Economy & Politics Tim Mullaney
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Opinion: Obama’s economic legacy: Here’s where we (and these 4 industries) are better off
Published: Jan 10, 2017 4:11 p.m. ET
It’s easy to say growth should have been faster. But who outdid the U.S?
President Obama delivers a farewell speech to the nation from Chicago.
At worst, Barack Obama’s economic legacy resembles his Chicago home: a $3.1 million 6,200-square-footer, in a South Side neighborhood many suburbanites avoid even though crime’s way down: A mansion in a “tough” part of town, for a man directing the best economy in a world of weaker, smaller ones.
At best, the 44th president — and, yes, the first black one — will go down as a calmly-canny manager of the worst economic crisis in 80 years, a visionary who propelled major American industries like energy, automobiles and health care into new eras. He did this with the force of his mind (and the federal checkbook), and left behind a foundation of much-better fiscal balance, and fairer after-tax income distribution thanks largely to tax hikes for the 1% that financed health insurance for 20 million people, mostly in GOP congressional districts.
As Obama heads into his final days in office, lots of us will assess his legacy, including the president himself. Here’s my take: He did well in the short term and brilliantly for the long term.
Right now, the president leaves behind virtually full employment — and, more important, an economy without obvious bubbles to cause the next recession. (Think technology stocks for Bill Clinton or commercial real estate for Ronald Reagan). President-elect Donald Trump will claim credit as the expansion ripens further, because the economy has slack still to absorb and because recent growth is built on Obama’s stable fiscal foundation, which will pay dividends. Yes, Trump plans undoing that fiscal stability. It’s Trump: Making sense is optional.
Unemployment is 4.7%, less than half its 2009 U.S. peak — or the 9.8% the eurozone has now. The stock market tripled, beginning the March 2009 day a Wall Street Journal op-ed shrieked “Obama’s Radicalism Is Killing the Dow.” That happened before the post-2016-election popgun of a rally Trump wants credit for, including the 21 trading days the Dow Jones Industrial Average DJIA, -0.03% has spent trying to get from 19,750 to 20,000. The federal deficit has shrunk by two-thirds. Even housing prices, measured by this index, are 30% higher.
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Opinion Journal: The Obama legacy(4:51)
Global View Columnist Bret Stephens previews President Obama’s farewell speech. Photo: European Pressphoto Agency
If the S&P 500 SPX, +0.18% is at 7,000 when Trump leaves, unemployment is at 2.3% and the federal deficit is $150 billion or less, he’ll have delivered better economic improvements in percentage terms than Obama. And he’ll have to cut the percentage of under-65 adults without health insurance below 5%, while repealing Obamacare.
Maybe. But don’t bet the house.
Inflation-adjusted middle-class incomes are higher than Obama inherited and will likely top internet-boom standards next year. Obama was handed an avalanche in which the U.S. lost 9 million jobs in two years and saw real median household income fall 10% from when George W. Bush arrived, bottoming in 2011. U.S. growth is the most consistent in the developed world: Republicans criticizing 2.5% yearly growth in 2014-2015 gross domestic product should look at the eurozone or Japan.
Now let’s think about the longer term, where Obama leaves four huge industries materially better-positioned.
First, cars. Obama’s policies created an electric-car industry where there was none, partly by financing Tesla’s first factory in a dormant credit market, helping create about 20,000 jobs at Tesla TSLA, +3.55% lone, so far. (If you find Teslas “elitist,” Obama also financed the factory where F, +0.32% makes fuel-efficient EcoBoost engines for F-150 pickups, for real Americans whose tricked-out F-150s cost more than Tesla’s $35,000 Model 3), And he saved General Motors GM, -0.45% and Chrysler FCAU, -2.21% salvaging 1.5 million jobs.
This president set health care on a fundamentally healthier business model for companies like HCA Holdings HCA, +0.35% and Tenet Healthcare THC, +0.72% by implementing results-based payments for medicine, phasing out fogeyish fee-for-service medicine that Trump’s team admires. The old system had made American medicine the developed world’s least cost-effective, by a mile, costing us about $1 trillion more a year.
Obama’s team also transformed energy and utility industries by guiding stimulus money toward wind and solar plants, which has driven renewables’ cost low enough to be sustainable, and by standing aside to let hydraulic fracking break Arab petrostates (and Russia).
The long-term shape of those business is now clear — and, as the president argued this week, unchangeable: Mostly carbon-free renewable electricity,and lower-carbon natural-gas-fired juice, powering mostly pollution-free, much safer self-driving electric cars. Both electric cars and clean-power technologies are made heavily in the U.S., and employ far more people than the coal business. The benefits of Obama’s energy policies only begin with the $1,000 per household Americans are already saving on gasoline.
Speaking of the long term, the 12% decline in U.S. carbon emissions from 2005 levels — almost halfway to the Paris climate accords’ goals — underscores that meeting the goals is pretty easy. Decoupling America’s strategic interests from energy gives future presidents freedom to let Arab states fix internal messes without Washington debating how many failed states, like Syria, the U.S. should manage at once.
You don’t do these things kvetching about Meryl Streep or using the presidency to hustle bracelets and hotel receptions. Say what you want about Obama: Trump’s 37% approval in a Quinnipiac poll is lower than Obama’s has ever been, and that’s before the inauguration. We’ll miss ol’ Mr. Spock, his often-cold logic most of all.