The 2012 election has entered the final stage in a dead heat. As the Republicans look to take down President Barack Obama, they're focusing on the piddling economic recovery as proof his policies have failed. It can be summed up in a singular question, oft repeated at the GOP convention in Tampa: Are you better off now than you were four years ago?
Clearly, Mitt Romney's supporters are looking to capitalize on a negative view of the pace of recovery, an unemployment rate still north of 8%, a housing market only beginning to stabilize and households still struggling to reduce accumulated debts at a time of stagnant wage growth.
Fair or not, it's a message that resonates.
According to a CBS News poll last month, 62% believe the country is on the wrong track -- up from 48% in the early days of the Obama administration. Some 42% believe the U.S. economy is headed for a new recession in the next few months. And 39% think their families are worse off today than they were four years ago -- about the same as what we saw in November 2008, when the country voted for hope and change in the midst of the subprime meltdown.
Anthony Mirhaydari
Obama's task, never easy, has been made more difficult by the political gridlock we've seen since Republicans won control of the House in 2010, gumming up any chance of additional fiscal stimulus or meaningful progress on the debt/deficit issue, and resulting in the credit downgrade of the U.S. Treasury last August that shocked market and business confidence.
Instead of taking action on Obama's jobs plan or looking at issues with bipartisan support (such as tax reform), Washington has descended into political blood sport where everyone plays for keeps and no one crosses the aisle. Things are likely to get worse as we barrel toward a "fiscal cliff" of tax hikes and spending cuts worth nearly 5% of the gross domestic product as the calendar flips to 2013. (Read "Countdown to the fiscal cliff.")
But before then, we've got an election to decide. And that means voters need to answer the critical question: Are we better off since Obama took office? Here's a look, by the numbers, at the past four years in the four areas that matter most: economic growth, jobs, income and wealth.
The overall takeaway: The economy has improved, but it's far from great for many Americans. Voters will have to decide whether that's good enough to elect Obama to a second term.
Growth
When Obama took office, the economy was shrinking at roughly 8% annually. For most of Obama's term, it's been growing, as the chart below shows. In absolute terms, the economy is now $853 billion larger than it was before Obama was inaugurated. So, yes, we're better off.
But if you're a little disappointed, you're not alone.
Coming out of the worst financial crisis since the Great Depression, ending a 20-year dependence on credit-fueled growth and in the wake of a delayed response to the crisis by the administration of then-President George W. Bush, the recovery was always going to be fitful. So it's no surprise that, 18 quarters after the pre-recession peak in GDP activity, the economy has managed to grow only 1.8% over the pre-recession high.
According to Credit Suisse economists, that's far from where we should be if this had been a normal recession -- the kind people have experienced before. On average, 18 months into a mild recession, GDP should be 10.4% larger than it is now. For a severe recession, it should be nearly 14% larger. That's almost $2 trillion in lost output, lost wages and lost prosperity.
Jobs
When Obama took office, the economy was losing nearly 820,000 jobs a month. The losses stopped in December 2009, and since then, the economy has created more than 4.1 million jobs.
But we haven't fully recovered. Philippa Dunne of The Liscio Report notes that we're still 4.7 million jobs below the pre-recession peak, as the chart below shows. At the rate we're creating jobs right now, it would take four years to regain those levels -- not even accounting for population growth.
Source: Federal Reseve
What's worse is that the job-growth rate has stalled. Nonfarm payrolls added 96,000 jobs in August, the fifth sub-100,000 gain in the past six months and an average gain of 205,000 per month for the previous six months. The unemployment rate fell to 8.1%, thanks to an estimated 386,000 workers who gave up and left the labor force. As a result, the labor force participation rate is at its lowest level since 1981.
Not a good sign.
Income
Even before Obama took office, inflation-adjusted after-tax income was falling hard as unemployment rose and wages fell. While the economy is slightly larger than its pre-recession peak, and while corporate profits have pushed to record highs, inflation-adjusted take-home pay for the average American family has yet to fully recover after suffering its worst pullback since World War II.
Source: Federal Reseve
Things have improved under Obama, as the chart shows, with income increasing $459 billion.
But that is somewhat misleading. Government transfers -- unemployment benefits, disability checks, Social Security -- played a larger role in household finances after the recession struck. Using Bureau of Economic Analysis data, and adjusting for inflation, personal disposable income less transfers from government social benefits has grown from $9.3 trillion in early 2009 to $9.6 trillion now, but remains below its old high of $9.9 trillion.
So, total Obama income gain is around $300 billion per year -- or less than $1,000 for every man, woman, and child in the country.
Wealth
Of all these measures, net household wealth has made the strongest bounce during Obama's term. When he took office, a crumbling housing market and stock market had caused net household wealth to drop from a total of $63 trillion to $51 trillion. It has since reversed and gained more than $11 trillion, though it still sits below the pre-recession high, as the chart below shows.
Source: Federal Reserve
Although many have been turned off of the stock market by years of volatility, scandal and insider dealings, the Standard & Poor's 500 Index ($INX) has stealthily marched up to four-year highs, returning to levels not seen since early 2008. Since Obama took office on Jan. 20, 2009, the index has gained nearly 69%, with a near-20% surge coming since June.
As for the other large component of American wealth, housing, the situation there is stabilizing. The S&P Case-Shiller Home Price Index has started to rise again on a year-over-year basis for the first time since early 2010. Still, the Obama record is negative: Since January 2009, the 20-city Case-Shiller index is down 4.2%.
Digging into the data, assets have jumped by $11.1 trillion, making up the bulk of the improvement, with stock-market gains leading the way. But unless you've been invested in stocks, you've missed out on the Obama recovery.
What next?
Depending on how Washington handles the fiscal cliff issue later this year, much of this wealth gain could evaporate quickly -- pulling the rug out from under one of the economy's few areas of strength. The others are corporate profitability and retained earnings. A repeat of the financial market turbulence of August 2011 would further damage the confidence of CEOs and cause them to continue to withhold needed capital investments and hiring, the subject of a recent column. (Read "Why CEOs need our love, too.")
Raising the stakes in this year-end political saga is the likelihood the nation will hit its debt ceiling around the same time. Credit rating agencies are warning that, without action on the debt and deficit, they will take a hatchet to America's credit rating.
On Tuesday, Moody's warned that unless Congress can put in place specific policies that stabilize and establish a downward trend in the federal debt over the medium term, without a large, immediate fiscal shock, its "Aaa" rating on the country could be at risk.
Let's hope that, no matter who wins this November, our elected officials immediately get to work to protect the slim gains that Obama has managed in a difficult environment.
Be sure to check out Anthony's new money management service, Mirhaydari Capital Management, and his investment newsletter, the Edge. A free, two-week trial subscription to the newsletter has been extended to MSN Money readers. Click here to sign up. Mirhaydari can be contacted at anthony@edgeletter.com and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
