President Obama should get some credit for pulling the U.S. economy out of a nosedive in 2009 and ending a brutal recession before it became a depression. But voters are feeling punitive and they’re inclined to believe Obama has flubbed the economy, which could cost Democrats the Senate in the midterm elections just a few weeks away.
So why can’t Obama get a break on the economy?
Comparing his record with the four other post-war presidents who served two full terms reveals the answer. Here are the changes for five key indicators during the presidencies of Eisenhower, Reagan, Clinton, George W. Bush and Obama, from the first month of their presidency until October of the sixth year, right before the midterms:
Obama’s record is middling on job creation, lowering the unemployment rate and overall GDP growth. Considering that the economy was in the midst of the worst downturn since the 1930s when he took office, those numbers look pretty good.
The stock market has performed well under Obama, though that’s largely because of extraordinary stimulus measures by the Federal Reserve, which operates independent of the White House. The only better six-year stock-market performance occurred under Bill Clinton in the 1990s, and we know now that by 1998 the stock market was in bubble territory, headed for a 45% correction. (Gulp.)
The biggest letdown on Obama's watch has been stagnant incomes, which is the one category he performs worst in. Disposable income per person, adjusted for inflation, has risen just 4.9% during Obama’s first six years, less than half the average of the five two-term presidents. To some extent that understates the problem with income, because DPI includes government subsidies that don’t come from work, such as unemployment compensation and disability payments. Both types of payments swelled during the last several years. Without them, Obama’s income number would be even worse.
[See related: Can Obama save the American middle class?]
Income measured this way correlates with other data. Median household income, adjusted for inflation, is still about 5% lower than it was in January 2009, when Obama took office, according to Sentier Research. The biggest problem with the job market seems to be newly created jobs that pay less, on the whole, than the jobs that have disappeared. While employers have been creating about 225,000 jobs per month so far this year—a healthy pace of job creation—incomes are only rising by about 2% per year, which is roughly the same as inflation. That means workers can’t get ahead.
Stagnant incomes lower living standards because purchasing power declines. People work the same to afford less. That’s an immensely dissatisfying sensation. And it explains why Obama’s approval ratings have steadily declined during his second term and why Democrats, who have lost credibility on their handling of the economy, could lose six or more Senate seats in November, along with control of the upper chamber.
To Obama’s credit, he has tried to push policies meant to raise incomes, such as a higher federal minimum wage and more stimulus spending on construction projects. Republicans have blocked most of those efforts, citing cost issues and questions about whether they would ultimately help or hurt the economy.
It’s also worth asking whether any policy formulated in Washington — under any president — could solve the intractable problem of stagnant incomes, which was evident even before the recession that began at the end of 2007. Businesses now have the flexibility to hire workers wherever it’s cheapest, and they’re increasingly substituting technology for people. Washington is unlikely to change that.
It's possible that wages will bounce back and resume a trajectory similar to that of the past. But we're also in an era of profound technological change, similar to the Industrial Revolution in the 1800s, and we may still be closer to the beginning of that transformation than the end. Digital technology has already made many jobs and professions obsolete, while bestowing vast riches on select innovators who come up with ingenious new ways to hold a business meeting, watch a movie or hail a cab. The digital revolution has eliminated many middle-class jobs, especially in manufacturing, where assembly-line workers are being replaced by robots and software. So far, new jobs that pay well haven't materialized to replace them. And few in Washington have ideas about how to create such jobs. (Note to politicians: Cutting taxes or raising in itself does nothing to create jobs.)
If Republicans do win the Senate in November, they’ll control both houses of Congress and have the ability to pass whatever laws they feel will help raise incomes. Maybe they’ll have better success than Obama. Or maybe they’ll run into the same immoveable force, and voters will blame them next.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.