Over the past several months, President Obama has spent much time pleading for patience on the sluggish economy and ongoing high unemployment, arguing that the economic hole was so deep and the crisis so monumental that a slow recovery — now in its 30th month — was inevitable.
But in making his case, Obama appears to be perpetuating several myths about the recession he inherited and the slow recovery over which he's presided. Among them: 1) The recession was unexpectedly severe. "I think we understood that it was bad, but we didn't know how bad it was," Obama said recently in an interview with a Seattle radio station.
However, several economists had been warning late in 2008 about the severity of the crisis. A January 2009 National Association of Business Economics survey found the "worst business conditions since the survey began in 1982," which was during that deep and prolonged recession.
During his campaign, Obama routinely depicted the downturn in the direst terms, calling it "the worst financial crisis since the Great Depression" in his first debate with Sen. John McCain, R-Ariz.
If Obama didn't know how bad the economy actually was when he was sworn in, he soon found out. Just one month after taking office, the Bureau of Economic Analysis reported that real GDP had fallen 6.2% in Q4 2008, nearly double its earlier estimate, and the biggest quarterly drop since the 1981-82 recession.
2) The country had to dig out of a historically deep hole. Obama often explains the length of the recovery by noting how deep the recession had been.
But while the so-called Great Recession lasted 18 months and sent unemployment to 10.1%, the 1981-82 recession was comparable in length and severity. That one lasted 16 months, and pushed unemployment even higher, to 10.8%.
The difference is that today unemployment is still at an historically high 8.6%, and it's only that low because the labor force has declined. Real GDP is a mere 0.04% above its pre-recession peak. At the comparable point in the Reagan recovery, unemployment had plunged to 7.3%, while the economy had grown 12% above its pre-recession peak, and was still climbing fast.
3) Everyone knew the recovery would take a long time. In his recent "60 Minutes" interview, Obama claimed that "I always believed that this was a long-term project," and "that it was gonna take more than a year. It was gonna take more than two years. It was gonna take more than one term.
But that's not what Obama was saying shortly after he took office. In March 2009, for example, he proclaimed that things were "not as bad as we think they are now," adding that "my long-term projections are highly optimistic.
And his May 2009 budget update predicted the economy would be cooking by 2011, climbing 4% in real terms, with unemployment down to 7.1%. The White House downgraded its forecast later that year, but still pegged 2011 GDP growth at a healthy 3.8% and joblessness averaging 8.6%.
So far this year, quarterly GDP growth has averaged a mere 1.16%, while unemployment has averaged 9%.
4) Recoveries from financial crises are inherently slower. At a Facebook town hall in April, Obama argued that the economy wasn't "growing quite as fast as we would like, because after a financial crisis, typically there's a bigger drag on the economy for a longer period of time.
True enough, economists Carmen Reinhart and Ken Rogoff looked at recent financial crises in other countries and warned that "the recessions that follow in the wake of big financial crises tend to last far longer than normal downturns, and to cause considerably more damage.
But an Atlanta Federal Reserve paper in October challenged that claim. After looking at U.S. recessions before and after the Great Depression, it concluded that "U.S. history provides no support for linking low employment and high unemployment in the current recovery with the financial crisis of 2007-2008.
It's worth noting, too, that many economists in the early '80s wrongly predicted a slow and painful Reagan recovery. The Congressional Budget Office, for example, expected unemployment to be as high as 9.5% in November 1984. Actual figure: 7.2%.
5) Things would have been much worse had Obama not acted. Obama told "60 Minutes" that "we did all the right things to prevent a Great Depression and to get the economy moving again. ... But it hasn't made up for the hole that we created in those six, nine, 12 months before my policies took effect.
While several economic studies have found that without the $825 billion stimulus, the auto bailouts and so on, the recession would have been deeper and longer, leaving millions more unemployed, others have found far more modest effects, if any.
And then there's the question of whether the economy would have recovered faster had Obama pursued Reagan-style policies of permanent tax cuts, deregulation and spending restraint rather than Keynesian stimulus spending, ObamaCare, heavy new regulations, and a series of temporary tax measures.
In any case, it's clear that Obama didn't prevent a Great Depression from happening. As IBD previously detailed, the recession had started to bottom out about the time Obama was signing the stimulus bill in late February 2009, and it officially ended just five months after he took office, when only a small fraction of the stimulus money was at work in the economy.