Reserving the right to object, President Obama's contention at last week's press conference that Republican economic alternatives do not deserve consideration because they represent a failed economic policy and strategy is just not credible. The fact that he gets away saying it is a testiment to the lack of real examination of his claims. When one looks at the reality of the numbers, not made up numbers, but the statistics generated by the Federal Government itself, there are simply no hard facts to support the failure of Republican economic performance nor the success of Democratic policies. The numbers tell the story.
To understand the difference between economic success and failure, you have to go back a decade and a half. Republicans took control of the Congress in 1995 after forty straight years of Democratic Party control of the U.S. House of Representatives and for all but a handful of those years, control of the U.S. Senate. Moreover, when the GOP assumed congressional power, the Democrats had two years of presidential leadership as well. In other words, their economic philosophy had been ascendent for four decades and in the early 1990s was in total control.
So where did the economy stand after all that time? The unemployment rate in January, 1995 was 5.6 percent. The growth of the national economy measured by GDP was nominally at 3.6 percent and really measured at 1.11 percent. The federal budget deficit stood at $164 billion. And the Dow Jones Industrial Average started the year at 3838.48.
Republicans promised change. Literally they were ridiculed for proposing to balance the budget,and the tax cuts they proposed to spur economic growth were called fiscally irresponsible.
So measured by the same criteria, did Republican policies succeed or fail. Five years later in January, 2001, the unemployment rate had dropped to 4.2 percent but the emerging recession brought on by the dotcom collapse had also dropped real GDP growth to -0.49 percent and nominal growth to 2.73 percent. On the other hand, the budget had a $128.2 billion surplus and the Dow Jones Industrials had nearly tripled to 10788. All of this represented a mixed record, but hardly a failed one.
The major change in 2001 was the advent of the Bush Presidency. Now Republicans were fully in charge, so their performance could be assessed more fully. They remained in charge until January, 2007 when the Democrats again took control of the Congress.
In January, 2007, the numbers are instructive. The unemployment rate was 4.6 percent, up slightly from 2001, but still considerably below the rate inherited by the Republicans in 1995. GDP growth was a real 0.05 percent and a nominal 6.88 percent, almost a doubling of the nominal growth rate over the twelve span of GOP power. The budget deficit was at $161 billion, something for which the voters had punished Republicans in the previous year's elections. But that deficit number was still slightly below the 1995 number. And, the Dow Jones Industrials had increased to 12474.53. Again, it was a mixed record. The Republican spending spree on earmarks and pork, coupled with their ethical lapses had undermined their effectiveness. But the numbers for the economy were still growth numbers.
When the Democrats reassumed control of Congress in 2007, they immediately began to talk about tax increases and greater regulatory activity. It was clear that they hoped to abandon tax cuts previously enacted and planned more government intervention in the marketplace. The results, by the numbers, were staggering. Just two years later, in January, 2009, the unemployment rate was at 7.2 percent and rising. Real economic growth had decreased to -6.3 percent and nominal growth was down to -5.8 percent. The budget deficit had grown to at least $455 billion and was projected to go to $1.2 trillion. The Dow Jones Industrials had shed 30 percent of their value and were down to 8116.03.
President Obama and other Democrats want to blame this precipitous deterioration of the economy on President Bush and Republican economic theory. The problem for them is that GOP policies were working until the Democrats reassumed congressional power, not working perfectly by any means, but working. The Democrat's tax, borrow and spend policies proved disastrous. And the disaster has been compounded by total Democratic control of the Washington levers of power.
Today, the economic downturn continues unabated. Using the most recent official number compiled in March, 2009, the situation has continued to deteriorate. Unemployment is up. The March figure was 8.5 percent and it has gone higher since that. GDP continues to sink. The real growth figure for the 1st Quarter of 2009 was -6.1 percent and the nominal growth number stood at -3.5 percent. The first half Fiscal Year 2009 deficit projection was $953 billion and if the President's proposals are enacted the annual deficit will go to $1.8 trillion, a one year deficit figure that exceeds all the deficits of the Bush Administrtion combined. And the Dow Jones Industrials after falling to below 7000 have recovered to 8188.51.
So, Mr. President, whose policies are really the failure? Maybe listening to some Republican alternatives would not only be an act of true bipartisanship, but might actually get the country back to policies that work. What we are doing now and have been doing for more than two years is certainly not the answer.