by Dr. Roy Cordato
Senior Economist, Emeritas
This has been the mantra of President Obama and the excuse given by his supporters, most recently Bill Clinton, for why during the recent recovery economic growth has been so anemic and job creation rates have been low. The assumption behind this claim is that the deeper the recession the slower the rates of economic growth during the recovery and the longer it will take for any stimulus to actually stimulate. The fact is that there is no economics that backs this up, not even Obama’s beloved Keynesian school. I have been studying and teaching economics for over 30 years. I am familiar with all of the major schools of thought when it comes macro economics and business cycle theory–Keynesian, Monetarist (Chicago), supply side, and Austrian. Indeed I have taught all of them at one time or another. None of the business cycle theories associated with any of these schools suggest the relationship between depth of recession and recovery that Obama is putting forth. In fact Keynesian stimulus policy is supposed to give a short run kick in the pants to an economy. It was never intended to work at all in the longer term.
A quick look at the Reagan recovery exposes the truth. Reagan faced a much slower growth rate than Obama and bounced off of it much more quickly. In the first quarter of 1982 GDP dropped by a whopping -6.4%. One year later, the first quarter of 1983 it grew by a robust +5.3 percent with the rates in the following quarters of 1983 being 9.3%, 8.1%, and 8.5%.
The slowest GDP decline faced by Barack Obama was more than a full percentage point better than Reagan at -5.3% in the first quarter of 2009. One year later GDP growth was an anemic 2.2% and the best he’s been able to accomplish since then is 4.1% in the fourth quarter of 2011, with nothing coming close to that since then.