Obama’s Economic Triumph
How Obama steered the economy back from the brink—and exposed a conservative lie. By Michael Tomasky.
This Friday morning will bring the new jobs numbers. If recent months and indicators are any sign, the news will be at least pretty good, and maybe really good—remember, the last several months have all been revised upward by significant amounts after the initial estimates. Yes, there is still a ways to go. But everything is moving in the right direction. The president and his people jumped the gun pretty badly in 2010 with their talk of “Recovery Summer.” But 2013 might finally be Recovery Summer. And by next summer, most experts say, the unemployment rate really will be back down to the normal range. In other words, the Republicans are about out of chances to do what they’ve been trying to do since Barack Obama took office—i.e., wreck the economy. Now more than ever, Obama has to ignore these people and get through the next three-plus years just trying to make sure they can’t screw up the economy any worse than they already have.
Let’s first review some recent economic news. Consumer confidence is at a five-year high. Personal debt is back to normal levels, which is a big deal. Housing investment is up, real-estate prices are rebounding everywhere, the stock market is breaking records. The political-economic news has been no less comforting to the right. Kenneth Rogoff and Carmen Reinhart’s arguments against higher deficit-spending have been debunked. And as winter melted into spring, with oddly little commentary, Obama soared past George W. Bush in the net job-creation sweepstakes: Obama has now created a net positive of more than 1.6 million jobs in four-and-a-half years, which is better than Bush’s mark of 1.08 million in all eight of his years.
Many economists believe that things would be going even better right now without the austerity imposed on us by the Republicans who run the House of Representatives. It is true—and this is one point on which liberals, me included, haven’t been entirely consistent—that “austerity” also includes the higher taxes on the rich achieved through the fiscal-cliff deal, and the end of the 2 percent payroll tax holiday. So Obama does bear some responsibility for those particular forms of austerity, although the budget cuts the GOP insisted on have had considerably more negative impact on the economy than the tax increases.
But here’s another point about those tax increases that arguably outweighs the austerity point, or is certainly far more important in historical terms: when you raise taxes, duh, you increase revenues. And so the deficit is going to tumble this year to its lowest level since 2008 ($845 billion or even lower, the way things are going), and next year to a level barely more than 2 percent of GDP, which is a level at which it’s not even worth worrying about. The deficit is going down because revenues are going up, and revenues are going up, the Congressional Budget Office says, “because of the growing economy, from policy changes that are scheduled to take effect during that period, and from policy changes that have already taken effect but whose full impact on revenues will not be felt until after this year (such as the recent increase in tax rates on income above certain thresholds).”
This is huge. Republicans, as we know, have spent years saying that raising taxes doesn’t increase revenues. It’s an argument that sits at the very core of supply-side theory. It’s been an absolute article of faith. They tried to say this when they passed the Bush tax cuts, and they’ve tried to say it since. But they were just lying. The Bush tax cuts cost the treasury $1.3 trillion by the low estimates and $1.8 trillion by the higher ones. They continued to make these claims long after the facts were in, but facts never stopped them, of course.
So let’s review. The only thing the Republicans have done to the economy since 2001 is make it worse. The tax cuts did not generate the great surge of activity that was predicted. Against Republican predictions and conservative economic belief, they drained the treasury. Later, GOP-led deregulation nearly destroyed the global economy. Then, when the new guy tried to rescue the economy, they opposed everything he tried. Today, with indicators clearly on the right track and clearly suggesting that more stimulus would help the recovery, they of course oppose that, too.
Obama isn’t going to get anything out of these people. He’s just going to have to Heisman them—stiff-arm them, keep them out of the way, prevent them from doing more damage. No grand bargain. That’s obviously over. No entitlement talks or concessions. And on the debt ceiling, Obama should push them right to the wall. The Republicans want more budget cuts and/or entitlement “reform” in exchange for raising the debt limit later this summer or early in the fall. But in an improving economy, and with the public aware that we’ve already endured deep budget cuts, Obama should be sitting in the catbird’s seat.
There’s a lot that I’m sure Obama would like to do that he’s never going to have a chance to do. A carbon tax or cap-and-trade regime is probably not going to happen. Ditto comprehensive, progressive tax reform. But he is going to be the president who led the country back from the edge of economic disaster and who managed to get a tax increase that helped disprove (yet again) the key trickle-down falsehood.
And, if the economy keeps growing at the pace of the past year, he stands to leave office having created several millions net jobs. That pace is 169,000 jobs per month. Multiply that by the 42 remaining months, and you come up with 7.1 million, on top of the 1.6 million net jobs already created. Those sure aren’t Clinton numbers. But they sure aren’t Republican numbers either. And the American people will know this.