Why is the economy – as measured by GDP – growing so slowly under President Obama? If takes a look at the following graphic, it’s readily apparent that at current pace, Obama has a good chance of becoming the worst President ever when it comes to GDP growth (at least for the presidents for which we have

Why?

gdp growth by president obama

Obama took over a horrible economy

Some might say that Obama took over a horrible economy from the Bush Administration. Defenders of such a statement are surely lying. Just take a look at the figure above. Almost all of the economic downturn is attributed to the years of the Bush Administration. Obama had the advantage of taking office when the economy was on the cusp of a recovery, a recovery that should have been – based on historical experience – a very strong one.

Some blind Obama supporters might argue that it’s just part of the business cycle. According to individuals with this thought process, if one just strips out the business cycle from the numbers, the figures would show a trend grow rate indifferent to the Obama Administration.

Here’s that look.

The first figure is the results of a Hodrick-Prescott Filter on the quarterly GDP figures.

(As a note, a Hodrick-Prescott Filter divides a time-series into two components, a trend and a cycle.)

The pink line in the figure below is the estimated trend (right axis) and the green line is the estimated cycle (left axis). As is shown, the trend has become flatter, while the cycle has gotten much weaker. Instead of the cycle growing, as it did in the past business cycles, the cycle is dampened.

Essentially, by this point in the business cycle, GDP should be at least $400 billion above trend (annual basis); instead, it’s only $60 billion above trend. That’s $340 billion missing.

hp

Here’s a look at the missing $340 billion by trend according to president. Clearly, things don’t look good for the sitting president.

trend gdp by president

Now, presidents are responsible for a lot less of economic activity than politicians will readily admit (both sides of the isle are guilty of this).

With that said, President Obama has made historic mistakes in economic policy. Here are five.

First, Obama is responsible for Dodd-Frank financial regulations, regulations that provide little incentive for financial institutions to take on risk, more difficult for startups to get funding, and so forth.

Second, Obama has done little to counteract the employment effects of Basel III and the effect it has on capital available for hiring.

Third, Obamacare, the bill that shifts employment from full-time to part-time.

Fourth, Obama pushed for and achieved higher taxes on the “rich.” It goes without saying, but the higher tax rates reduce available funds for job-creating investments and high-end spending.

Fifth, Obama has failed to address a continuously ballooning deficit. The overhang from debt incurred during his presidency will stay around for some time.

After looking at how businesses and individuals have fared over the past six years, it’s readily apparent that certain Obama policies are at least partially to blame for the historically slow economic recovery. Only chicken-littles with a hatred for the Tea Party and utter devotion of blind politics could see it otherwise.