Jeremy Sawyer

Gasoline Prices Skyrocket under President Obama

Posted by Jeremy Sawyer on Monday, July 16th, 2012, 1:55 PM PERMALINK

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President Obama’s Energy Secretary, Steven Chu, infamously said, “We have to figure out how to boost the price of gasoline to the levels in Europe.” The statement was widely seen as a gaffe that hurt the President politically. Yet the data show that the Obama administration has had success doing precisely that, to the detriment of American citizens.

Many Americans correctly recall an era not too long ago when energy prices were seemingly orders of magnitude lower than they are today. Indeed, the numbers show this perception to be firmly anchored in reality.

When President Reagan took office, gasoline prices had reached $3.41 per gallon in today’s dollars. Prices remained at high levels partly as a result of the 1970s OPEC embargo and President Carter’s ineffectual handling of the situation. Reagan responded by removing price controls via executive order and cutting taxes.

By June 1984, real gas prices had declined dramatically to $2.64 per gallon. The decrease of $0.77 represented a 22.58 percent cut in real prices. Gas prices declined faster than the dollar depreciated due to inflation during President Reagan’s first term, such that even in nominal terms a gallon of gas cost less 41 months into Reagan’s presidency than at its beginning.

On the other hand, gas prices have risen sharply under President Obama even when adjusted for inflation. At the beginning of the Obama administration, a gallon of regular gasoline cost only $1.93 in today’s dollars. However, President Obama has pursued policies that have been counterproductive to achieving the goal of low energy prices. The current administration has pushed restrictions on drilling in the Arctic National Wildlife Refuge (ANWR), imposed a moratorium on deep-water drilling, and rejected the Keystone XL pipeline.

These policies have contributed to steadily rising gasoline prices throughout the Obama administration. Real prices have approached $4.00 per gallon in the spring of 2011 and again this past April; they remained at the historically high level of $3.54 in June.

Whether President Obama will change course and advocate policies that would boost domestic energy production and lead to lower gas prices has yet to be determined. The data show, however, that the course being followed by the current administration is likely to result in more pain at the pump for ordinary Americans.

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In Obama Recovery, Nervous Consumers Refuse to Spend

Posted by Jeremy Sawyer on Thursday, July 12th, 2012, 1:18 PM PERMALINK

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One of the maxims of modern-day economics is that the entire system is built on confidence. Feelings of financial insecurity have a tendency to spread quickly and envelop the entire economy. For this reason, it is extremely important that consumers have confidence in the fundamentals of the economy.

It is natural for citizens to feel trepidation about the economy during and immediately after a recession. The University of Michigan/Thompson Reuters Consumer Sentiment Index reflects this phenomenon. Indeed, the index registered at the low level of 70.4 in the third month of the Reagan recovery, January 1983.

However, in a solid recovery a spike in consumer sentiment generally occurs as citizens sense that the engines of economic growth are restarting. In the mid-1980s recovery, consumer confidence shot up remarkably quickly. In just four months, the index had increased from 70.4 in January 1983 to 93.3 in May of that year. As consumers felt a sustained boost to the economy, the index remained around or above 90 for the rest of the recovery.

In the recovery overseen by President Obama, consumer confidence has failed not only to sustain the levels reached under Reagan but even to reach them at all. The highest data point in the University of Michigan index during the tenure of President Obama is 79.3, recorded in May. Just as it appeared that consumer sentiment might be approaching normal levels, the index dropped sharply to 74.1 in June. 

At every point in the Obama recovery, consumer confidence has been below its level at equivalent points in the Reagan recovery. The perception on the part of ordinary Americans that the economy is in a precarious position has negatively impacted growth. When consumer spending suffers, roughly 70 percent of economic activity declines.

