would have done the same exact thing, as Clinton himself has said. (I’m of the opinion that Romney would have done the same exact thing as Obama, in spite of his rhetoric. When you are President of the United States of America and the economy is in free-fall, you don’t have the luxury of slavishly following some fixed ideological position when 90% of your economic and business council on the right and left are screaming that you have to save Wall Street and save Detroit. You have to do what Obama did.)

  7. Geoff, thanks for the post. I was actually thinking the same thing over the last few days of posting something like this.
    If we start talking real numbers, where unemployment is around 14.5 percent, then maybe more people will realize that things are worse than we imagine. And no, paying people to be on unemployment does not count as employed people, even if they have given up looking.

  8. Nate, economists say all kinds of nonsensical things, so frankly I don’t take most of them very seriously. There is a group of economists right now calling for more govt stimulus, even though as the graph shows we have been stimulating like crazy. Stimulus will cause inflation, which is a horrible tax on the poor and middle class.

    Your claim about war spending was addressed extensively by Hayek. His point is that the purpose of a healthy economy is not only jobs and employment. If this were the purpose, we would legalize slavery of all unemployed people and have full employment. The purpose of a healthy economy is economic growth and productivity so you can buy stuff and have leisure. Both world wars involved rationing and nominal growth, but the people could not buy anything because, to use one example, all auto factories were used to make tanks and jeeps. Virtually no cars were built from 1941 to 1945. So, the claim that World War II caused a huge boom in the economy is fatally flawed because it involved 1)massive government employment that was forced in most cases (the draft) and 2)rationing and massive government control and 3)falling purchasing power for people because they couldn’t buy anything. This was not a healthy economy, this was a wartime slave economy, which is not what anybody wants on a permanent basis.

    It was actually the tax cuts and cuts in government spending in 1946 that caused the ensuing boom, which lasted basically until the 1970s (with some very brief and shallow recessions).

    True economics involves using common sense. The government can only raise revenue two ways, either by printing (which causes inflation and crowds out the private sector) or taxing (which causes capital to flow offshore and not be invested). The record clearly shows that cutting government spending frees up capital for investment, which causes economic growth and stimulates the economy. We have seen that three times in the last 100 years, as the graph shows.

  9. Nate: I believe that you are misinformed about what the government “had” to do to address the economic downturn on several levels. First, the most important issue isn’t even an economic one — it is the proper role of government. If you see it as the role of government to pick and choose which businesses make it and which don’t, which depend on public support and receive extraordinary intervention and which don’t, then the approach you suggest becomes a possibility. However, like many conservatives, I don’t see that as a proper or even a permissible role of government. If we note that the Democrats essentially decided to save their historical constituency and to sell Chrysler to the very unions that are a core Democratic constituency, then I think you may get a flavor for why such government intervention isn’t merely not desirable, but not even permissible.

    Chrysler would have been better off in a managed bankruptcy. I have worked through managed bankruptcies and such an avenue would have worked out far better than socializing risk and rewarding risky financial investments. The suggestion of the Obama administration’s appointed lackey to oversee Chrysler that it just couldn’t get financing is historically inaccurate — it had access to such financing. What it couldn’t get in a managed bankruptcy was a loan to union members to buy the company — instead Obama gave them a government handout to do so. Is that a proper role of government? I believe it is beyond outrageous.

    With respect to the numbers, the numbers game being played by the Obama administration significantly distorts and under-counts the jobs lost and that remain displaced because entrepreneurs cannot get credit due to Democratic initiatives (think Dodd-Frank). What the bail-outs did was prolong the pain that could have been cured much faster and more effectively through a regular economic cycle and trusting the market to correct itself by allowing in more sensible and competitive businesses.

    The jobs numbers that came out yesterday vindicate precisely what I am saying — the “recovery” is sputtering because of the Dodd-Frank retraints on borrowing and the massive Federal deficit. What these numbers show is permanent job displacement that is no longer counted. What they show is that we are getting rose colored glasses that are a lie on which to base assessment of Obama’s so-called “recovery.”

    In this election, the real issue is the massive Federal deficit that is strangling our economy and will continue to do so. The real issue is the failure of the Obama administration to even suggest a budget that cuts the deficit — let alone one that effectively addresses the deficit. What we have is a massive failure at the highest level to do the most essential job –presenting a budget that at least shows some possibility of addressing the deficit issues. What has been presented is not merely laughable but treason — a tax increase on the rich that already pay more than 70% of all taxes and that only adds less than $50 billion to supposedly address the $15,000,000,000,000.00 budget deficit.

    Instead of a credible budget to address the massive and strangling deficit from the Obama administration, we get class warfare and 3 years of campaigning based on class warfare.

  10. The growth during the Clinton years and reduction of the federal deficit was due to: (1) A vast increase in market size and market efficiencies from the advent of the internet marketing; and (2) a peace dividend that was the result of the Reagan and Bush I successes that made the United Stated the single world power.

  11. Blake is right. And so, not only is he a fantastic linguist and philosopher, but he is very savvy on contemporary economic and political issues.

    Mr. Ostler, I stand in awe of you.

  12. The denominator for the labor participation rate is the population age 16 and older, including those born in 1946 who turned 65 in 2011. Also, in the Mansfield household we’ve been able to keep the rate at a targeted 50% in keeping with counsel we received from Spencer Kimball, Ezra Taft Benson, Gordon Hinckley, and Henry Eyring. If a percent or two of families shifted to such a pattern, more prevalent in the early 80’s than in the 90’s and 00’s, I am glad for them.

  13. John Mansfield,

    Re: Comment 13 — Yeah, society is *literally* paying the price for not following that counsel more closely.

  14. The labor participation rate is even worse than the chart – – if you look at male participation rate in the labor force. We are presently at a male participation rate equal to 1945 when hundreds of thousands of soldiers were looking for jobs in the civilian economy.

  15. Unfortunately, the Obama war on women has included enslaving them to jobs they must take whether they want to or not because their husbands cannot find work.

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