Tomorrow President Obama gives his second State of the Union address and several pundits are already wondering if the President is going to bounce back in the second half of his term and follow the pattern of one of his predecessors, the “Comeback Kid,” President Clinton. To that I have to laugh.Why? Because the bar that Obama has to get over if he wants to earn a second term was not set by the loveable liberal, Bill Clinton, but instead, by the similarly loveable conservative, Ronald Reagan.
History can be ironic. Despite the fact that many economists and pundits like to call the current period that we are living in today the “Greatest Recession Since the Great Depression”, that phraseology is quite overblown. Yes indeed, what we are living through is a Great Recession, but the truth of the matter is this: our current economic condition is nothing like a Depression.
In fact, our current economy is much more characteristic of the Recession of the early 1980s than anything that happened during the Depression of the 1930s.
To see what I am talking about, let’s go to the video tape. And as a starting point, let’s take a look at a 60-year history of unemployment—after all, don’t we all expect one of the President’s key talking points tomorrow evening to be on the subject of job creation and reducing unemployment?
Exhibit 1 shows the history of unemployment in the United States from 1950 – 2010 as recorded by our infallible record-keeper, the Bureau of labour and Statistics. The full first term periods of Reagan and Clinton and the first two-years of the Obama Administration are specifically annotated in Exhibit 1 to highlight the point of this article.
Photo: Jim Boswell
Do you see in similarities between the unemployment picture early in President Reagan’s term and President Obama’s? For those readers who either have short memories or were not old enough to remember–the first few years of President Reagan’s Administration 30-years ago included high unemployment, high inflation resulting from two rather large “oil shocks”, and a business community that was beginning to feel the effects of a new competitive economic threat from Asia, Japan.
And in the early part of 1980s, people were discouraged. Doomsayers were saying that America had seen its better days, that Japan was going to surpass the United States in its influence, and that young Americans needed to start preparing to live out the rest of their lives with a lower standard of living than their parents.
Now let’s go back to the video tape and check some more of our history out. But this time let’s look at our economic history as defined, not by unemployment, but by the level of our Gross Domestic Product—again as reported by our same infallible and diligent scorekeeper, the BLS.
In order to put things on a contemporary scale with our times, let’s adjust the GDP values for inflation so that we can evaluate our GDP history on the same scale and in terms of current 2010 dollars. Exhibit 2 shows the running average 3-year growth rate by quarter of our GDP (adjusted for inflation) over the past 60-years.
Photo: Jim Boswell
Funny, isn’t it? If you compare the rather frequent ups and downs of our economy over the past 60-years, our current Great Recession does in fact look bad, but it hardly looks to be any worse than the period back at the beginning of the 1980s and especially during President Reagan’s first two years in office.
But look what happened shortly after the lowest point on Exhibit 2. Not only did our economy start growing again, less than four years after bottoming out in 1982 our economy reached 3-year GDP growth levels that we have not experienced since.
“Yeah, Boswell, I know but things are different today than they were back in the 1980s. Our National Debt is higher. Our financial system is in shambles. Health care costs have soared. The Baby-Boomers are about ready to deplete the Social Security System. And the world has changed. It’s harder for us to compete today.”
Hogwash on top of more hogwash. Look at Exhibit 2 again. The Greatest Recession Since the Great Depression (GRSGD) is nothing like it has been made out to be. In fact, if there is really any difference between our economy today and that of the 1980s, it is a result of our own mindset, if not our own leadership.
Quit whining, America. The “GRSGD sound bite” you like to use is symbolic of these times—a time in which you would prefer to summarize complex issues in six words and blow them way out of proportion than you would prefer to deal with the true nature of the beast.
Get over your Pessimism, America. It’s not worthy of you. Since it seems to be your nature to believe things are so bad and that our country is going down the tubes, let’s go back once more to the video tape, but this time let’s break down our economy in terms of GDP per capita. Exhibit 3 shows the last 60-year annual history of GDP per capita adjusted for inflation.
Photo: Jim Boswell
Do you find anything surprising here? Note the somewhat continuous growth in real GDP per capita. Over the past 60-years while the population of the United States has doubled, our economy has grown by a factor of six, resulting in a threefold real steady growth in our GDP per capita.
Note also what happened during the 1978-1982 time period and look at that in terms of where we are today and what is now happening to our GDP per capita measurement.
Granted, GDP per capita may not directly correlate to our standard of living, but really–does anyone really believe that our economy or our American standard of living is lower today than it was in the 1980s or in fact, any prior period of our American history? If so, I challenge you to show me your video tapes. Heck, even though it is faint, based upon Exhibit 3, America is already seeing real growth in our GDP per capita again.
Yes, I will admit, America, we do still have a ways to go to get back on our feet. But when President Obama speaks tomorrow there will be more than just a few independent souls in his audience, like me, who will not be looking for signs of a mid-course correction, but instead, looking for him to provide the type of inspiration and optimism shown by a President who faced a similar daunting task—President Ronald Reagan—before him. And that inspiration would start out something like this:
“I would like to talk with you this evening about what we can do together– not as Republicans and Democrats, but as Americans. . .For too many of our fellow citizens this is a painful period. We must all do everything in our power to bring their ordeal to an end. It has fallen to us, in our time, to undo damage that was a long time in the making, and to begin the hard but necessary task of building a better future for ourselves and our children. We have a long way to go, but thanks to the courage, patience, and strength of our people, America is on the mend. (Ronald Reagan’s Second State of the Union Address).”
And if President Obama succeeds in inspiring the American people the way his predecessor did, he will have my vote for a “second” time in 2012. And in eighteen months I will be looking at the video tapes again to see how he measured up against the benchmark that I have set for him in my own mind.
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