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In making his case for re-election in the face of historically high unemployment and sluggish growth, President Obama has a simple and straightforward argument.
Things were terrible when I arrived, he says, thanks to Bush-era policies of tax cuts and deregulation. We stopped the decline, but the ditch was so deep that it will take time to get out. Still, we are making progress, even if it isn't as fast as everyone would like.
So the last thing we want to do is return to the failed Bush policies that, he says, drove us into the ditch.
That argument appears to be working. More people continue to blame Bush than Obama for the current poor state of affairs, and some surveys show that consumer confidence has recently increased.
But each part of Obama's argument is based on claims that are not accurate:
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Bush tax cuts and deregulation caused the recession.
At a campaign rally, Obama said Romney is "just churning out the same ideas that we saw in the decade before I took office . . . the same tax cuts and deregulation agenda that helped get us into this mess in the first place."
It's a standard Obama talking point. But it's not true. Bush's tax cuts did not cause the last recession.
In fact, once they were fully in effect in 2003, they sparked stronger growth — generating more than 8 million new jobs over the next four years, and GDP growth averaging close to 3%.
Those tax cuts didn't explode the deficit, either, as Obama frequently claims. Deficits steadily declined after 2003, until the recession hit.
Nor was Bush a deregulator. Conservative Heritage Foundation's regulation expert James Gattuso concluded, after reviewing Bush's record, that "regulation grew substantially during the Bush years."
Even the Washington Post's fact-checker, Glenn Kessler, gave Obama's claim three out of four "Pinocchios," saying "it is time for the Obama campaign to retire this talking point, no matter how much it seems to resonate with voters."
What did cause the economic crisis? The housing bubble. And that, in turn, was the result of a determined federal effort to boost homeownership by, among other things, pressuring banks to lower lending standards.
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I stopped a second Great Depression.
Another frequent Obama claim is that "we did all the right things to prevent a Great Depression." But this, too, is false.
The economy had pretty much hit bottom by the time Obama took office, and long before his policies were in place. The worst declines in monthly GDP and employment, in fact, occurred before he was even sworn in.
What's more, the recovery officially started less than four months after Obama signed the stimulus into effect, when only a small fraction of the stimulus money was actually in the economy. Plus, other Obama economic interventions came either after the recession had ended — including his GM (GM) bailout — or have been widely judged to be failures.
When economists Alan Blinder and Mark Zandi tried to determine what ended the so-called Great Recession, they said President Bush's TARP program and actions by the Federal Reserve were "substantially more effective" than anything Obama had done.
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My policies are working.
In his recent two-minute campaign ad, Obama claimed that "as a nation we are moving forward again." But while the overall economy has grown somewhat since Obama's recovery started more than three years ago, several other important indicators have actually gone backward.
Median household incomes, for example, have dropped $3,000 — a 5.7% decline — since the Obama recovery started. Income inequality has reached new heights.
There are 659,000 more long-term unemployed than there were in June 2009, and the share of people working has dropped to levels not seen in 30 years, according to the Bureau of Labor Statistics.
Meanwhile, there are 11.8 million more people on food stamps and nearly 2.7 million more in poverty than when the Obama recovery started.
And while Obama likes to tout the fact that 4 million net new jobs have been created since February 2010, what he doesn't say is that most of those are low-wage jobs that replaced better-paying jobs lost during the recession.
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A slow recovery was inevitable.
Obama dismisses the slow and painful recovery by saying that he knew the road would be long. "I always believed that this was a long-term project (and) that it was going to take more than a year," he has said. "It was going to take more than two years. It was going to take more than one term."
The reason, Obama argues, is that recoveries from financial crises are always slow. "After a financial crisis, typically there's a bigger drag on the economy for a longer period of time," he said. But Obama didn't trot out this excuse until his own economic policies failed to produce the growth he had promised.
Obama's first budget, released in February 2009, predicted "rapid growth" that would "push down the unemployment rate to 5.3% by the end of 2013." In March 2009, Obama boasted that "my long-term projections are highly optimistic."
In August 2009, his economists predicted economic growth rates above 4% this year and next. In April 2010, Vice President Biden predicted job growth of "between 250,000 and 500,000 a month."
It was only after the actual results starting coming in far below expectations that Obama started laying blame on the financial crisis and asking for more time.
And his claim that financial crises inevitably lead to sluggish recoveries is at least open to debate.
While some economists make that claim, others dispute it. A November 2011 paper by economists at Rutgers University and the Cleveland Fed, for example, concluded that "recessions associated with financial crises are generally followed by rapid recoveries."
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Nobody could have done any better.
One of Bill Clinton's biggest applause lines at the Democratic convention was when he said that "no president — not me or any of my predecessors — could have repaired all the damage in just four years."
But historically, deeper recessions have been followed by faster recoveries.
"You can't find a single deep recession that has been followed by a moderate recovery," is how Dean Maki, chief U.S. economist at Barclays Capital, put it in August 2009.
Yet despite the depth of the downturn, Obama has presided over the slowest economic recovery since the Great Depression.
In fact, what has been noteworthy about Obama's recovery is how frequently it has "unexpectedly" underperformed economists' projections.
To get a sense of how dismal Obama's recovery has been, consider this: Since World War II, there have been 10 recoveries before Obama's. Had Obama's merely performed as well the average of all those recoveries, the nation's GDP would be a staggering $1.2 trillion bigger than it is today, and 7.9 million more people would have jobs.
