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Did Obama fix the Great Recession?


Graham Osborn
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I was just listening to Obama speaking in Nevada and was surprised to hear him say (essentially) that he fixed the economy after Bush destroyed it.  In true Taleb spirit, I decided to measure the "return" for presidents bracketing the 4 biggest crashes of the last 100 years:

 

Hoover/ March 4, 1929 – March 4, 1933/ 356-110 (-70%)

Roosevelt/ March 4, 1933 – April 12, 1945/ 110-198 (25%)

 

Nixon/ January 20, 1969 – August 9, 1974/ 686-342 (-50%)

Ford/ August 9, 1974 – January 20, 1977/ 342-414 (21%)

 

Clinton/ January 20, 1993 – January 20, 2001/ 730-1850 (153%)

Bush/ January 20, 2001 – January 20, 2009/ 1850-927 (-50%)

 

Bush/ January 20, 2001 – January 20, 2009/ 1850-927 (-50%)

Obama/ January 20, 2009 – October 23, 2016/ 927-2141 (131%)

 

It would seem that for presidents as for investors it's all about timing.  If only Bush had gotten out a year earlier ;) Clinton gets the award for a well-timed exit.

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"It would seem that for presidents as for investors it's all about timing.  If only Bush had gotten out a year earlier ;) Clinton gets the award for a well-timed exit."

 

Exactly! Lot's of luck and bad luck into this.

 

Obama spent almost his two terms blaming Bush or whenever people mentioned that growth from the recovery was too slow. Bush inherited a gigantic deflating bubble. On a stock market standpoint, the internet bubble was 10 times worst than 2007-2008. You can go back to Prem Watsa's annual letters and he could not believe that the bubble was re-inflating in 2004 or so. So the money moved out from the stock market to the housing market and that bubble had also started by the way in the 90's.

 

If people want to blame someone for the current 16 year malaise (secular bear), don't look at Presidents but, at Mr. Alan Greenspan. This guy did everything to appease every crisis (Greenspan Put) unlike his predecessor Mr. Volcker who did his basic job. Do you think it was easy or popular to raise interest rates like mad to kill off inflation in the early 80's?

 

And to this date or appeasing every crisis is how the system continues to operate.

 

Cardboard 

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I think in general presidents get blamed for and get credit for way too many things they have little control over.

 

I absolutely agree.  I feel like this is the one bipartisan accord still in existence.  In an way, it's very embarrassing that politicians have (or at least sell) such a distorted view of the President's results.  On the other hand, everyone seems to do it, and people in general seem to actually buy it, so maybe it's no less than you'd expect from the politicians.

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I think in general presidents get blamed for and get credit for way too many things they have little control over.

 

I absolutely agree.  I feel like this is the one bipartisan accord still in existence.  In an way, it's very embarrassing that politicians have (or at least sell) such a distorted view of the President's results.  On the other hand, everyone seems to do it, and people in general seem to actually buy it, so maybe it's no less than you'd expect from the politicians.

 

Spot on.  Totally agree that its all about lucky (or unlucky) timing with presidents as it relates to the economy and financial markets. 

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I think in general presidents get blamed for and get credit for way too many things they have little control over.

 

This.

 

Americans in general like to think of our president as having power over a variety of things that in reality they only have limited control over. It's also easier to promote the narrative that Clinton was responsible for the economic boom of the 90s or that Bush caused the recession than it is to actually analyze the factors that contribute to economic events. Narratives mean a lot in politics and both parties are happy to use them so presidents are made out to be far more powerful than they actually are and assume responsibility for everything that happens during their time in office. It's funny how the narrative works both ways though where the opposition party is able to say if only a Rep/Dem was in power they could have done XYZ to fix things. There's little doubt from either side that the office of the president IS powerful enough, it's simply the policy choices they made that lead to the situation.

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Well looking at it the opposite way. If the prez doesn't have much influence on the economy then who does?  If you say Alan Greenspan is responsible for the bust then Yellen is now responsible for the recovery?  Or is the economy this unwavering train that no one can rein in?

 

I think the prez heavily influences the economy. I don't think it is a coincidence that the economy is much worse under republican prez than dems. The president appoints the Fed chair. He can guide the direction of congress on the economy.  Kennedy called for tax cuts in the 60's, to this day I don't know if that was the cause of inflation in the ensuing 15yrs.  If Nixon had won in 1960 maybe the economy would have turned out much much different.

 

Obama didn't have to work hard, he had to make tough decisions like getting Gneither to lead the treasury.  The presided over lots of the bailouts 2009.

 

And there are things he didn't do. Like Bush adding fuel to the fire by saying every person should own a home, or trying to get Social Security to invest in the stock market.

 

Funny thing is Trump says Clinton will be a disaster for the country if she runs the country. Yet he also says Clinton will be another 4 years of Obama. The latter case would be great! 

 

 

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I think in general presidents get blamed for and get credit for way too many things they have little control over.

 

Agree with this... But also think that presidents do have influence over the economy but that influence doesn't necessarily line up with their term in office. Their influence lives on far into the next presidency and it's very hard to tell exactly where their influence starts and stops.

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4 More years of Obama and my now messed up health insurance is not exciting.

