Almost 32 years ago, Ronald Reagan, in his bid to win the presidency and oust incumbent Jimmy Carter, famously asked the public, "Are you better off than you were four years ago?"
It was a powerful question, and the answer, judging by Reagan's win and Carter's defeat, was a big "no."
Now Republicans are asking the same question about Barack Obama's first term: Are we better off than when he took office in January of 2009?
There are many ways to interpret this question. Some people point to the misery index, which melds the unemployment rate with the inflation rate (and it's not looking great). Others point to the state of the auto industry (recovering quite nicely). Still others track the GDP (pretty good, especially compared to other developed countries).
The fact is, there are myriad ways to measure the growth and health of the economy, and everything seems to yield a different answer. So, today, we've decided to look at the four factors that matter most to your bottom line: housing, jobs, wages and retirement savings.
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Get started with a free financial assessment.
Are We Better Housed?
Housing prices were in the process of plummeting during Barack Obama's election campaign, and didn't bottom out until March 2009, three months after he took office. Since then, they've stagnated. It depends on what city you live in, but overall, median home prices are only $9,000 above where they were four years ago--currently $185,000, far below the 2006 high of $227,100. Of course, this is bad (sorry, not just bad, head-bangingly frustrating) if you are trying to sell a home that's worth less than the mortgage you have on it.
But if you are trying to buy a house, times are good. The Housing Affordability Index for the first quarter of 2012 rose to a record high. This is good news, as the higher the index, the more able consumers are to buy homes. Consumers are taking the hint--the National Association of Realtors reported 15 months of gains in the Pending Home Sales Index, scootching it up to its highest level since April 2010.
What about foreclosures? In January of 2009, one in every 466 U.S. housing units received a foreclosure filing, according to RealtyTrac. In July 2012, that number stood at 1 in 686. So, fewer people are being forced out of their homes than four years ago because they can't pay their mortgages.
Why Is This?
Home prices are largely determined by the Federal Reserve setting interest rates (which determines how expensive your mortgage will be) and how consumers are feeling about buying a home--consumer confidence is doing well right now but isn't as amazing as in the early 2000's. In other words, a lot of this isn't in the direct control of the government.
But one thing the administration has tried to change? Foreclosures.
Obama's 2009 Home Affordable Mortgage Program (or HAMP) promised to help three million to four million homeowners, but three years later only one million have been helped. The U.S. Treasury Department blames the banks, who haven't fully embraced the voluntary program, despite signing contracts to do so.
The parallel Home Affordable Refinance Program (HARP)--to help refinance existing mortgages--was supposed to help five million homeowners, but had helped fewer than two million people by the end of last year; also, the program has used less than $3 billion of the $50 billion allotted for it, at least in part because stringent requirements made many banks decline to participate. Some people posit that these programs even slowed housing recovery progress, as homeowners stalled, waiting for a bailout to come that never arrived.
Touted as a win for consumers, Obama reached a deal with banks that settled allegations that banks mishandled mortgages, but the banks have stalled in handing out the full $10 billion promised in loan forgiveness to consumers, and, judging by several reports, are completely unhelpful to consumers in general.
The takeway: Stan Humphries, chief economist at Zillow, says: "The overall market is healing, albeit at a frustratingly slow pace." Things could have been even better with a better managed mortgage program from the administration and more cooperation from the banks.
Are We Better Employed?
There are two good ways to look at this: through job creation and through unemployment numbers.
Job losses were at a high when Obama took office in January of 2009, with 839,000 jobs disappearing that month. Since then, those losses have gradually shrunk, finally heading into positive territory in March of 2010 and we've been gaining jobs ever since. It's important to note, however, that these numbers don't include public sector jobs, which have been disappearing as the state and local governments see their budgets shrink because of lower income tax revenues. Overall, we have 332,000 more private sector jobs than when Obama was sworn in; after accounting for public sector jobs, the country has slightly fewer jobs overall than in January 2009.
Unemployment, meanwhile, is not looking great. It was at 7.8% in Janauary of 2009. From there, it continued to rise, hitting its peak of 10% that October. Despite declining since then, it's still higher then when Obama started, at 8.3%.
Why Is This?
The Obama administration passed a stimulus program in 2009, which the nonpartisan Congressional Budget Office estimates saved or created at least 1.4 million jobs. He proposed a second stimulus called the American Jobs Act, but that was stalled in Congress and hasn't been taken back up since.
Many say unemployment remains high because companies just can't find qualified people. While there are four job seekers for every open position, those positions remain open because of an overall mismatch in skills. This isn't due to any one action by a president, but because of a profound shift in how business functions due to changing technology (for example, administrative assistants now need to know how to manage digital calendars instead of just typing), and many potential employees are being left behind.
The takeaway: Job creation isn't terribly impressive, but is better, while unemployment is still worse than four years ago. Obama gave it a shot but has been oaneuvered by a shifting business climate and an incalcitrant Congress.
Are We Paid Better?
Median household income fell from $54,983 in January of 2009 to $50,964 in June of 2012. But when we look not at households (which can include a shifting number of members as people join and leave a household) but at individuals, real personal income per capita has risen since the fall of 2008.
Meanwhile, the top 1% captured 93% of the growth in income from the recovery, contributing to an ever-widening income gap. So that means that while Average Joe is worse off, the wealthy have been doing pretty well.
Why Is This?
The fall of median household incomes has to do with the kinds of jobs that have become available. Most of the jobs lost during the recession were solid, middle-class jobs. Most of the new jobs gained during the recovery are low-wage jobs, according to a study by the National Employment Law Project. This is due, again, to the fact that there is a skill mismatch and the loss of middle-class public sector jobs.
More importantly, this trend might just be a continuation of what had been happening long before Obama took office. Middle-class jobs have been eroding for the past decade.
The takeaway: We are definitely worse off when it comes to income. Obama's administration hasn't successfully addressed the skill mismatch or the hollowing out of the middle class. But then again, Bush's economic policies weren't successful, either.
Are We Better Prepared for Retirement?
Finally, let's look at how your retirement account is doing. Since Obama has taken office, the Dow has soared from 8,228 to 13,292. That's only slightly down from its frothy heights in 2007. So it's likely your 401(k) has recovered quite nicely. In fact, the average 401(k) balance was 62% higher in March of this year than at the same time 2009.
Why Is This?
As the economy has slowly worked its way out of the recession and corporations have recovered, the stock market has gone up with investor sentiment.
If you believe that Obama's administration was instrumental in preventing the deepening of the recession and stabilizing the economy, then you have him to thank. According to the Fitch ratings agency, at least, the federal government may be responsible for 4% of US growth and prevented a longer and deeper recession.
The takeaway: On the whole, Americans are much better prepared for retirement than when Barack Obama assumed office. While many factors affect the market, the president's policies were one piece of a positive recovery.
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