As we witnessed the peaceful transition of power on January, 20th, despite the rancor occurring during the election itself, it seems fitting to think a bit about Obama’s legacy. There have certainly been many analysts and talking heads who have expressed their views, but are their views grounded in truth? Without that, their words are as empty as the wind, and as of little value.
I think we first need to separate the man from his policies, and examine some results of those policies. From some aspects, he is an historic and admirable figure. He is he first non-white President in our country’s history. He is personally quite likable, and leaves office with an approval rating still hovering around 50%. People personally liked him, they recognized his historical significance, and wanted him to succeed.
Look at the way he carried the country in his two elections, but also look at the results when just his policies were the election issue—as he himself asserted during both mid-term elections. His party was shellacked. One would be hard pressed to find a presidency where the incumbent party lost more seats, not only in the House and Senate, but also in Governors mansions and state legislatures. This too was an historic shift.
Some proofs offered for Obama’s success by the aforementioned analysts are:
· The historic rise in the stock market during his term in office
· The number of jobs created since the 2008 recession
· The lessening of racial divisions over the last eight years
This post is going to focus on just the above domestic issues, as those are what he ran on. His foreign policy though, has been an unmitigated disaster on a number of levels and does deserve scrutiny (see Unfit to Serve for more on this topic).
As to the first item, several pundits and supporters have made the claim that Obama presided over one of the greatest rises of the stock market in history, comparing him to Presidents Coolidge and FDR. These three men all share one thing in common in regards to this claim. All three sat in the President’s office after a depression/major recession. This means the market went from a period of being overvalued to one of being undervalued—they went from a period of being artificially high to one where they were artificially low. This is not very meaningful in itself, but is misleading.
First, Presidents do not control the stock markets or run the economy (yet at least). They can at best only set the conditions that allow for the markets to work through their policies. Coolidge is largely credited with restoring confidence in the office of the President after the previous administration’s scandals, and implementing policies that improved conditions for working class families.
FDR implemented the New Deal, creating policies and leading efforts on legislation that helped make big government what it is today. While he initially saw a run up in the stock market, his policies set the stage for political stagnation for the rest of his twelve year term. It is only in the U.S. the 1930’s depression is called the Great Depression, and it is the only place that progressive policies were so extensively implemented. Even FDR’s Treasury Secretary, Henry Morgenthau, was frustrated with FDR’s unwillingness to change direction when his policies were not working.
We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong, as far as I am concerned, somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. ... I say after eight years of this Administration we have just as much unemployment as when we started. ... And an enormous debt to boot! We are just sitting here and fiddling and I am just wearing myself out and getting sick. Because why? I can’t see any daylight.
The Obama Administration was more of the same as FDR, only with a slight twist. The quantitative easing led to an increase of money supply, a money supply that could not find its way to consumers and businesses as the banking regulations under his administration stifled lending to the very people who could help the economy grow—for those who had jobs at least. More on that in a moment. The lending situation is especially true for local community banks, those that support their communities and the small businesses that drive our economy. Instead those monies found their way into the capital market, resulting in a type of capital inflation.
But back to the stock market run-ups. Below is a graph of the Dow Jones averages for the last one hundred years. The times of the Coolidge, FDR, and Obama Administrations have each been circled, in order from left to right. A brief comparison of the timeframe for each of these runs is also made, because it is not just the magnitude but the length of time that should be considered.
I find the results intriguing. FDR and Obama implemented similar policies, and achieved relatively weaker results. Both supported policies that were almost the polar opposite of those Coolidge attempted to implement. In the case of both Coolidge and FDR these changes did not last, but in Coolidge’s defense policies changed dramatically under his successor (Herbert Hoover).
Figure 1: Stock Market Over Last Hundred Years
While the increase in the stock market looks good on paper, did it translate into jobs? His supporters say yes. This is the second item in the preceding list of accomplishments.
In the past full employment was considered to be obtained with an unemployment rate of about 5%, and a labor participation rate averaging about 66%. So why, if our economy is actually improving, do we now have an unemployment rate of about 4.7% but a labor participation rate hovering near 60%? A participation rate level that has not been seen in forty years. If the economy were really growing, and people were able to get jobs, we would see a drop in the unemployment rate while the participation rate stayed steady, or a steady unemployment number with increases in the participation rate. Maybe because someone cooked the books with this economic statistic in order to support a narrative? For more on the change, see A House of Cards.
But this is not the only relevant measure that we can look at. The quality of the jobs also matters. Many of the ‘new’ jobs have been part time jobs, and many of those were created to reduce part-time workers hours so they would be below the 32 hour threshold to avoid Obamacare insurance requirements. We have this situation in Virginia. Our current governor claims to have created about 90,000 jobs. The problem is that almost all of these were part-time jobs which reduced people’s hours below the 32 hour threshold, and reduced their ability to earn a living. Many of these jobs nationally have been in relatively low paying sectors (such as hospitality, retail, and sanitation). Finally, we can look at individual’s take-home pay. It has been stagnant or declining for the last fifteen years or more. None of this supports the story of having a vibrant growing economy.
And we can say the same thing about inflation. The reported numbers remain quite low, between one and two percent. However, the prices of many individual goods in grocery stores and other places have increased by twenty to thirty percent over the last four to five years, and many consumer items now come in smaller packages to reduce the sticker shock. The use of substitution for determining the basket of goods to be included in the inflation figure, and the exclusion of volatile items such as food and energy, further weaken this measure’s usefulness.
So, let’s look at the third item his supporters cite, the improvement in racial relations. The chart below comes from the Washington Post and includes polling of individuals for about the last twenty-five years. The number of those believing race relations are good has decreased from a high of about 64% to about half that in just a few years. So much for hope and change.
Figure 2: Changes in race relations: 1990-2016.
Finally, we can look at the right direction/wrong track polls. Since April, 2013 there have been relatively few weeks where the wrong direction measure has been under 60, and for one week it went as high as 80%. These too, are not figures that indicate most people think our economic, governance, and security issues are being addressed.
So what is Obama’s legacy? I guess it depends on whether you measure it in charisma or results. I’ll take the later as you can take it to the bank, and use it care for others. The latter is our purpose. A lot can be gained by looking at whether unity, peace, and prosperity were created; or where division, strife, and covetousness . History will eventually determine Obama's legacy.
 Folsum, Burton W., Jr., New Deal or Raw Deal?, p. 144, Threshold Editions, 2008.