Obama's Jobs' Spin Speaks to Desperation

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With the last pre-election GDP and jobs reports now in hand, let's look at the case for reappointing Barack Obama as America's CEO.

By the end of his second term, George W. Bush was a failed CEO. At 1.68%, economic growth during the first 15 quarters of Bush 43's second term was the worst of any presidency since 1952. At just over 0.5% per year, the average annual growth of total employment during Bush 43's eight years in office was even lower than that of the previous record-holder, Bush 41, whom the voters fired after one term.

The American people hired Barack Obama to turn the economy around. Upon taking office, he implemented a bold economic plan based upon Keynesian stimulus, both fiscal and monetary.

In terms of the increase in federal debt held by the public as a percent of GDP, Obama's fiscal stimulus was the biggest in America's peacetime history. In terms of the percentage increase in the size of the monetary base, Obama's monetary stimulus was the biggest in history, period. And, Obama's economic program failed-utterly and completely.

Despite getting the economic measures that he wanted, real economic growth during the first 15 quarters of Obama's presidency averaged only 1.49%. This is the lowest among the 15 presidential terms since 1952. And, the growth in total employment during the first 46 months of Obama's presidency was only 0.04%. The previous record low, set by Bush 43, was 1.68%.

In case anyone was wondering why Bill Clinton was the star of the 2012 Democratic National Convention, the comparable numbers for his second presidential term were 4.39% annualized real GDP growth and a 7.22% gain in total employment.

Failed CEOs generally produce three things: bad results, good excuses, and desperate spin. George W. Bush showed both humility and class by not seeking to explain or justify his terrible performance.

In contrast, Obama has made excuses and spin the pillars of his reelection campaign. At this point, this is all he's got. The only idea for creating jobs that Obama has voiced recently is to hire 100,000 teachers. In other words, he is hoping that $10 billion/year of fiscal stimulus will do what $862 billion failed to do.

But wait! Haven't we just had two good monthly jobs reports in a row?

In truth, the last two employment reports were mixed. Adjusted to the labor force participation rate that obtained when Bush 43 left office, the unemployment rate declined from 11.3% in August to 10.7% in October. However, many of the jobs that have been created in the past two months have been low quality "part time for economic reasons" positions. In terms of the broadest-based reported measure of unemployment/underemployment, which is compiled by Shadow Government Statistics, things actually got worse during the past two months. The "SGS Alternate" rate increased from 22.8% in August to 22.9% in October.

All of this having been said, for a CEO hired to effect a turnaround to point to two halfway decent months after four years on the job is "spin" of the most desperate kind.

By this time in his first term, America's other post-war turnaround CEO, Ronald Reagan, had produced real GDP growth averaging 3.21% and total employment growth of 6.03%. And, in addition to a sharp recession and high unemployment, Reagan also had high inflation to deal with.

The slogan in "improv" is "Just go with it". So, what if we were to simply accept the Obama administration's claim that the last two jobs reports signified an improving economy? It would be the final nail in the coffin of Obama's case for reelection.

A CEO is paid for two things: 1) knowing what the desired results are; and, 2) having a mental model of reality that allows him/her to achieve those results. If the economy is now, finally, at the last minute, starting to mend, it would completely invalidate Obama's Keynesian model of economic reality.

Obama's first act as CEO was to "invest" $862 billion to implement his fiscal stimulus program. Federal deficits, and therefore the degree of fiscal stimulus being provided by the federal government, have been declining since their peak in FY2009. If the economy were to be finally starting to improve now, it would suggest that fiscal stimulus retards, rather than accelerates, economic growth.

CEO Obama also believes in the efficacy of monetary stimulus, based upon an ever-depreciating dollar. Despite the Federal Reserve's announcement of QE3, the monetary base actually contracted by 1.3% during the past two months, and it shrank by 1.1% over the past 12 months. If the economy is improving now, this fact would invalidate Obama's belief in monetary stimulus.

Even if the economy were to have improved modestly during the past two months, this would be far too little, far too late, to provide any justification for reelecting President Obama. And, even if one were to be impressed by two months of tepid results after four years of economic agony, positive change now would completely invalidate Obama's economic worldview. To give a president with a defective model of economic reality another four-year term would be like hiring a doctor who believed in treating patients by bleeding them.

All this having been said, while it is amazing that the American people would even consider giving a CEO with a performance record like Obama's another term, it is even more amazing that the best candidate that the Republican Party could come up with to oppose him is in serious danger of losing.

The Republican Party is either the party of economic growth, or it is nothing. On Tuesday, the Republicans are primed to lose a number of important races because so many of their candidates chose to be nothing.


Louis Woodhill (louis@woodhill.com), an engineer and software entrepreneur, and a RealClearMarkets contributor.  


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