The argument for electing Mitt Romney based upon the economy is that Barack Obama has not fixed the economy fast enough after conservative Republican economic policies crashed the economy, and therefore we should return to conservative Republican policies which have repeatedly failed. Yes, it is illogical, but are there any policies promoted by the extremists now in control of the GOP which are not bat-shit crazy?
Beyond the obvious flaw of returning to the same policies which caused the economic crash, there are a couple of other problems with the argument for Romney.
First of all, Congressional Republicans have been partially successful in making matters worse to harm Obama politically. Their threats to have the United States default on debts which Republicans previously voted for resulted in a down-grading of the nation’s credit rating. Their cuts in government services directly increased the number of unemployed regardless of whether such spending cuts are beneficial or harmful in the long run. They refused to act on Obama’s job bill despite the view of independent economists that it would have decreased unemployment.
Secondly, in evaluating Obama’s performance on the economy it is necessary to look at what expectations are realistic and how long it should take to get out of a recession of the severity which Obama inherited from the Republicans. We already knew that four years would not be long enough but more evidence of this is welcome. An analysis posted at Bloomberg helps demonstrate this:
Five years after the onset of the 2007 subprime financial crisis, U.S. gross domestic product per capita remains below its initial level. Unemployment, though down from its peak, is still about 8 percent. Rather than the V- shaped recovery that is typical of most postwar recessions, this one has exhibited slow and halting growth.
This disappointing performance shouldn’t be surprising. We have presented evidence that recessions associated with systemic banking crises tend to be deep and protracted and that this pattern is evident across both history and countries. Subsequent academic research using different approaches and samples has found similar results.
Recently, however, a few op-ed writers have argued that, in fact, the U.S. is “different” and that international comparisons aren’t relevant because of profound institutional differences from one country to another. Some of these authors, including Kevin Hassett, Glenn Hubbard and John Taylor — who are advisers to the Republican presidential nominee, Mitt Romney — as well as Michael Bordo, who supports the candidate, have stressed that the U.S. is also “different” in that its recoveries from recessions associated with financial crises have been rapid and strong. Their interpretation is at least partly based on a 2012 study by Bordo and Joseph Haubrich, which examines the issue for the U.S. since 1880.
See the full article for a detailed historical analysis. The conclusion is contrary to the claims of the Romney camp, showing that a prolonged recovery is what should be expected:
The most recent U.S. crisis appears to fit the more general pattern of a recovery from severe financial crisis that is more protracted than with a normal recession or milder forms of financial distress. There is certainly little evidence to suggest that this time was worse. Indeed, if one compares U.S. output per capita and employment performance with those of other countries that suffered systemic financial crises in 2007-08, the U.S. performance is better than average.
This doesn’t mean that policy is irrelevant, of course. On the contrary, at the depth of the recent financial crisis, there was almost certainly a risk of a second Great Depression. However, although it is clear that the challenges in recovering from financial crises are daunting, an early recognition of the likely depth and duration of the problem would certainly have been helpful, particularly in assessing various responses and their attendant risks. Policy choices also matter going forward.
It is not our intention to closely analyze policy responses that may take years of study to sort out. Rather, our aim is to dismiss the misconception that the U.S. is somehow different. The latest financial crisis, yet again, proved it is not.