Playing with Fire: Are You Better Off Than You Were Four Years Ago?
I have many drafts of things I started writing but didn’t finish. This is one of them, started back in April when Republican operative Brad Blakeman appeared on Fox News, citing an unnamed poll indicating 70% of Americans answered the question “are you better off than you were four years ago” with “no.”
Now this question, targeting Obama with Ronald Reagan’s famous 1980 quip, has been all over the media for a few weeks, it’s time for my typically late two cents.
This is a very high-risk tactic, one that can go very badly for the GOP. Because the fact is, unlike 1980, the country is in very much better shape economically than it was on election day 2008.
It’s true that in autumn of 1980, unemployment was lower, running at or above 7.5% compared to today’s ~8.2%. But inflation had been higher than 10% for 18 months. Bracket creep meant people were paying higher taxes without any real income gains. Paul Volcker, Jimmy Carter’s Fed Chairman, had started to wring inflation out of the economy, resulting in a sharp recession in mid-1980.
Today, unemployment is a big problem. But inflation? It’s miniscule (too low, in fact). Recession? No, we have growth. Too slow, in large part because of ongoing deleveraging and persistently low demand, but still growth.
Remember the “misery index”? In 1980, the unemployment rate plus the inflation rate was more than 20, which was higher than at any time since World War II.
As of July 2012, it was 9.7 and in August (CPI numbers to be released on 9/15), it will likely be around 9.3. Which is, by the way, lower than it was four years ago (11.4).
But the misery index is contrived. What measures about economic well-being are more substantive?
The chart on page 9 of a report from Sentier Research, endorsed by the Romney campaign, shows the Republican argument. It boils down to unemployment and median household income. So let’s look at these.
The FRED series UNRATE is the standard measure of unemployment. Today, this figure stands at 8.1%. When Obama was elected, they say, it was 7.8%. True enough. And three weeks later it was 8.3%. Was this 0.5% increase in the unemployment rate Obama’s fault? Don’t be ridiculous. If we’re going to hold presidents responsible for job gains and losses, certainly they have to be given a chance to do something first. The first thing Obama did upon entering office is get the American Recovery and Reinvestment Act (the stimulus) passed. It was signed into law on February 17, 2009 — after the data was collected leading to the 8.3% unemployment rate of February 2009. So by any reasonable reckoning, headline unemployment is lower now than when Obama took the reigns.
By March 2009, UNRATE had risen to 8.7%. And in April it rose to 8.9%, in June to 9.4%, and in July 9.5%. ARRA spending and tax cuts didn’t start to impact the economy for a couple of months, so one of these numbers is the most reasonable baseline for Obama. And no matter which it is, UNRATE is lower now.
The preferred alternate measure of unemployment for many on the right (especially the far right) is U6, which is the unemployed, plus those who’ve become discouraged and are no longer counted as unemployed, plus those working part-time when they’d rather be working full-time. In August, this metric was 14.7%; 14.7% of Americans fall into this broad category of un- and under-employed. But three weeks after Obama was inaugurated, it was 15.1%. And in the months before the stimulus put the brakes on the downturn, U6 rose to 15.7%, then 15.8%, then 16.4%.
So, by this measure of the Romney campaign’s choosing, we are better off than we were before Obama took office. Unemployment was screaming upward. Now it’s inching lower, passing where it was when Obama came to power.
Now, about median household income. It’s fallen. A lot. So I’m going to give the GOP this one, though I think it’s worth looking at the breakdown of income distribution. I’ll put it on my to do list.
What else is there? Fortunately, quite a lot. In addition to the standard econometric data, there are indexes that try to estimate overall economic well-being.
- There’s the University of Michigan Consumer Sentiment index. Current reading: 74.3. Reading in January 2009: 61.2. Up 13 points.
- There’s the Conference Board’s Consumer Confidence index. Current reading: 60.6. Reading in January 2009: 37.4. Up 23 points.
- There’s the Conference Board’s Present Situation index. Current reading: 45.8. Reading in January 2009: 29.7. Up 16 points.
- There’s the Conference Board’s Expectations Index: Current reading: 70.5. Reading in January 2009: 42.5. Up 28 points.
- There’s the Bloomberg Consumer Comfort Index: Current reading: -47.3. Reading in January 2009: -53. Up 5.7 points.
- There’s the S&P 500. Current level (9/11/12): 1433.56. January 20, 2009 level: 805.22. Total return: Up 90%.
Are you better off than you were 4 years ago? For millions of people who are unemployed or underemployed, the answer is no. But for hundreds of millions, the answer is certainly yes.
Asking the “are you better off” question right now is a very high-risk tactic that depends on (1) an economy that gets incrementally worse in the next two months and (2) a massive case of collective amnesia about just how bad things were four years ago.
For me, the only reason to push this line is if things are desperate. You don’t throw the Hail Mary, you don’t bring in a fifth infielder, if you don’t think it’s the only way you can win.