The 'new normal' excuse

Even a talker as talented as President Obama can’t do the impossible: Persuade Americans that the three-year-old economic “recovery” is anything other than pathetic.

Growth is sinking back toward the recession red zone and unemployment’s firmly stuck at over 8 percent for 42 straight months.

It’s no wonder a new Gallup poll finds 75 percent of us “dissatisfied” with the direction of the country. Or that a CNN survey finds that twice as many Americans (39 percent) think the economy is still mired in recession than think it recovering (19 percent).

So Obama isn’t even trying to make the “Morning in America” case for his re-election. He now concedes that “the economy isn’t where it needs to be” and that “we have a lot more work to do.” But he’s quick to add that the Not-So-Great Recovery isn’t his fault, saying: “Throughout history, it has typically taken countries up to 10 years to recover from financial crises of this magnitude.”

Falling far short: President Obama’s team promised that his stimulus would bring unemployment down to 5.6 percent in 2012.

Obama, you see, is a believer in the “New Normal,” a phrase popularized on Wall Street, where gloomy economists cite the slow growth, high unemployment and high debt that supposedly afflict countries after severe banking crises.

But the president’s a recent convert to this religion of low expectations. He certainly didn’t buy it when he took office. Back then, he predicted aquick and powerful economic rebound — if only lawmakers implemented his policies, such as the $800 billion stimulus. Which Congress, then with strong Democratic majorities, quickly did.

In 2009, for instance, the White House said the economy would be growing at a brisk 4.3 percent annual clip this year, with unemployment down to 5.6 percent. Indeed, Obama’s top economists predicted we’d be smack in the middle of a fat streak of high-growth years: 4.3 percent in 2011, followed by 4.3 percent growth in 2012 and 2013, too. And 2014? 4 percent growth.

Ronald Reagan and Bill Clinton would have nothing on Obama, these predictions suggested. Back then, Team Obama scoffed at the dismal New Normal faith.

Yet we’re still waiting on the boom that they promised. Now they’re evangelizing for “the New Normal” — and hoping enough voters buy the excuse.

But was America somehow predestined for a Long Recession? No, says a new study from the Cleveland Fed; it concludes that “in general, recessions associated with financial crises are generally followed by rapid recoveries.” One notable outlier: the Obama recovery.

Ah, but America suffered both a banking crisis and a housing crisis. The study speculates that this might explain today’s tepid growth, but fails to arrive at a conclusion.

And new research from the San Francisco Fed strongly suggests the housing collapse isn’t to blame for the weak recovery. If housing were the villain, it points out, the states that didn’t suffer such big home-price declines would be doing a lot better than those that did. And they’re not.

So what’s the problem with the Obama recovery?Why is it the weakest since the Great Depression?

Maybe it’s the Obama policies, like a stunning disregard for the trillion-dollar deficits that are likely already a dead weight on growth. Or maybe it’s the Obama guarantee of more tax hikes and regulation that makes US business too worried to hire and invest.

But it’s not too late to start shrinking unproductive government, cut debt and reduce penalties on work and investment — just like in those recoveries that we used to know.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

James
Pethokoukis

What's new on AEI

AEI Election Watch 2014: What will happen and why it matters
image A nation divided by marriage
image Teaching reform
image Socialist party pushing $20 minimum wage defends $13-an-hour job listing
AEI on Facebook
Events Calendar
  • 27
    MON
  • 28
    TUE
  • 29
    WED
  • 30
    THU
  • 31
    FRI
Monday, October 27, 2014 | 10:00 a.m. – 11:30 a.m.
State income taxes and the Supreme Court: Maryland Comptroller v. Wynne

Please join AEI for a panel discussion exploring these and other questions about this crucial case.

Tuesday, October 28, 2014 | 9:30 a.m. – 12:15 p.m.
For richer, for poorer: How family structures economic success in America

Join Lerman, Wilcox, and a group of distinguished scholars and commentators for the release of Lerman and Wilcox’s report, which examines the relationships among and policy implications of marriage, family structure, and economic success in America.

Tuesday, October 28, 2014 | 5:30 p.m. – 7:00 p.m.
The 7 deadly virtues: 18 conservative writers on why the virtuous life is funny as hell

Please join AEI for a book forum moderated by Last and featuring five of these leading conservative voices. By the time the forum is over, attendees may be on their way to discovering an entirely different — and better — moral universe.

Thursday, October 30, 2014 | 2:00 p.m. – 3:00 p.m.
A nuclear deal with Iran? Weighing the possibilities

Join us, as experts discuss their predictions for whether the United States will strike a nuclear deal with Iran ahead of the November 24 deadline, and the repercussions of the possible outcomes.

Thursday, October 30, 2014 | 5:00 p.m. – 6:15 p.m.
The forgotten depression — 1921: The crash that cured itself

Please join Author James Grant and AEI senior economists for a discussion about Grant's book, "The Forgotten Depression: 1921: The Crash That Cured Itself" (Simon & Schuster, 2014).

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.