Weak US Jobs Growth Is Only Part of a Bigger Problem

November 2, 2015 Updated: November 2, 2015

On Nov. 6 the U.S. Labor Department will issue another mediocre job report. Private forecasters estimate 190,000 jobs were created in October, well below the 260,000 averaged in 2014.

The White House will tout the economy is doing quite well and proclaim 61 consecutive months of job creation. Liberal commentators including New York Times columnist and CNBC analyst John Harwood may offer this as more proof the economy does better with a Democrat in the White House.

So much depends on the circumstances in which each president governs. For example, does his party control one or both the Senate and the House and, more important, what was the state of the economy bequeathed by his predecessor?

The best apples-to-apples comparison is the rather difficult conditions Presidents Ronald Reagan and Barack Obama inherited, and how the fortunes of America’s families then progressed.

The best apples-to-apples comparison is the rather difficult conditions presidents Ronald Reagan and Barack Obama inherited, and how the fortunes of America’s families then progressed. Reagan relied on conservative prescriptions while Obama used activist government to stimulate growth.

Obama confronted a terrible financial crisis and endured a punishing recession. Unemployment peaked at 10 percent in his first term but the economy has reclaimed and added 12.6 million jobs and employment is up 9.8 percent.

Reagan faced tough times too: double-digit unemployment and interest rates and a bruising recession. Unemployment peaked at 10.8 percent but subsequently the economy added more than 17.2 million jobs and employment rose 19.4 percent.

The reason Reagan was able to create so many more jobs in a much smaller economy is quite simple. It wasn’t just lower taxes and less spending but a reliance on private decisions to guide recovery. He cleared a path for businesses, large and small, to invest as they deemed fit and raise wages as they decided they could afford. He encouraged the unemployed to get out and look for work.

Whereas from subsidies for solar energy projects and mandatory health insurance to incessant preaching that ordinary folks are victims of racism, sexism, and the evil machinations of the well-off, Obama has sought to micromanage business through an explosion of regulations and to pacify a middle class under siege and Americans underemployed or not working at all with giveaways from free contraception to forgiving college debt.

Through the first 25 quarters of Obama’s recovery, GDP growth has averaged 2.1 percent whereas during the comparable period for Reagan, GDP advanced at a 4.6 percent annual pace.

Reagan’s social safety net assisted the unemployed. Obama’s pays the unemployed to be idle.

The 7 million men between the ages of 25 and 54 who are neither employed nor are looking for work are rewarded with food stamps, the earned income tax credit if their spouse is a low-income worker, and federal health care subsidies—even virtually free health care through Medicaid in many states.

For folks refusing to do anything productive with their lives, Obama is offering an even more attractive benefit in the form of a government pension.

Despite the fact that Americans are living healthier and longer lives and work is generally less physically challenging, the percentage of adults ages 16 to 64 certified as permanently incapable of working by the Social Security Disability Insurance program now stands at 5.1 percent, about double the figure in Reagan’s day.

A broken appeals system offers a decided advantage to those crafty applicants who hire a lawyer—a situation the Obama administration refuses to fix.

For hardworking families, the results are predictable—annual family incomes have declined about $1,650 during the Obama years, whereas those increased $3,900 during Reagan’s tenure.

For the indolent, this is the Second Age of Pericles but for those who toil for their daily bread, Obama’s pronouncements the economy is much improved and performs better with Democrats in control have a decided Orwellian ring.

Peter Morici, professor at the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Previously he served as director of the Office of Economics at the U.S. International Trade Commission. Follow him on Twitter @pmorici1

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

Peter Morici