Data on consumer spending show that low confidence in the economy has indeed affected outlays. Real personal consumption expenditures (PCE), consumer spending adjusted for inflation, have risen by only 5.52 percent over the first 13 quarters of the Obama presidency compared with 8.87 percent in the first 13 quarters of President George W. Bush’s first term. PCE was not calculated on a quarterly basis during the Reagan presidency, but Commerce Department figures show a strong 12.87 percent increase over the first three years of Reagan’s first term.  

Midway through President Obama’s fourth year in office, consumers are still not spending because they remain worried about the fundamentals of the American economy, and rightly so. In the absence of the enactment of pro-growth policies, expect consumer confidence and spending to linger at subpar levels.

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Real Incomes Flatlining in Lackluster Obama Recovery

Posted by Jeremy Sawyer on Wednesday, July 11th, 2012, 4:47 PM PERMALINK

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Over the past century, the global economy and the American economy in particular have increased rapidly in productivity. Heightened levels of output have translated into more prosperity for individuals through higher wages.

A solid measure of this phenomenon is real disposable income per capita. Adjusted for inflation and population growth, it measures personal income minus taxes.

During the presidency of Ronald Reagan, Americans saw a solid increase in the pay they took home. In the first 41 months of the Reagan presidency, the after-tax income of the average American worker increased by $2977, which represented a 15.62 percent increase over the period of less than three and a half years.

Similarly, real disposable income per capita rose by $2195 in the first three years of the recovery from the 1980s recession, an increase of 11.28 percent.

As with other key economic indicators, the data from the Obama administration tell a different story entirely. Through May, President Obama has actually overseen a decrease in real disposable income per capita. In inflation-adjusted terms, the average American is taking home less pay than he did at the end of President George W. Bush’s second term.

Even across the Obama recovery, real per capita income growth has been paltry. After-tax income for the typical American worker has risen from $32,179 to $32,716, a paltry 1.67 percent increase.

It is common for ordinary citizens to feel as though their purchasing power is diminishing during tough times. What is not normal is for that purchasing power to actually be decreasing and for the hard times to linger for the entirety of a president’s term. Americans are dearly missing the thousands of dollars that would be in their wallets this year if the Obama recovery were comparable to the one overseen by President Reagan.

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Miserable June Jobs Report Shows Enduring Stagnation under President Obama

Posted by Jeremy Sawyer on Monday, July 9th, 2012, 3:52 PM PERMALINK

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After the Bureau of Labor Statistics released its monthly data for June on Friday, President Obama called the numbers “a step in the right direction.” While the report may pass for progress in the current dismal recovery, a comparison with the recovery that occurred while President Reagan was in office shows that Americans can and should expect much more.

The most important number from Friday’s report is 80,000, which represents the number of jobs added to the US economy. While that number may appear large at first glance, it is in fact miniscule. The increase in employed individuals over the month represents only 0.05 percent of a labor force of more than 155 million workers.

Only the professional sector saw significant job growth in June. Construction added a mere 2,000 jobs and mining added none, while jobs were destroyed in nondurable goods, retail, information, and transportation and warehousing.

In a past time not too distant for many Americans to remember, jobs reports during a period of economic recovery were cause for optimism. Between the 35th and 37th months of the Reagan recovery, monthly employment growth averaged 200,000 new jobs. Adjusting for the smaller size of the labor force in nominal terms during the Reagan presidency (116 million workers in 1985 versus 155 million in 2012) shows that in today’s terms an average of 267,000 new jobs were created during those months.

Over the same period in the current recovery, April to June 2012, the average number of jobs created monthly is a mere 75,000. Despite the existence of a labor force that was significantly smaller than it is today because of differences in population, the mid-1980s recovery saw fifteen months of employment growth above 300,000 jobs against only one month of comparable growth during the Obama recovery.

The 80,000 jobs growth number was far from the only negative statistic to emerge from Friday’s report. Among other figures, labor-force participation remained historically low. Unemployment stayed stuck at 8.2 percent, a remarkably high number. As James Pethokoukis has aptly noted, the unemployment rate would be a truly dismal 10.9 percent if the labor force participation rate were the same in June as it was when President Obama took office. That number would be higher than any unemployment rate recorded under President Reagan, whose administration oversaw falling unemployment and rising labor force participation rates.

