Recently, the Des Moines, Iowa newspaper, the Register, endorsed Mitt Romney for president, basing its decision on economics. It did endorse the 2009 economic stimulus, giving credit to Obama for that, but now wrote that what would put America back to work was “a renewed sense of confidence will spark renewed investment by American companies” and that would come with Mitt Romney, even though it admitted that his short-term economic proposals were similar to Obama. So it’s all about confidence.
The comment section on the paper’s website were full of people ripping Obama for the abject failure of his economic policy and how he was leading the country to economic disaster along with scores of people praising Romney’s business success and referring to all the great things that happened the last time taxes were cut.
It’s enough to make you cry.
These things called facts
See the chart associated with this article. It shows how many jobs the United States economy has gained or lost each month for the last several years based on data from the Bureau of Labor Statistics. It shows the boom in the 2005-2007 period, the bust that occurred in 2008 and the return to job creation from 2010. It also shows when Bush left office and when Obama arrived.
The first, obvious, conclusion to draw from this graph is that we are not spiraling down to economic disaster in terms of employment; jobs have been created steadily for over two years. Of course the crash of 2008-2009 created massive unemployment and that is taking a long time to work off. Thus the unemployment rate is still high, if slowly declining.
The second point from this graph should also be obvious, but isn’t: The economy works on a time lag. Actions taken today will have an impact over the next few months or a year or more. Just as George Bush can’t be held responsible for what happened to the U.S. economy in the first few months of his administration, Obama can’t be blamed for the job losses that occurred in the first few months of his term in office.
So it isn’t fair to count all those losses in the first few months against his job creation record.
Just who blew up the economy?
This graph alone ought to be proof against the idea that Obama is destroying the economy, but of course it isn’t. Certain memes circulate on economic debates, phrases and slogans repeated and repeated even when they actually make no sense. I’ve previously written about the problems with people being obsessed with the deficit. Paul Krugman has again and again written derisively about the “confidence fairy,” the “bond vigilantes” and the “inflation fairy” – three economic concepts dearly loved by the right-wing and the wealthy but unsupported by any data.
Other graphs could address those issues. A graph of inflation could show that there hasn’t been any inflation. A graph of interest rates on bonds would show that the U.S. is not having any trouble financing its deficit. A graph of business perceptions about the economy and graphs of cash held by business might help show why “confidence” in candidates for office also has little or no impact on investment decisions.
Other graphs could show you what happened the last time we tried to cut taxes with the rationale that doing so would increase revenue for the government and how that has never worked.
In short, we know what the Republican economic theory is, and we know it’s never worked.
Yet another graph that showed economic performance in different administrations would support this conclusion from the co-founder of GMO, an asset management company with $100 billion under management. “History speaks pretty clearly that the markets do better with Democrats. Republicans’ ideas of what constitutes fiscal responsibility simply are not good for the stock market.”
Behind the graphs
Behind the accusation that Obama has destroyed our economy is the idea that further spending cuts would be a good thing to do in a time of reduced economic demand. Even the International Monetary Fund has had to reconsider that notion. In a technical discussion in a side bar in the IMF’s World Economic Outlook October 2012, evidence is presented (and graphed) that the “fiscal multiplier” is larger than many have thought.
What that term refers to is this: If you take out $1 in government spending, or raise $1 in taxes, how much does the economy contract? Does a dollar reduction produce a dollar contraction in the economy (a multiplier of 1) or of 50 cents (a multiplier of .5). A comprehensive but less technical discussion of this issue can be found in the Financial Times. If this multiplier is, in fact, larger than thought, then the policies of the Republicans are even worse for the economy than expected.
Graphs can be “spun” and can be misleading also, but they do have a way of forcing you to confront things. Go back and look at that job creation graph one more time and then try to defend the idea that Obama has “wrecked” the economy.
Final election update
With one week to go, the race has stabilized with a small lead for Obama. He remains three or more points ahead in states with 277 electoral votes (based on Pollster data). Nate Silver, the guru behind 538.com, still predicts an Obama win with 73 percent probability. Over the past two weeks the poll data has been very stable with no significant changes at all. Some states, like Ohio and Iowa, have flipped back and forth from “leaning Obama” to “Obama lead” but this reflects only tiny changes in the underlying numbers.
The asymmetrical part of the race is that if Romney is ahead in a state, he’s generally way ahead — there is exactly one state where he has a lead, but the lead is less than eight points. That means he is pretty much guaranteed 191 electoral votes from the 23 states he is ahead in. Obama, by contrast, has six states (56 EV) where he leads by two to eight points. Obama is ahead by eight or more points in 15 states with 184 EV.
If you go on the standard assumption that Democratic voters are more likely to be affected by turnout related issues — weather, problems at the polls, etc. — then Obama should win unless there is a major disruption on election night. But he won’t win by much.
Next week I’ll be publishing my guide to election night. This lays out the election night hour by hour and indicates which states would be declared for one candidate or the other and allows you to see which way the trend is running.