At the Democratic National Convention, former President Bill Clinton said that "nobody could have fixed the economy in four years." President Obama routinely doubles down on this theme, using the phrase "four years ago" to defend his policies and the current economic situation. Both Clinton and Obama frame their argument for a second Obama term by reminding voters how bad things were in 2008.
But are they correct? Was the problem unfixable in four years? Was the hole just too big, regardless of the policies they chose? The pundits will continue to debate this point for years to come, but recent history might be the most instructive. Compare what Obama inherited in 2008 to what President Ronald Reagan inherited in 1980, and let's consider the results.
The economic downturn Obama inherited from President George W. Bush was formidable, but by any objective standard, it pales in comparison to what Reagan inherited from President Jimmy Carter. On Election Day 1980, unemployment was at 7.5 percent and headed for 10.8 percent; inflation was at 12.5 percent, headed for 13.6 percent, and interest rates were at 15.5 percent, headed for 21.5 percent by Christmas, well before Reagan was sworn in.
We forget, but 1981-82 was also called "The Great Recession" and billed as the most severe since the Depression. As 1981 began, small-business people and farmers were borrowing money at 23 to 24 percent -- the highest interest rates since the Civil War. The rate of inflation was also the highest since Abraham Lincoln's day.
The decade leading up to the Reagan years had been culturally difficult as well. The 1970s featured Watergate and Richard Nixon's resignation; the Vietnam War and helicopter escapes from Saigon; the Russian invasion of Afghanistan; Iranian hostages, and gas lines. Worst of all, there was a feeling that communism was on the rise and that the Soviet Union was on the offensive. Even with 9/11 and two foreign wars, the decade of the 2000s looks manageable compared to the 1970s -- a tough 10 years for freedom and capitalism by any measure.
So, by comparison, how did things look for Obama on Election Day 2008? Not good, but not as bad as 1980. Unemployment was a 6.8 percent and rose to a height of 10 percent; inflation was at 1.1 percent and hasn't risen above 4 percent since, and interest rates were at 1 percent and have remained at historic lows (for better or for worse, the Fed is keeping the rate artificially low). Obama inherited high unemployment -- as did Reagan -- but neither heavy inflation nor high borrowing costs were a factor in 2008.
Yet the difference lies more in how they responded than in what they inherited.
First, consider what Reagan didn't do. There was no massive increase in government. No stimulus package (although he did increase defense spending, which produced jobs). And, most important, there was no blame. Those who knew Reagan well do not recall him blaming the situation on Carter. Sure, he criticized Carter on the campaign trail, but once in office, he owned the problem.