Additionally, a broader measure of unemployment called U-6, which includes marginally attached workers and those working part-time for economic reasons, continued to edge up. U-6 was not calculated during the Reagan administration, but at 14.9 percent it remains well above the highest levels recorded before President Obama took office.

President Obama’s recovery has been weak across nearly all relevant areas. In order to match the economic performance of President Reagan, Obama would need several jobs reports that look very different from the one released on Friday.   

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Long-Term Unemployment a Chronic Problem for Obama Recovery

Posted by Jeremy Sawyer on Friday, July 6th, 2012, 3:04 PM PERMALINK

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Long-term unemployment is one of the hardest-hitting aspects of a recession. Workers who are jobless for extended periods of time find it difficult to pay their bills and support their families. It is imperative that those who are laid off be able to quickly find new jobs and get back to work.

Under President Reagan, long-term unemployment was limited in scope. The average number of weeks that a jobless worker spent unemployed reached its highest point at 21.2 in July 1983. For most of Reagan’s presidency, the figure hovered around 15 weeks.

Similarly, the number of workers unable to find employment for 27 weeks or longer saw a short-lived spike in the aftermath of the early 1980s recession but generally remained at a low level during Reagan’s two terms. 2.89 million workers were jobless for more than six months in June 1983, but the figure dropped dramatically and settled below 750,000 at the end of the Reagan presidency.

The long-term unemployment situation has been drastically different under President Obama. Simply put, Barack Obama has been the president of continuing joblessness. No other administration has overseen comparable levels of average weeks unemployed. A sharp increase occurred at the beginning of Obama’s presidency and the drop that ordinarily accompanies a recovery has not come to pass.

The average weeks unemployed figure hit its highest value at 40.9 weeks in November 2011 and has remained in the high 30s for the majority of President Obama’s time in office. Newly released data from the Bureau of Labor Statistics show that the average number of weeks that an unemployed American worker has been jobless rose to 39.9 weeks in June. In the Obama era, the average worker who loses her job will not find a new one for nearly nine months; this bleak state of affairs is entirely unprecedented and radically dissimilar to the situation under President Reagan.

Perhaps the only figures more striking than average weeks unemployed statistics from the Obama presidency are those that measure the number of workers unemployed for 27 weeks or longer. In March 2008, towards the end of the presidency of George W. Bush, 1.32 million Americans were out of work for longer than six months. By April 2010, just over two years later, the figure had shot up to 6.37 million. Today’s BLS report shows that in June an astronomically high 5.37 million American workers were unemployed for longer than six months. For perspective, the 2.89 million people unemployed in the early 1980s recession had been the previous high water mark; at no other time since the BLS began recording the statistic had the number of long-term unemployed exceeded 2.2 million. 

Vice President Biden said recently, “When your brother-in-law is out of work, it’s a recession. When you’re out of work, it’s a depression.” While many Americans felt like they were experiencing a depression following the early 1980s recession, roughly four times as many have felt that way during the entire Obama administration. Under President Obama, long-term unemployment has become the “new normal,” and Americans are suffering because of it.

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Not Exactly Below Eight Percent

Posted by Jeremy Sawyer on Thursday, July 5th, 2012, 3:28 PM PERMALINK

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When the massive ARRA (American Recovery and Reinvestment Act) stimulus bill was being debated, President Obama’s economic advisors Christina Romer and Jared Bernstein infamously authored a report in which they predicted that passing the stimulus would keep the unemployment rate below eight percent. The events of the past three and a half years have proven that estimate to have been far from correct. What Romer and Bernstein were forecasting was something akin to another Reagan recovery, a phenomenon that is unlikely to occur as long as the current administration continues to meddle in the economy.