 

 

well Obama or no Obama, Obamacare stays. Even if say someone like Trump manages to repeal Obamacare as president, it will live on in some other form.  The genie is out of the bottle and cannot be returned.  When people talk about repeal they generally mean the individual mandate but that is a relatively small number compared to the numbers impacted by medicare and other aspects of obamacare.

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Well looking at it the opposite way. If the prez doesn't have much influence on the economy then who does?  If you say Alan Greenspan is responsible for the bust then Yellen is now responsible for the recovery?  Or is the economy this unwavering train that no one can rein in?

 

I think the prez heavily influences the economy. I don't think it is a coincidence that the economy is much worse under republican prez than dems. The president appoints the Fed chair. He can guide the direction of congress on the economy.  Kennedy called for tax cuts in the 60's, to this day I don't know if that was the cause of inflation in the ensuing 15yrs.  If Nixon had won in 1960 maybe the economy would have turned out much much different.

 

Obama didn't have to work hard, he had to make tough decisions like getting Gneither to lead the treasury.  The presided over lots of the bailouts 2009.

 

And there are things he didn't do. Like Bush adding fuel to the fire by saying every person should own a home, or trying to get Social Security to invest in the stock market.

 

Funny thing is Trump says Clinton will be a disaster for the country if she runs the country. Yet he also says Clinton will be another 4 years of Obama. The latter case would be great!

 

Love your avatar (and your thinking...)

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In my book, Obama did OK, as far as the economy is concerned. While we give a president credit for the stock market performance during his presidency, the stock market certainly did more than OK.

 

Moreover, I had a real concern in late 2008 and early 2009, that we would go into a 1930 style meltdown. I think Obama and Bernanke did a good job reinstating confidence again in the financial institutions (remember Bernanke's "fireside: chat in front of his parents home in North Caroline?), steering the bailouts for GM (despite the gripes about pensioners getting better treatment than debtholders), slowly getting the economy moving again. I think the slow growth after a big meltdown should not surprise anyone, especially some of the laissez faire Republican's. It is well known, that after a debt binge, often a period of slower growth follows.

 

Could some things have been done better? Yes, certainly but I personally think that just avoiding an economic meltdown itself is a huge victory that give Obama, to some extend the late Bush and Bernanke some credit for.

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I go for limited impact.  Just look at what is out of the Prez's control:

 

Energy prices - fossil fuels - incidentally the largest portion of the economy - it is in everything.  Energy prices are the sungle biggest driver of economic performance. 

 

Demographics - the baby boom generation being a good example in the western world and now the aging baby boom.

 

Technological development and breakthroughs.

 

Policies can encourage things in a certain direction and crisis response is important.  But does anyone think that Bush would have behaved differently than Obama in 2009?  Bernanke was in place.  In fact, the bailouts started before Obama was elected. 

 

Luck has an enormous amount to do with it.  And I think that each and every President knows this, before, during, and after their terms. 

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  • 2 weeks later...

I think Obama was very focused on what happens during his 8 years...not beyond it.  Unfortunately what a president does has effects beyond their term.  Look at small business growth eco-system:

 

Sputtering Startups Weigh on U.S. Economic Growth:

 

"That is, tech entrepreneurs are generating good ideas and founding companies at a healthy pace, but those ventures aren’t breaking out into successful big companies.

 

The system for translating good, high-quality foundings into a growth firm, that system seems to have broken,” said Scott Stern, an MIT professor and co-author of the study on startups." (Emphasis in bold added)

 

http://www.wsj.com/articles/sputtering-startups-weigh-on-u-s-economic-growth-1477235874

 

The problem with Obama policies are IMO are pretty bad in long term. The American dream of starting out like Bill Gates or Bezos and building a big corporation is slowly being destroyed.

 

 

 

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Well looking at it the opposite way. If the prez doesn't have much influence on the economy then who does?  If you say Alan Greenspan is responsible for the bust then Yellen is now responsible for the recovery?  Or is the economy this unwavering train that no one can rein in?

 

I think the prez heavily influences the economy. I don't think it is a coincidence that the economy is much worse under republican prez than dems. The president appoints the Fed chair. He can guide the direction of congress on the economy.  Kennedy called for tax cuts in the 60's, to this day I don't know if that was the cause of inflation in the ensuing 15yrs.  If Nixon had won in 1960 maybe the economy would have turned out much much different.

 

Obama didn't have to work hard, he had to make tough decisions like getting Gneither to lead the treasury.  The presided over lots of the bailouts 2009.

 

And there are things he didn't do. Like Bush adding fuel to the fire by saying every person should own a home, or trying to get Social Security to invest in the stock market.

 

Funny thing is Trump says Clinton will be a disaster for the country if she runs the country. Yet he also says Clinton will be another 4 years of Obama. The latter case would be great!

 

Love your avatar (and your thinking...)

 

 

Thanks (I hope you meant it Doo......)

 

So back to the original topic, yesterday's 2-3% rise in the US market shows how the market is deeply worried about the choice of prez.... I am not saying the market is all-knowing or that it is pricing the market efficiently. But investors are telling you what they think with their actions........

 

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Love your avatar (and your thinking...)

Thanks (I hope you meant it Doo......)

 

So back to the original topic, yesterday's 2-3% rise in the US market shows how the market is deeply worried about the choice of prez.... I am not saying the market is all-knowing or that it is pricing the market efficiently. But investors are telling you what they think with their actions........

 

Absolutely (on both counts!)

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