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Monday, April 18, 2016

Presidential Economic Performance...By the Numbers

I was at a friends house this weekend and invariably the topic of the upcoming presidential election came up.  I have to be very clear, I'm quite agnostic (and cynical) regarding the whole process at this point.  Still, I was astounded by the misinformation and the amount of talking past one another taking place.  Thus, I thought I'd at least attempt to offer some simple perspective to gauge economic performance during different presidents terms (personally, I don't attribute much of the activity during a presidents term to the administration...much bigger pieces are at play than tax and fiscal policy).  Still, below are some simple metrics.

Please note, data below is from February 1 of each presidents inauguration through January 31 of term closure.  Obama figures are through January 31, 2017 premised on continued trend job and debt growth.

The first chart below shows growth of federal debt vs. growth of full time jobs during differing presidential terms.
  • Obama's administration will create nearly as much federal debt as the previous 7 presidents (Nixon through Bush II).  However, the massive debt increase saw creation in excess of 10 million full time jobs (double the debt growth but 20x's more FT jobs than during Bush II's administration).

The chart below is a simple division of FT job creation by federal debt growth. 
  • Obama's administration saw significant job growth (Obama's inauguration nearly bottom ticked the downturn in jobs & financial markets...both bottoming in March '09) but at a historically dear price of nearly $900k per new full time job created.
  • However, by this metric (and, IMO, many others), Bush II's performance is likely the worst in US history fighting multiple non-essential wars on "terror" while decreasing taxation against while ramping expenditures (this man is why Obama cannot claim the top spot in presidential infamy).


The chart below shows federal debt creation by presidential periods.
  • Obama's administration will be responsible for about 46% of all US Treasury debt creation in the nations history (about $9.3 T of the est. $20.2 T to exist by Jan 31, 2017).
  • The Bush administrations abysmal performance also stands out.






The last chart highlights the most disturbing trend, the growth in Treasury Marketable debt.  During previous administrations, particularly since the creation of the Social Security surplus used to purchase non-marketable US Treasury debt, up to half of all US debt was purchased via this surplus.  However, with the demographic shift of the baby boom, the surplus has nearly ceased and is likely to ultimately turn to a deficit.  This meant that nearly all federal debt issued during Obama's administration had to be sold in the open market (Marketable debt).  The flood of debt was purchased by two primary sources: Foreigners and the Federal Reserve.

For those interested in the story of who bought all that debt...please read Treasury Buying Mystery.  This is a story of the shift of Treasury buying from domestic to foreign to Federal Reserve to the last year during which an abandonment of all credible buyers has been accompanied by rates smoothly continuing ever lower (perfectly opposite the manner a "free market" would trade).  Truly a "mystery".
For those curious why the system is seemingly spiraling into insanity...please read Truth is the Only Topic Off Limits in this Election.  The article outlines the driver of economic deterioration, demographics, and the Fed (and central banks worldwide) attempt to maintain growth via interest rate cuts to incent greater debt from a flattening and shrinking core of consumers.

This is no way an attack on red team or blue team...from what I can tell, they are all on the same team, the green ($) team.  I'm not sure a vote for any of the mainstream candidates is warranted.  I'm also pretty confident even a "perfect" candidate would not be capable of even explaining why and /or initiating the truly necessary and painful restructuring necessary.  It's likely impossible, in a bought and paid for "democracy", to get the national acceptance for the national shared sacrifices that a quasi bankruptcy and restructuring would entail...despite this being the only real means to avoid a total financial, economic, and likely societal breakdown.
Best of luck to us all.





5 comments:

  1. Chris - I would be interested in seeing the % increase in debt per FT job versus the total nominal debt amount per FT job. That is kind of misleading as the Federal debt doubles approx. every 7-8 years since 1980. Also, federal debt is only one component of overall debt, therefore federal debt may not increase at the same rate if household or corporate debt creation is picking up the slack.

    Growth ultimately comes down to demographics, productivity, and credit/monetary creation. We have negative demographic trends, low productivity, and poor credit creation in the household sector, with positive credit creation in the corporate and governmental sectors. Keep up the good work! Thanks!

    ReplyDelete
    Replies
    1. Anon - good questions and maybe this coming weekend I can take a little time to show the data as you suggest.

      Cheers
      Chris

      Delete
  2. Comments on "Presidential Economic Performance" column, and several older columns I read:

    (1) MEASURING A PRESIDENT'S ECONOMIC PERFORMANCE:
    Bush's term ended near the trough of a recession -- making "his" years look worse than Presidents whose terms did not end during a recession . Obama's term started near the trough of that recession -- making his years look better than Presidents whose terms did not start during a recession .

    But even with the advantage of a low starting point during a recession, under Obama we've had the weakest rebound from a recession since GDP data were first compiled in 1929. The Obama record will be even worse if a recession starts in 2016, or in early 2017. We'll have to wait to see if that happens.


