About the only talking point Joe Biden didn’t repeat in his debate with Paul Ryan was the one lionizing President Obama for having saved the country from another Great Depression. Biden used it in his speech at the Democratic convention, as did others, and it remains a hardy perennial of Obama lore. The president, ever immodest, has credited himself for this achievement. Last year Treasury Secretary Tim Geithner told him, it’s “your legacy.” Andrew Sullivan, in a recent Newsweek cover story likening Obama to Ronald Reagan, twice credited the president with having “prevented a second Great Depression.”
This is the canard that never dies—despite the total absence of facts to back it up. What’s surprising is that Republicans, conservatives, and the media have done so little to stash the Obama-as-savior claim in the attic of political untruths. Correcting that oversight is long overdue.
That the president saved us is an empty boast. The Obama camp cites the stimulus package enacted in February 2009 as evidence for the claim. But on inspection, this proof dissolves. The stimulus wasn’t responsible even for halting the recession, much less keeping America out of a depression. The recession officially ended in June 2009—at a time when only a fraction of the $831 billion in stimulus funds had been spent.
Besides, had we been on the brink of a Great -Depression in 2009, the stimulus wouldn’t have been big enough to stop it. Ed Lazear, who headed George W. Bush’s council of -economic advisers, has produced the relevant numbers. The gross domestic product (GDP) shrank 12 percent during the 2007-2009 recession. “The largest estimates of the effect of the Obama stimulus is about 3.5 percent,” Lazear says. “The Great Depression was a 40 percent ‘recession.’ ” The math disproves the Obama claim.
So does the course of the economy in 2008. James Pethokoukis, the American Enterprise Institute economics -columnist, has noted that the drop in GDP ended in December. “The big break in the decline happened before the stimulus was passed,” he says. Indeed, it occurred before Obama had taken office. If there was a threat of a depression, it was gone. Unemployment continued to grow for a few months, but it’s a lagging indicator.
Two more points. “Economists weren’t predicting a Depression,” according to John Merline of Investor’s Business Daily. Obama’s economists, surveying the economy as he entered the White House, didn’t see any indication of one. Nor did the Congressional Budget Office (CBO), which predicted the recession would end in the second half of 2009. Former CBO director Douglas Holtz-Eakin reminds us that any administration would have proposed an economic stimulus, given conditions in early 2009. Obama’s program wasn’t unique, except in its failure to spark a strong recovery.
If anyone is responsible for averting a financial disaster, it’s the much-maligned chairman of the Federal Reserve, Ben Bernanke. A Princeton economist, he’s a student of the Depression and an expert in the role of monetary policy. He acted early and often to prevent a catastrophic collapse, with remarkable success.
After Bear Stearns, the global investment bank and brokerage firm, collapsed in March 2008, Bernanke opened the Fed’s discount window—with its cheap loans—to non-commercial banks like Goldman Sachs and Morgan Stanley. Then, after Lehman Brothers, the financial services firm, went under in September 2008, Bernanke was instrumental in creating the $700 billion Troubled Assets Relief Program (TARP) that kept the big banks alive.
That wasn’t all. Bernanke had learned the lessons of the Depression. In the early 1930s, the Fed tightened the money supply. Bernanke understood the Fed should have done the opposite. So in December 2008, a full month before Obama was inaugurated, the Bernanke Fed cut interest rates to near zero. How has Bernanke been rewarded for his foresight? Obama claims all the credit for himself for saving the economy.
It gets worse. Because the economic recovery is so sickly, Bernanke has been forced to step in again, this time to rescue Obama from his wrongheaded policies. To stave off a new recession, he has eased monetary policy three times—QE1, QE2, QE3—by buying trillions in government-held mortgages and bonds, at the risk of higher inflation.
The task for Obama was to create conditions conducive to a sharp snap-back from the recession. He hasn’t done this. Bernanke’s job was to stop the economic free-fall in 2008. He did that. There was never a serious threat of another Great Depression. But assuming a small threat existed, Bernanke snuffed it out.
“That was Bernanke’s crowning achievement,” says Washington consultant David Smick, “for which he’ll be remembered with enormous praise by historians.” Obama? He should get the credit he deserves: none.