May 22nd, 2015

Six years ago, Jonathan Chait wrote this:

Quite possibly, four years from now we could still be mired in a worldwide depression and Obama could be facing dismal — who knows, even Bush-like — popularity ratings. The world is unpredictable. But isn’t there a pretty decent chance that the economy will have recovered, and Obama’s policies will look fairly wise in retrospect? Do Republicans want to make any political plans for this contingency?

My response:

Sure they have a contingency plan: lie. That’s how they claimed Clinton was not responsible for the booming economy he oversaw. If the economy gets better, claim it was because of actions taken by Republicans in the Bush years which came to fruition later, because of economic conditions completely divorced from Obama, and because of pressures Republicans exerted to shape policies during the Obama administration. Meanwhile, they will blame Obama for every piece of negative news during that time (there is always something bad happening), and will claim he’s the most liberal and worst president ever.

Is Chait new here or something?

I’d call my prediction six years ago as pretty much spot-on. Some claimed that Bush was the real savior (e.g., via TARP and the Fed’s reaction), some simply claimed that it was the “natural forces of the business cycle,” and yes, Republicans have blamed Obama for every last thing that went wrong in between, and yes, they have called him the most liberal and worst president ever.

If anything, I understated it. Republicans not only ignored and misattributed what recovery we did experience, they simply flat-out claimed that the stimulus was an unmitigated failure. And calling Obama “the worst president ever” is perhaps the least savaging of all the names they have called him.

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  1. Troy
    May 22nd, 2015 at 12:06 | #1

    1990s was not a lot to do with Clinton (Democrats got whalloped in 1994 and only took back the House in 2006) but rather the baby boomers hitting their most productive years, their 30s and 40s.

    Internet, Windows 3 & 95 (as much as it pains me to say), Y2K investment in IT, and the rise of big-box retailing and dirt-cheap Chinese imports to stock the shelves with also pushed the economy forward in the late 90s.

    What happened 2002-2007 is not understandable unless you’ve internalized what this graph is saying:

    That’s consumer debt / wages, showing how during and after the dotcom recession US consumers turned to debt take-on to fund their lifestyles, all this powered by a world-class housing bubble that got rolling in 2004 and peaked in 2006:

    shows how rising home prices (blue, 1990 = 100) drove up the debt bubble (red, 1990 = 100), resulting in trillions of bad loans having been made by the end of it in 2007.

    And these trillions didn’t just disappear, they funded millions and millions of jobs in the global economy as the US consumer temporarily found himself completely flush with cash thanks to the home ATM.

    (e.g. Japan’s recovery of 10 years ago had a lot to do with rising sales of its export goods in the US)

    But once the bubble machine stopped, there were ~20 million jobs on the chopping block:

    and thanks to the ARRA we only lost 8M of them.

    Blaming or crediting Obama for today’s economy is odd, though, since like Clinton he’s been a spectator since the first midterm, the electorate having taken the keys away from the Democrats again for some reason.

    The Fed’s 3 waves of QE:

    have a lot to do with where we are now, this $3.6T of money add eliminating any possibility of ‘tight’ credit conditions, which was the least the Fed could do given we’re no longer on a stupid gold standard.

    Things are OK for most people now, but for 6 years into a recovery they’re not particularly great.

    Full-time employment is about 10 million jobs short of where it should be, and housing costs are getting out of control thanks to the supply being stressed by Gen Y (age 16 – 34) wanting to move out now.

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