Why the ‘Obama Recovery’ Took So Long

The economy should have roared back. Instead it crawled.

 

President Barack Obama speaks during a visit to Home Depot in Alexandria, Va., Dec. 15, 2009.
President Barack Obama speaks during a visit to Home Depot in Alexandria, Va., Dec. 15, 2009. PHOTO: SUSAN WALSH/ASSOCIATED PRESS

Barack Obama is back, and he wants credit for the booming economy. “When you hear how great the economy is doing right now,” he said in a speech last week, “let’s just remember when this recovery started.” That would be in the summer of 2009, but the story is more complicated.

Milton Friedman was the first economist to notice a pattern in American economic history: The deeper the recession, the stronger the recovery. The economy has to grow even faster than normal for a while to catch up to where it would have been without the recession. The fundamentals of America’s world-leading economy are so strong that the pattern held throughout the country’s history.

Until the past decade. The 2008-09 recession was so bad, the economy should have come roaring back with a booming recovery—even stronger than Reagan’s boom in the 1980s. But Mr. Obama carefully, studiously pursued the opposite of every pro-growth policy Reagan had followed. What he got was the worst recovery from a recession since the Great Depression.

Before Mr. Obama, in the 11 previous recessions since the Depression, the economy recovered all jobs lost during the recession an average of 27 months after the recession began. In Mr. Obama’s recovery, dating from the summer of 2009, the recession’s job losses were not recovered until after 76 months—more than six years.

America also suffered a severe recession during Reagan’s early years, because of the tight monetary policy that broke the back of 1970s inflation. All the job losses from that recession were recovered after 35 months. Seventy-six months after that recession started, the number of jobs was up 12.8 million from the previous peak.

Before Mr. Obama, in the 11 previous post-Depression recessions, the economy recovered the gross domestic product lost during the recession within an average of 4.6 quarters, or a little over a year. It took Mr. Obama’s recovery 14 quarters, or 3½ years, to reach that point. The Reagan recovery took half that time.

Obama apologists argued America could no longer grow any faster than Mr. Obama’s 2% real growth averaged over eight years. Slow growth was the “new normal.” The American Dream was over. Get used to it. Hillary Clinton promised to continue Mr. Obama’s economic policies. America’s blue-collar voters rose up.

The recovery took off on Election Day 2016, as the stock market communicated. Mr. Trump’s tax cuts and sweeping deregulation—especially regarding energy—fundamentally changed course from Mr. Obama. These policies have driven today’s boom, increasing annual growth to more than 3% within six months and now to over 4%.

Will Democrats ever figure out what policies create jobs, economic growth and rising wages? If not, they’ll wake up some Wednesday morning to find they have been routed in a fundamental realignment election, in which they have permanently lost the blue-collar vote—once the backbone of their party.

Mr. Ferrara teaches economics at the King’s College.

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