October 14, 2008
Dean Baker and John Schmitt
TPMCafé (Talking Points Memo), October 14, 2008
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See accompanying video produced by Brave New Films
In his 1980 presidential debate with Jimmy Carter, Ronald Reagan famously asked the American people whether they were better off than they had been four years ago. Enough voters answered “no” to give Reagan a decisive victory in the election.
Senator Obama is posing the same question today, since Senator McCain promises to continue the economic policies of the Bush administration. One of us (John Schmitt) recently compared all the major indicators of economic well-being in 2008 and 2000.
On 23 of the 25 measures selected, the economy was doing better in 2000 than 2008. The deterioration was sharpest in the measures that concern us most. For example, the unemployment was just 4.0 percent in 2000. The most recent data show the unemployment rate at 6.1 percent. While family income was higher in 2008 than 2000, the gain over these 8 years was a pathetic 0.4 percent, compared to 14.7 percent growth in the Clinton years. Real wages actually fell in the last 8 years, after rising 8.2 percent in the Clinton years.
The percent of the population without health insurance coverage increased from 14.0 percent to 15.3 percent. The share of the country living below the poverty line rose by 1.2 percentage points.
The ratio of federal debt to GDP rose sharply — from 57.3 percent in 2000 to 65.8 percent in 2008. Over the same period, the ratio of foreign indebtedness to GDP rose from 13.6 percent to 17.9 percent. We won’t even talk about the price of gas.
Other than the modest increase in family income noted earlier, the only other major indicator that shows the economy doing better in the Bush years than the Clinton years is productivity growth. Productivity increased by 21.9 percent in the Bush years compared to 15.9 percent in the Clinton years. This is a good productivity performance, but it’s not much to hang an election campaign on, especially when these gains haven’t translated into economic improvements for the typical voter.
In fact, the economic bind facing Republicans in 2008 is far worse than what the Democrats were looking at back in 1980, when voters handed Carter a crushing defeat. By our count, the economy performed better during the Carter years than it did under Bush. By 12 of our 23 measures (two of the recent measures were not available in the earlier period), the economy was doing better in 1980 than in 1976. By comparison, only two of our 25 indicators are better now than they were in 2000.
Many people, even those who voted in 1980, are surprised to hear that as high as the unemployment rate was that year — 7.1 percent — it was actually 0.6 percentage points lower than it had been in the year before Jimmy Carter took office.
Real family income was 1.6 percent higher at the end of the four years of the Carter presidency than it had been at the beginning. By contrast, family income had risen by just 0.6 percent over the prior four years. (In eight years under Bush, real family incomes are up just 0.4 percent.)
Several measures, of course, clearly deteriorated during the Carter years. Inflation in the last year of the Carter presidency, for example, was 10.9 percent (because of a faulty measure, the inflation rate reported at the time was 12.5 percent). Real wages also fell 2.2 percent during the Carter years, although this was a smaller drop than the 2.9 percent decline in the prior four years.
Not everyone remembers back a full four years, and for people who just remembered the last year, the picture was certainly not good. Inflation and unemployment were rising and wages were falling. The economy had slipped into recession in 1980 and employment fell by 1.1 percent, the equivalent of 1.5 million jobs today. It is likely that many voters were thinking about whether they had gotten better off over the last year when President Reagan posed his question, not the last four years.
In Senator McCain’s case, it really won’t matter whether voters think about just the last year or the last 8 years, the picture is bleak in either case. That may not be entirely fair. The economy’s performance at any point in time will always be determined to a substantial degree by factors that are not under the president’s control. But, that is how the game is played, just ask President Reagan.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer. He also has a blog on the American Prospect, “Beat the Press,” where he discusses the media’s coverage of economic issues. John Schmitt is Senior Economist at the Center for Economic and Policy Research (CEPR).
