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Saturday, November 28, 2020
Banking The Economist: A Retrospective on the Past Eight Years

The Economist: A Retrospective on the Past Eight Years

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There is a great deal of talk these days about “alternative facts” and how they seem to be replacing the truth in our political discourse. I can’t imagine that this trend has staying power, but if it does, please remember that I am 6′ 8″ tall, strikingly handsome, was an All-Star centerfielder for the Cardinals, and regularly sell out concerts at the Rose Bowl!

More seriously, ongoing research and tracking by Public Policy Polling indicates that the vast majority of Republican voters think that the unemployment rate went up during the past eight years (it was basically cut in half) and the stock market went down (it basically tripled). In fact, only 27 percent recognized what actually occurred. With that backdrop, it is worth taking a few moments for a fact-based, emotion free retrospective as the baton passes from one president to the next. As always, I will confine my musings to things economic. Other things are equally important (or perhaps more so), but outside the realm of my expertise.

When President Obama took office, he was facing a massive recession with job losses exceeding 700,000 per month, markets in a state of shock and free fall, a massive housing crisis with soaring foreclosures, a decimated financial sector, and, for largely unrelated reasons, an automobile industry that was virtually bankrupt. He turns the reins over to his successor with an unemployment rate that is at levels traditionally considered “full employment” and an economy that has posted 75 consecutive months of job growth. Markets are healthy, the financial system is thriving, housing is well on its way to recovery, and the automobile industry is expanding. That is the big picture and, by any objective measure, history will justifiably confer high marks on this era. It is not, however, the whole story for at least two reasons.

First, some of the numbers beneath the surface are not so encouraging. For example, income inequality has expanded in recent years and wage rates are only now beginning to increase. While the deficit as a percentage of gross domestic product has fallen notably in recent years as the recovery has taken hold, there are structural factors in place that will cause it to explode in the next few years if not addressed (mainly having to do with a growing number of retirees from the Baby Boomer population). Regulatory burdens have notably increased, thus reducing the global competitiveness of the US in energy, manufacturing, transportation, financial services, and other sectors. The tax structure encourages firms to keep profits abroad and even restructure their domicile to foreign countries. All of that to say that the economy is a very complex thing, and there are always things pulling in multiple directions.

Second, although we inevitably attach the names of presidents to things that happen in any era, the reality is that one person does not define what happens. The best (or worst) laid plans of any president can be thwarted or aided by Congress or the Courts; the actions of countries around the world can profoundly affect economic outcomes; and things as diverse as weather, natural disasters, and emerging technologies can alter the path of U.S. business activity at warp speed. Moreover, some decisions made by others take a while to manifest themselves. For example, the financial crisis that will be forever linked to President Bush had its origins in policies that were in place before he came into power as well as in those he promoted. Thus, presidents often get the credit and the blame for things that are far removed from their ability to control or, at times, even influence.

The bottom line is that, while the economy is always a mixed bag and no one individual determines what happens, President Obama left business conditions a lot better than he found them, and for that history will remember him well, as well it should. Let’s hope the next president does the same.

Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.


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