The recession of the early 1980s was one of the worst in the history of the United States, and American workers suffered the brunt of its effects. The unemployment rate reached 10.8 percent in December 1982, the highest mark since the Great Depression. However, the swift recovery from this contraction of the economy provided relief to workers. Under President Reagan, unemployment declined to 7.2 percent in June 1984 and continued falling.

Contrary to the Obama administration’s claims, “Recovery Summer” never took place. During the summer of 2010, when infrastructure spending was supposed to lead to a decline in joblessness, unemployment never dropped below the astronomically high figure of 9.4 percent. Hopes for a quick turnaround were dashed by the reality of business uncertainty. The unemployment rate has been above 8 percent since February 2009 – 40 consecutive months. For virtually the entirety of Obama’s presidency, unemployment has been above a level that it did not reach even once between the beginning of 1984 and President Obama’s inauguration. In contrast to the sharp downward trend in unemployment that occurred during the Reagan recovery, the figures from the Obama administration show a leveling off of unemployment at a level that is exceedingly high from a historical perspective. Unfortunately, the data do not appear to be getting any better. May saw an increase in the unemployment rate to 8.2 percent.   

While almost all Americans are suffering during the floundering recovery, few groups are impacted more by the failure of the economy to rebound than young Americans. Workers new to the job market were a key part of the Reagan recovery. Under President Reagan, the unemployment rate for workers between the ages of 16 and 19 dropped from 24.1 percent to 17.5 percent and continued to remain low.

The Obama recovery, however, has been a different story entirely. One might expect the unemployment rate among young workers to be significantly lower under President Obama than it was under President Reagan, seeing as many more teenage Americans are now attending college full-time and therefore not part of the workforce. However, the opposite effect has occurred. Youth unemployment reached 27 percent in 2009 and 2010 – the highest figure since the BLS began recording the statistic in 1948. The youth unemployment rate has failed to decline meaningfully; in May the figure was 24.6 percent, which is higher than it ever was during the Reagan presidency.

As the data make clear, there is a massive gap between the unemployment rates under President Reagan and those that have been recorded during the administration of President Obama. When the Obama recovery is contrasted with the recovery overseen by President Reagan, it is hard to avoid judging it a failure.

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President Obama's Missing Workers

Posted by Jeremy Sawyer on Monday, July 2nd, 2012, 2:47 PM PERMALINK

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Two crucial but often overlooked indicators of the health of the nation’s economy are the related measures of the labor force and the labor force participation rate. The labor force statistic determines how many Americans are either employed or searching for employment (unemployed). Labor force participation measures the number of Americans in the labor force as a percentage of the civilian noninstitutional population.

The size of the labor force and the labor force participation rate are important insofar as they speak to a society’s productivity. When more citizens become workers, greater levels of prosperity can be achieved. Workers enter the labor force when conditions are favorable, and they leave when economic circumstances worsen.

An analysis of the presidency of Ronald Reagan with regards to the labor force yields positive results for the former president. Under Reagan, the labor force grew from 108 million workers to 123.4 million workers, a gain of 15.4 million workers. This figure is especially remarkable given that the US population grew by only 17.3 million during this time period. As the data show, the workforce grew at almost the same rate as the population under President Reagan.

Through May 2012, President Obama has been in office for 41 months. Over those 41 months, the labor force has grown by a mere 771,000 workers. In contrast, the economy added more than eight million workers in the first 41 months of Reagan’s presidency-over ten times as many workers. The measly growth of the labor force under Obama looks even worse when one considers that the US population has grown by 8.3 million under Obama. If the growth of the labor force had proceeded during the Obama administration as it did under Reagan, several million more workers would be a part of the American economy today.