    (2) JOB GROWTH UNDER OBAMA:
    You Wrote:
    "Obama's administration saw significant job growth".

    My Comment:
    Not "significant" compared with Reagan and Clinton, or even when compared with Bush, whose administration had the disadvantage of ending during a recession, while Obama had the advantage of starting during that recession.

    A full eight-year comparison would be better, but guessing Obama's eighth year would be bad economics, so I compare the first seven years of the Presidents:

    Reagan
    February 1981 payroll jobs: 91,105,000
    February 1988 payroll jobs: 104,211,000
    Seven-year % payroll job growth = +14.4%

    Clinton
    February 1993 payroll jobs: 110,047,000
    February 2000 payroll jobs: 131,140,000
    Seven-year % payroll job growth = +19.2%

    G. W. Bush
    February 2001 payroll jobs: 137,612,000
    February 2008 payroll jobs: 146,156,000 (recession month)
    Seven-year % payroll job growth = +6.2%

    Obama
    February 2009 payroll jobs: 141,640,000 (recession month)
    February 2016 payroll jobs: 151,074,000
    Seven-year % payroll job growth = +6.7%

    Data source: http://data.bls.gov/cgi-bin/surveymost?bls

    ReplyDelete
    Replies
    1. additional comments:


      3) FULL-TIME JOBS:
      There's no logical reason to focus on full-time jobs and ignore part-time jobs. More hours worked and/or more output per hour of work are the source of economic growth -- part-time workers contribute to economic growth too.


      (4) FEDERAL DEBT GROWTH:
      There's no logical reason to focus on Federal debt growth and ignore Federal spending growth, which has been slow in recent years.


      (5) POPULATION GROWTH:
      For the US, the productivity growth rate slowdown is the main cause of slow economic growth -- much more important than slower population growth. Economic growth since 1999 averaged only 2% -- the worst growth since the Great Depression:

      "For the total (US) economy, productivity growth was:
      +2.7% from 1920 to 1970,
      +1.6% from 1970 to 1994,
      +2.3% from 1994 to 2004, ("the dotcom era"), and
      +1.0% from 2004 to the second quarter of 2015.”
      Professor Robert Gordon (original format revised)
      Note: The productivity data above are for the overall US economy.
      The conventional productivity measure is for the US non-farm business sector, and tends to be about +0.4 percentage points higher).


      (6) SOCIAL SECURITY SURPLUS:
      You Wrote:
      "During previous administrations, particularly since the creation of the Social Security surplus used to purchase non-marketable US Treasury debt, up to half of all US debt was purchased via this surplus. However, with the demographic shift of the baby boom, the surplus has nearly ceased and is likely to ultimately turn to a deficit."

      My Comment:
      Social Security (SS) buying non-marketable Treasury debt is nothing more than transferring money from "the government's right pocket to its left pocket" after workers paid their SS taxes, and was required by law.

      Treasury debt sold to the public is different -- that takes money from private investors that could otherwise have been used for productive investments in the private sector.

      SS is a pay-as-you-go senior citizen welfare program. It would be ideal if payroll tax revenues equalled spending every year. The surplus should not be interpreted as "good news" -- it just meant SS taxes were too high for a few decades.

      The bad news, due to baby boomers retiring, is SS spending has exceeded SS tax revenues for about five years, forcing the government to borrow money from the public and give it to the SS Trustees. I assume the SS "deficit" will expand as baby boomers retire, because politicians won't even talk about raising SS taxes to cover the SS spending.

      The declining birth rate especially affects senior citizen welfare programs (Social Security, Medicare, etc.) and government employee pensions, because fewer taxpayers will be supporting each retiree than originally expected.

      Delete
    2. Additional comments:


      From the 2014 Trustee's Reports:
      Social Security and Medicare "deficit" spending (spending in excess of payroll tax and Medicare premium income) account for most of the Federal deficit:

      ----------------------------------------------------------
      2014 SS & MC Spending, Income, and "Deficits"
      (2014 calendar year, in billions of US dollars )
      ---------------------------------------------------------

      Social Security Spending:
      $ 714 SS
      +145 SS disability
      = 859

      Social Security Income:
      $ 756 payroll taxes
      +30 taxes on benefits
      = 786
      .
      The Social Security "Deficit":
      859 - 786 = $73 billion deficit

      ---------------------------------------------------------

      Medicare Spending:
      $ 269 Part A - hospitals
      +344 Parts B & D - doctors & drugs
      = 613

      Medicare Income: **
      $ 227 payroll taxes
      +18 taxes on benefits
      +80 patient premiums
      = 325
      ** excludes $8.7 billion of MC revenues received from the states
      .
      The Medicare "Deficit":
      613 - 325 = $288 billion deficit

      ---------------------------------------------------------
      Total SS + MC "Deficit" = $361 billion
      73 (SS) + 288 (MC) = $361
      ----------------------------------------------------------

      Delete

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