Bill Clinton stumbled into the truth about the US economy recently when he conceded that Mitt Romney is right, “It is true, we’re not fixed.”
During the more than three-year Obama recovery, we’ve recovered only 4.8 million private-sector jobs of the 8.9 million lost in the Great Recession.
At the current pace of job creation the past two years (and assuming labor force participation stays constant), the economy won’t return to the Bush low of 4.4 percent unemployment for nine more years.
The current level of private-sector jobs remains nearly 13 million below where it would be if the labor market were back to normal and creating jobs at what economists call a “trend recovery.” And what kind of recovery is it when incomes decline faster than during the preceding downturn?
The Great Recession never ended, not really. It just morphed into the Long Recession.
So things are most definitely not fixed. And in some ways, they’re getting worse. The United States now ranks seventh of 144 nations in the World Economic Forum competitiveness rankings. In 2008, it was first.
Fewer new firms are being formed today than two years ago when the recession ended, according to a Hudson Institute study. US government publicly held debt as a share of GDP was 41 percent in 2008; it’s projected to be 76 percent next year — and, under the most recent Obama budget, it’ll more or less stay at that historically high level for another decade.
The president’s apologists call it “The New Normal,” but America has been here before: Its jobs machine broken, its confidence shattered — the Indispensable Nation seemingly on the verge of irreversible decline.
From the late 1960s through the early 1980s, the economy suffered through a stagflationary nightmare of soaring prices, high unemployment and economic volatility producing four recessions.
Over that span, the stock market fell by two-thirds, adjusted for inflation. Gold, a safe haven from both inflation and economic collapse, rose by more than 2,000 percent.
The Washington elite wondered if the presidency was too big, too complicated, too overwhelming for just one man.
That was the dire backdrop against which Ronald Reagan declared his presidential run in November 1979. Watch his speech on YouTube today, and you’re struck by its relevancy to America’s current troubles. It’s almost as if the Gipper, gone almost a decade now, is reaching across space and time to speak powerful words of comfort and inspiration, of hope and change, to his countrymen:
“There are those in our land today, however, who would have us believe that the United States, like other great civilizations of the past, has reached the zenith of its power; that we are weak and fearful, reduced to bickering with each other and no longer possessed of the will to cope with our problems.
“Much of this talk has come from leaders who claim that our problems are too difficult to handle. We are supposed to meekly accept their failures as the most which humanly can be done. . . I don’t believe that. And, I don’t believe you do either. That is why I am seeking the presidency. I cannot and will not stand by and see this great country destroy itself.”
Reagan spoke. Then Reagan won. Then Reagan acted — launching a revolution in economic freedom that produced what economists now call the Long Boom.
Tax rates fell by 60 percent, regulations by 40 percent. And over the next generation, those pro-market policies helped free up the private sector to create 50 million jobs as the economy grew by 130 percent in real terms. Stagflation was relegated to the ashbin of economy history.
Where the Obama recovery has taken three years to restore about half the jobs lost in the recession, the Reagan recovery took just a year to recover all the lost jobs.
Reagan liked to say that freedom is never more than one generation away from extinction. Turns out the same is true for economic common sense. When the Long Boom finally ended — partly due to dumb government housing policy, partly due to dumb Federal Reserve monetary policy — a new president and a new Congress once again faced a daunting economic challenge.
But the Obamacrats wanted nothing to do with the Reagan solution. Instead of using what was right with America — the free enterprise system — to fix what was wrong with America, they chose a different path. Trickle-down government. A trillion dollars spent on pet projects, bureaucrat salaries, and temporary tax relief.
White House economists predicted this ersatz New Deal would ignite a multiyear, Reaganesque boom. It didn’t happen. Instead of a robust economy they promised, expanding at more than 4 percent in 2012, it’s growing at less than 2 percent.
And instead of unemployment headed toward 5 percent, it’s nearly 8 percent — and close to 11 percent if you count all those folks who’ve stopped looking for work.
When Obama took office, the United States had a fiscally unsustainable safety net and an uncompetitive, growth-sapping tax system. Today? Same.
And tomorrow? Well, Team Obama just published a magazine-style manifesto that promises more tax hikes, more spending, more debt and more ObamaCare in pursuit of more redistribution and more equality. How exactly is this supposed to produce anything better than what it’s already given us?
The alternative is Reaganomics 2.0, which is what Mitt Romney is offering. It’s a growth-and-opportunity agenda built around four “Es”: boosting entrepreneurs, tapping our vast and growing energy resources, reforming education and modernizing entitlements for the 21st century. It sees government as an enabler of the business-led growth, not a replacement for it.
At its heart, Romneyomics, like Reaganomics, is about shifting resources from the wasteful public sector to the productive private sector. It’s worked before, and there’s no reason it can’t work again. It’s never not worked.
As Reagan put it back in 1979, “There remains the greatness of our people, our capacity for dreaming up fantastic deeds and bringing them off to the surprise of an unbelieving world.”
The New Normal is a diagnosis, but it’s not our destiny. We can do better. And by once again embracing economic freedom, we will.
James Pethokoukis is editor of The American Enterprise Institute’s Enterprise blog.