The stark differences in the US labor market under Reagan and Obama are further demonstrated by labor force participation rate figures. Over the entirety of Reagan’s time in office, the rate increased by a striking 2.6 percentage points. In the first 41 months of Reagan’s first term, the labor force participation rate increased by .6 percent, from 63.9 percent to 64.5 percent. Over the same time period in Obama’s presidency, the figure dropped by 1.9 percentage points. At 63.6 percent in April 2012, the labor force participation rate was at its lowest point since 1981. With gender norms evolving and more women steadily entering the workforce, a rising labor force participation rate would be expected. Indeed, that phenomenon occurred up until Obama took office. Many economists and the Wall Street Journal have plausibly attributed the recent decline in labor force participation to “jobless and disheartened workers turning to disability benefits or reluctant retirement, or otherwise leaving the workforce for good.”

The staggering number of workers missing from the American workforce in the Obama era should be worrying to all those concerned with the health of the national economy. Without a change in the labor market akin to what was achieved under President Reagan, the United States could be headed down the road of becoming a less productive society.

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GDP Figures under Obama Fail to Measure up to Reagan Era

Posted by Jeremy Sawyer on Friday, June 29th, 2012, 12:22 PM PERMALINK

Part of a series by Americans for Tax Reform Foundation

In the aftermath of a recession in the early 1980s, President Ronald Reagan presided over a robust recovery that restarted the engines of the nation’s economic growth. Productivity picked up rapidly as policies were put in place to boost output.

Under President Obama, the recovery from the latest recession has languished. Despite the efforts of the administration to solve the problem by throwing money at it in the form of the TARP (Troubled Asset Relief Program) bailout and $787 billion stimulus, the economy has grown at a remarkably slow rate given historical precedent.

The best indicator of output is real GDP, or Gross Domestic Product. It measures the total value of all goods and services produced within a nation in a given year. Measured quarterly and adjusted for inflation, it is among the most closely watched economic indicators.

Real GDP data from the recoveries of both Reagan and Obama demonstrate that the Reagan recovery was far stronger than the economic upturn under President Obama. In the first 11 quarters since the beginning of the recovery, from the first quarter of 1983 through the third quarter of 1985, real GDP growth averaged 6.08 percent. In contrast, President Obama’s recovery saw real GDP growth average only 2.4 percent over the first 11 quarters of the recovery, which began in the third quarter of 2009. As the graph makes clear, the economy grew at a faster clip under Reagan at every point in that recovery than it has while President Obama has been in office.

Examining real GDP data across the entirety of both presidencies hardly yields better results for President Obama. In the first 13 quarters of Reagan’s presidency, the economy grew at an average quarterly rate of 3 percent. Obama, however, presided over average quarterly growth of just 1.46 percent.

Perhaps the worst news is that output appears to be heading in the wrong direction. In the last five quarters, only one (fourth quarter of 2011) has seen even measly growth of two percent. Change in output in the first quarter of 2012 was revised down to 1.9 percent from an initial estimate of 2.2 percent. The current administration has some work to do before it can compare the recovery that has occurred on its watch with the one overseen by President Reagan.

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Introducing the Reagan vs. Obama Recovery Project

Posted by Jeremy Sawyer on Wednesday, June 27th, 2012, 3:00 PM PERMALINK

Three and a half years into the presidency of Barack Obama, many observers are seeking to evaluate the president’s economic performance. A telling comparison is the state of the economy under President Reagan, the last president to govern during a deep recession.

Throughout the Obama presidency, the growth of the economy has been slow and inconsistent. In contrast to Reagan, President Obama has never presided over a period of strong economic development.

The data clearly show that the sluggish pace of the Obama recovery pales in comparison to the economic rebound that the nation experienced under President Reagan. In several key areas, the current administration’s policies have failed to produce the strong upward trends that occurred at the close of Reagan’s first term and the beginning of his second.

The Obama recovery is considered to have begun in June 2009 with the end of the most recent US recession, and continues through the present. This period of time will be compared to the Reagan recovery, which lasted from November 1982 to October 1985.

This series of posts will analyze and compare a wide range of economic indicators compiled during the Reagan and Obama presidencies.

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