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American Pie
"After eight years of Bush-McCain economics, the pie is shrinking, it's not growing" — Barack Obama, on the state of the economy.
The analogy of pie is a common one when discussing economics. Whether someone is wanting a "piece of the pie", or talking about "growing the pie", the pie analogy seems as American as, well, apple pie, and political campaigns, especially presidential campaigns, typically center around the economy and what a prospective candidate will do to improve the economy. In making his own case on the economy, Sen. Obama has sought to tie John McCain with President Bush, frequently referring negatively to the "Bush-McCain economy" and the past 8 years — effectively treating Sen. McCain as the incumbent President.
With the recent financial problems caused by the credit crunch, the subprime mortgage mess, and the various "bailout" packages, it would seem that Obama could easily find the high ground in discussing the state of the economy. But is his claim true? What has "the pie" — the American economy — actually done over the past 8 years? All economic statistics referenced below are from the Bureau of Economic Analysis, the official economics statistics wing of the United States Department of Commerce, and from the Bureau of Labor Statistics, located within the US Department of Labor.
One test of the economy is to look at the measure of the economic output. The commonly accepted measuring stick is Gross Domestic Product (GDP). During the 7+ years of the Bush Presidency, the GDP has increased by nearly 20% when corrected for inflation. There has been a decrease in the size of GDP in only three quarters out of thirty, including the first quarter of 2001 (when Bush was inaugurated) and the 3rd quarter of 2001 (which would include the 9/11 attacks and some of the aftermath). So using economic output as a gauge, the "pie" has certainly not been "shrinking" as Obama contends.
Another measure of the economy is income. If the pie has been "shrinking" over the past 8 years, then surely income has decreased. Not so: total personal income has increased from $8.7 trillion in 2001 to $12.2 trillion in the 2nd quarter of 2008; per capita income has increased from $25,620 to $29,274. That's an increase of nearly 40% in overall compensation, and an increase of 14% in constant-dollar per capita income. Again, no shrinkage is apparent.
A third measure of economic vitality is job creation. A shrinking American economic pie would imply job losses along the way. The unemployment rate has increased, from 4.2% when Bush took office in January of 2001 to 6.1% in September of 2008 — an increase of 45%. And 2008 has certainly been a bad year for jobs: since January, approximately 760,000 jobs have been lost. But for the total 7+ years of the Bush Administration, there is still a net gain of 4.8 million jobs. Once more: no "shrinking pie", even with the aftermath of 9/11 and an increase in the minimum wage.
Perhaps, in making his claim of a shrinking economy, Obama was referring to some other measure of economic performance than GDP, income, or job creation. Certainly, the current state of the economy is not strong, and the short-term outlook is more job losses and either slow or even negative GDP growth; however, Sen. Obama's claims of a shrinking pie don't seem to match with the facts.
The analogy of pie is a common one when discussing economics. Whether someone is wanting a "piece of the pie", or talking about "growing the pie", the pie analogy seems as American as, well, apple pie, and political campaigns, especially presidential campaigns, typically center around the economy and what a prospective candidate will do to improve the economy. In making his own case on the economy, Sen. Obama has sought to tie John McCain with President Bush, frequently referring negatively to the "Bush-McCain economy" and the past 8 years — effectively treating Sen. McCain as the incumbent President.
With the recent financial problems caused by the credit crunch, the subprime mortgage mess, and the various "bailout" packages, it would seem that Obama could easily find the high ground in discussing the state of the economy. But is his claim true? What has "the pie" — the American economy — actually done over the past 8 years? All economic statistics referenced below are from the Bureau of Economic Analysis, the official economics statistics wing of the United States Department of Commerce, and from the Bureau of Labor Statistics, located within the US Department of Labor.
One test of the economy is to look at the measure of the economic output. The commonly accepted measuring stick is Gross Domestic Product (GDP). During the 7+ years of the Bush Presidency, the GDP has increased by nearly 20% when corrected for inflation. There has been a decrease in the size of GDP in only three quarters out of thirty, including the first quarter of 2001 (when Bush was inaugurated) and the 3rd quarter of 2001 (which would include the 9/11 attacks and some of the aftermath). So using economic output as a gauge, the "pie" has certainly not been "shrinking" as Obama contends.
Another measure of the economy is income. If the pie has been "shrinking" over the past 8 years, then surely income has decreased. Not so: total personal income has increased from $8.7 trillion in 2001 to $12.2 trillion in the 2nd quarter of 2008; per capita income has increased from $25,620 to $29,274. That's an increase of nearly 40% in overall compensation, and an increase of 14% in constant-dollar per capita income. Again, no shrinkage is apparent.
A third measure of economic vitality is job creation. A shrinking American economic pie would imply job losses along the way. The unemployment rate has increased, from 4.2% when Bush took office in January of 2001 to 6.1% in September of 2008 — an increase of 45%. And 2008 has certainly been a bad year for jobs: since January, approximately 760,000 jobs have been lost. But for the total 7+ years of the Bush Administration, there is still a net gain of 4.8 million jobs. Once more: no "shrinking pie", even with the aftermath of 9/11 and an increase in the minimum wage.
Perhaps, in making his claim of a shrinking economy, Obama was referring to some other measure of economic performance than GDP, income, or job creation. Certainly, the current state of the economy is not strong, and the short-term outlook is more job losses and either slow or even negative GDP growth; however, Sen. Obama's claims of a shrinking pie don't seem to match with the facts.
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