With the onset of the election, the economy continues to remain the number one issue on voters’ minds. President Obama would have them believe he turned the economy around from the abyss after the financial crisis of 2008, and were now on a forward path because of his policies. The problem with this story is that it doesn’t stand up to scrutiny. Almost every broad-based measurement of economic well-being shows stagnation or decline over his term. Given this, voters should look towards the Republican nominee for president, Mitt Romney, to lead this country towards economic revival.
For starters, look at the jobs market. 23 million Americans continue to remain unemployed, underemployed or stopped looking for work. The only reason the unemployment rate declined from its recessionary peak of 10% to its current level of 8.1% is from millions of Americans dropping out of the labor force. Since the unemployment rate is calculated by dividing the amount of people unemployed by the labor force, all it takes for the unemployment rate to drop is for individuals to become discouraged and stop registering their unemployed status to the government. The labor force participation rate stands at a 60 year low for males. Instead of finding a job millions of Americans have found it more convenient to live off the current administration’s expansion of the social safety net. In fact, the unemployment rate calculated with the same labor force participation rate held on January 2009 would be through the roof at 11.3%.
There has been 4.5 million private sector jobs added over the past 30 months that Obama likes to talk about. But, compared to other recoveries after a severe recession, 4.5 million jobs is disappointing to say the least. If this jobs recovery kept up with the pace of the Reagan recovery, roughly 7.5 million more people would have a job. Based on the past 20 years of job growth our economy is currently 13 million jobs below its trend line.
On top of that, a recent study demonstrated that most of the jobs lost during the recession were middle-class jobs while majority of the new jobs are lower class. In other words, not only have the quantity of jobs added under Obama undershot expectations, but they have also suffered in quality.
Given the dismal state of job and income growth, it’s no surprise that household incomes have actually fallen more during the so-called recovery than the actual recession. Under the latest estimations, household incomes fell 2.6% during the recessionary years and by 4.8% since.
Though the scariest picture of them all is the coming sovereign debt crisis this country faces similar to the situation facing many European countries. The current administration’s appetite for debt fueled government spending in the name of stimulus and wealth redistribution may be the final straw that breaks the back of our economy, equalizing us with the debt ridden, depressed economies of Europe. Since taking office, the Obama administration has run four consecutive trillion dollar deficits, increasing the national debt by 5.6 trillion in less than four years. The national debt as a percentage of GDP, which measures our liabilities against assets, has risen from an already too high rate of 70% when Obama took office, to over a whopping 100%. Under current budget projections, this ratio only worsens under an Obama second term, as the national debt continues to grow faster than the economy.
In short, economic statistics clearly reveal that the US economy has stagnated under the current administration’s policies and faces financial ruin in the near future if we don’t reverse course. Ultimately, voters will decide whether we stay with the status quo of misery or turn the corner and select a new set of policies with a Romney administration, which will foster prosperity that this country is so used to.
Daniel Wilson is a recent graduate of James Madison University and holds a degree in economics.