Reagan VS Obama: Who inherited the worse economy?

I have been quite puzzled the last few days since hearing former President Bill Clinton proclaim that the recession that President Obama inherited could not have been corrected in four years by any President… not even him. I felt this statement needed to be looked at more closely in order to check the validity of his assertion. I was very young during the Reagan years having been born only two months before he was elected in 1980. However, I remember, as a child, hearing about how bad the economy had been…and words like “recession”, “inflation”, and “unemployment”. Now of course, at the time, these terms meant very little to me as my greatest concerns were whether or not my dad would let me watch cartoons instead of a boring rerun of Star Trek or if we were going to order pizza for dinner instead of having dad’s famous hamburger surprise.

Having closely researched the failing economy at the end of the Carter administration into the beginning of the Reagan administration, I am left to wonder if the recession of the early 80s at the beginning of Reagan’s presidency was not only comparable but, in many cases, much worse than the recession of 2008 into 2009 as Obama’s term as president began. First of all, Reagan didn’t inherit one recession…there had been three separate recessions that began in 1969 with each recession being worse than the one before. So you could say that Reagan inherited an economy that had been sputtering along for a decade and was in the midst of the worst recession yet… where as President Obama had inherited a recession which had been preceded by 54 months of job growth and economic growth of over 3% per year.

When President Reagan swore into office in January of 1981, the unemployment rate was 7.5% and the labor force as a percentage of population was 63.5% (which up until now, was the all time low in civil participation in the workforce). At the end of his first term, in January of 1985, the unemployment rate had gone down to 7.3% after having peaked at nearly 11% in 1982. You might be thinking that a .2 point drop overall from 7.5% to 7.3% isn’t really that impressive, but when you see that he lowered the unemployment rate and increased the labor force to 64.5% in the same time frame it becomes much more impressive…and by the end of his second term, in January of 1989, the unemployment rate was 5.4% with a workforce participation rate of 66.3% only about 1 point off from the all time high in workforce participation rate since the statistic began being calculated. Now, lets compare Obama’s record.

When President Obama swore into office in January of 2009, the unemployment rate was 7.8% (only slightly higher than the number Reagan inherited) and the workforce participation rate was 65.7%. In the closing month’s of President Obama’s first term, unemployment stands at 8.1% after having peaked at just over 10% (nearly a full point lower than the trajectory of the recession in the 80s which topped out at 11%) with a workforce participation rate of 63.5% (returning to the all time low at the beginning of the Reagan administration). It needs to be said that if the workforce were as large as it was when Obama took office, the unemployment rate would be a whopping 11% right now.

Furthermore, when Ronald Reagan took office America was suffering double-digit inflation, with the CPI (Consumer Price Index) registering at 11.3% in 1979 and 13.5% in 1980 (25% in two years). The Washington establishment at the time argued that this inflation was now endemic to the American economy, and could not be stopped by anyone (sounds a lot like what Mr. Clinton said), at least it couldn’t be fixed without a calamitous economic collapse (heard that one before too). However, by the end of 1983 (Reagan’s third full year as President) , inflation rates had fallen to 3.22% which is only slightly higher that the inflation rate at the end of 2011 (Obama’s third full year as President) which stood at 3.15%. However, Obama was not handed the same hand when it comes to inflation. In fact in the two years leading up to Obama’s first term, the inflation rates were 2.85% in 2007 and 3.85% in 2008. Again, Ronald Reagan was handed a much worse hand than was Barrack Obama.

Not to mention that all of the above was accompanied by double digit interest rates in the early 80s, with the rate peaking at 14.14% in 1981. The poverty rate started increasing in 1978, eventually climbing by an astounding 33%, from 11.4% to 15.2%, but by the end of his presidency Reagan had managed to stop the upward trend and lowered the poverty level back to 14%. A fall in real median family income, that began in 1978, snowballed to a decline of almost 10% by 1982, but by the end of the 1980s, median household incomes had increased by 15%. In addition, from 1968 to 1982, the Dow Jones industrial average lost 70% of its real value, reflecting an overall collapse of stocks. Now, before you go investigating my numbers, and respond by saying the actual decline of the stock market during this time period was closer to 23%…please realize that I have done my homework and factoring in the catastrophic inflation rate of the period the loss in value is equivalent to 70%. Folks back then would have been better off putting their money in mattresses than investing in the stock market.

To be fair, Obama inherited some similar numbers in some aspects. Interests rates, however, have not been above 5% since he took office. Therefore, once again, Reagan stepped into yet another worse situation than did Barrack Obama. President Obama did inherit a rising poverty level, however, at the end of his first term the level continues to rise to a rate of over 15% with a record number of Americans on food stamps. President Obama did inherit a crashing stock market which lost more than half its value between 2007 and 2009 and, to be fair, much of those losses have been recovered. However, the market has yet to return to the high it had reached in 2007. By this point in the Reagan presidency, the market had not only regained all of its losses, but had climbed by 20% over the previous high.

By all accounts, I would say that the recession of the early 80s was either as bad or worse than the recession of 2008. It feels silly comparing the two…kind of like the age old “my dad can beat up your dad” argument, but when someone argues that he inherited the worst economic crisis sense the Great Depression, and nobody could have fixed it…that argument needs to be challenged. Even if I stipulate (which I don’t), that they were equally bad on all counts or even the recession of 2008 was worse in some aspects… There is absolutely no argument that the Obama “recovery” is in any way comparable to the tremendous turnaround of the American economy during the Reagan administration.

I’ve already shown that economic indicators such as the unemployment rate, workforce participation, poverty rate, stock market, and median household income were all much better under President Reagan. However, the truest indicator of a strong American economy is the growth rate or GDP (gross domestic product) growth. In Reagan’s third year, 1983, the economy grew at a staggering rate of 7.25% and by the end of the Reagan recovery the growth rate had maintained an average of above 4% adding more than 20 million jobs. In Obama’s third year, 2011, the economy grew at a rate of 1.65% which was a slower growth than the previous year, 2010. That is a very troubling sign, since the recession officially ended in May of 2009. The Obama campaign team likes to boast about 4 million new jobs created and 30 months of straight private sector job growth. However, these numbers are misleading and underwhelming.

The 4 million jobs added don’t include the jobs that have been lost during his presidency…there has actually been a net loss of 300,000 jobs since he assumed the office in 2009. Also, the 30 months of straight job growth is not a feat never before accomplished by a president. Actually, the record for number of straight months with job growth is 92 months which began in 1982 under Ronald Reagan and continued until 1990. Hell, the 30 months that the Obama campaign is so boastful about doesn’t even come close to the 54 straight months of private sector job growth that occurred during George W. Bush’s presidency. In fact, the 30 months of straight job growth becomes even more lack luster when you realize that for the past six months our economy has added a mere 93,000 jobs per month on average. That’s about 50,000 jobs short of what we need to just break even with population growth, 100,000 jobs short of where we need to be in order to see any real progress in economic growth, and about 200,000 jobs short of the bar set by President Reagan.

So…Mr. Clinton, I feel that not only was it possible to have fixed the recession of 2008 in one term…I have conclusive proof that it HAS been done before. Hell… President Clinton, himself, inherited a pretty bad economy only a couple years removed from a recession and an unemployment rate over 7% and he turned things around as well. I’m so sick of liberals whining and crying about George Bush and the awful recession and poor pitiful President Obama who couldn’t have possibly risen to the bar that he had set for himself in 2008 with all his lofty campaign promises. Time to grow up, grow a pair and grow this economy…or get out of the way and let someone who knows what they’re doing take over.