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A Project of The Annenberg Public Policy Center

Obama Oversells U.S. Economy

In a recent speech, President Obama criticized Republicans for making claims about the economy and health care that are “not supported by the facts.” But Obama resorted to some spin of his own.

  • Obama said “America’s economy is not just better than it was eight years ago — it is the strongest, most durable economy in the world.” Actually, China’s economy grew by an estimated 6.9 percent in 2015 — more than double the U.S. rate.
  • Obama also claimed that “we’ve seen the first sustained manufacturing growth since the 1990s.” But manufacturing employment has declined by 35,000 in 2016, and it’s still down 2.2 percent from when Obama took office.
  • Obama said family health insurance premiums are “$2,600 less” on average than they would have been “if premiums had kept on going up at the pace before Obamacare.” There has been a decade-long slowdown in the growth of employer-sponsored health care premiums, and how much of it is attributable to the health care law is in dispute.

The president gave his economic address June 1 at Concord Community High School in Elkhart, Indiana. He criticized Republicans for opposing his economic agenda and for being “anti-government, anti-immigrant, anti-trade, and, let’s face it, it’s anti-change.”

‘Strongest’ Economy?

Obama said one of his main points was this: “America’s economy is not just better than it was eight years ago — it is the strongest, most durable economy in the world.”

But the U.S. economy isn’t the “strongest” based on annual growth of gross domestic product.

U.S. GDP grew by an estimated 2.5 percent in 2015, according to a January 2016 report from the World Bank. That was better than Europe, as a whole, which grew only 1.5 percent, and better than Japan, which was almost flat at 0.8 percent. The U.S. economy also performed better than Latin America’s developing one, which actually had negative growth last year.

However, the U.S. economy didn’t have the “strongest” growth. The World Bank estimated that China’s economy grew by 6.9 percent in 2015. That’s more than two times better than the United States. China’s GDP growth last year was a decline from its 7.7 percent growth in 2013 and its 7.3 percent growth in 2014.

The developing economies of East Asia and the Pacific collectively grew 6.4 percent in 2015, according to World Bank estimates.

Manufacturing Gains

Obama also claimed that “we’ve seen the first sustained manufacturing growth since the 1990s.” But that depends on the time period used to measure growth.

It’s true that U.S. manufacturing employment has rebounded by 7.3 percent since plunging to a post-World War II low in February 2010. But the fact is that manufacturing employment, at nearly 12.3 million in May, was still 2.2 percent below where it was when Obama took office. Plus, it remains 10.6 percent below where it was at the start of the Great Recession in December 2007.

The manufacturing sector’s growth hasn’t been “sustained” lately, either. Manufacturing employment was down by 35,000 through the first five months of 2016, according to the U.S. Bureau of Labor Statistics.

Obama on Obamacare

On health care, Obama exaggerated when he suggested that the Affordable Care Act is responsible for keeping employer-sponsored health insurance premiums low, and he wasn’t telling the full story when he said the average increase for subsidized health plans on the exchange is just $4 a month.

Obama, June 1: Today, the average family’s health insurance premium is $2,600 less than it would have been if premiums had kept on going up at the pace before Obamacare.

That is accurate, but it leaves the false impression that the Affordable Care Act — aka, Obamacare — is the reason for slow growth in premiums. There are “a variety of causes,” including the Affordable Care Act, for the slow growth in health care costs, according to Jason Furman, chairman of the president’s Council of Economic Advisers.

The $2,600 figure comes from Furman, who did an analysis last year of premiums based on data from the Kaiser Family Foundation’s annual surveys of employer-sponsored health plans. Furman links to the Kaiser report, which notes that the slowdown in health insurance premiums dates to 2005 — five years before the Affordable Care Act was signed into law. “Since 2005, premiums have grown an average of 5 percent each year, compared to 11 percent annually between 1999 and 2005,” the Kaiser report said.

What are the reasons for the slow growth?

In an Oct. 7, 2015, speech, Furman said “the recent slow growth in health care costs has a variety of causes.” Furman listed some of them: the recession and its aftermath, private-sector efforts to control health care costs “even before the recession hit and the Affordable Care Act was enacted,” and the Affordable Care Act. He said the law’s reductions in Medicare spending are having a “spillover effect” on overall health care spending, and he credited the law as “a major reason” for slow growth.

But there is disagreement on how much credit, if any, the Affordable Care Act deserves for slower growth in health care costs and, in turn, premiums.

Drew Altman, president of the Kaiser Family Foundation, said at a health care forum last year that there is “widespread agreement” that the slowdown in health care cost increases is “due to both the sluggish economy and changes in the health care system.” But, he added, “There’s far less agreement about the role of the ACA, about the role of the Affordable Care Act, or frankly whether it’s played any role at all.” (His remarks come at the 6:40 mark.)

Obama also rejected criticism that health insurance premiums are skyrocketing for those who buy plans on the health care exchanges set up by the Affordable Care Act.

Obama, June 1: For the millions of Americans who buy on HealthCare.gov, they get tax credits to help them pay for it. The average price increase this year has been four bucks a month. There hasn’t been a double-digit percentage hike — four bucks a month.

The $4 per month increase is the average for those who received tax credits to buy a health plan on the exchanges. As we have written before, the Department of Health and Human Services reported in April that 85 percent of those buying a plan on the HealthCare.gov marketplaces in 2016 qualified for tax credits and saw a jump in premiums of 4 percent or $4 per month on average. The average premium increase for all HealthCare.gov consumers was 8 percent in 2016.

And those, of course, are averages.

The Kaiser Family Foundation did an analysis in October of premium changes for the second-lowest cost silver marketplace plans in major cities in 50 states and the District of Columbia. It found that the percentage change before tax credits ranged from a 10.6 percent decrease in Seattle to a 38.4 percent increase in Nashville, Tennessee, with average double-digit increases in 22 of the major cities. The average increase was 10.1 percent before tax credits.

After accounting for tax credits, there were only two cities that had average increases in the double digits — Phoenix and Minneapolis — and 45 had seen reductions in the average premiums.