President Barack Obama began his 2015 State of the Union address last week with these words:
“We are 15 years into this new century. Fifteen years that dawned with terror touching our shores; that unfolded with a new generation fighting two long and costly wars; that saw a vicious recession spread across our nation and the world. It has been, and still is, a hard time for many.
“But tonight, we turn the page.”
This might sound like presidential hyperbole. Obviously, every sitting president exaggerates the challenges he faced, in order to make himself look that much more heroic. But in this case, Obama may actually have understated his case.
The U.S. withstood an almost-unprecedented series of shocks in the years from 2000 through 2011. The list of disasters is so extraordinary that it’s worth repeating, just for emphasis.
First, there were the economic disasters. In 2000 the tech bubble popped, and in 2008 the housing bubble followed. Each of these asset price crashes represented $6.2 trillion dollars of financial wealth vanishing into thin air. That means each was larger, as a percentage of U.S. gross domestic product, than the stock market crash that touched off the Great Depression. In the space of a decade, we had the two biggest financial crashes in U.S. history.
The recession that followed the 2000 crash wasn’t particularly severe. But it was long – a “jobless recovery.” And during the entire Bush administration, real median household income never came back to its peak in the late 1990s.
But that recession was a pipsqueak compared with the monster that followed the financial crisis of 2008. The Great Recession was the worst thing to hit our economy since the Great Depression. U.S. GDP fell outright, by 3.9 percent. Household wealth plummeted by about half, and wages nose-dived. Unemployment soared to 10 percent – and by broader measures, much higher than that. An entire generation was scarred. Budget deficits ballooned as the government lost tax revenue even as it struggled to pump money into the flagging economy.
At the same time, of course, rapid growth in developing countries and dwindling supplies of crude oil pushed commodity prices to levels they hadn’t touched in decades. Gasoline went from a little more than $1 a gallon at the start of the decade to $4.
In economic terms, the 2000s weren’t as bad as the 1930s, but they were worse than anything else in the 20th century, including the much-derided 1970s.
But economic shocks weren’t the only ones to hit the U.S. in the Terrible 2000s. The legacy of the terrorist attacks of 9/11 remain to this day, undermining the very basic notion of the U.S. as the “land of the free.”
Then there was the Bush administration’s dissembling in the run up to the war in Iraq. Much of the world swung from loving the U.S. to fearing it – a swing that has only partially reversed itself during the Obama administration. The futility of our actions in Iraq became obvious fairly quickly and our military victories were unable to halt the country’s political disintegration, which provided an opening for the brutal Islamic State.
Finally, the 2000s were a period of remarkable political dysfunction. The contested election of 2000 left many voters with a sour taste in their mouths, more so than any election in the previous century. Political partisanship deepened to an almost pathological degree. Suddenly we were a 50-50 nation, and angry people were taking to the streets, in the form of the Tea Party and Occupy Wall Street. The political crisis came to a head in the debt-ceiling crisis of 2011, when Congress almost forced the U.S. into a technical default.
And all this time, the U.S. was facing down a new, invigorated set of international rivals – the Chinese economic juggernaut, a resurgent Russia and a metastasizing cancer of international Islamist terrorism.
This string of calamities sounds like a century’s worth. But it happened in a single decade. For 10 years, the U.S. took a relentless series of heavy blows, one after another.
So although Americans are still worried, and although some of these problems haven’t gone away, it’s almost astonishing how well the U.S. has done. Osama bin Laden is dead. Al-Qaida is already a brand name instead of an organization. Support for terrorism has dropped like a rock, and the U.S. has recovered some of its lost prestige. The war in Iraq is over. The political extremism of 2011 seems to be fading. Unemployment is back below 6 percent, GDP is growing solidly if not spectacularly, and the budget deficit has returned to normal levels. The stock market is back near record highs.
German Chancellor Otto von Bismarck once said that “God has a special providence for fools, drunks and the United States of America.” Perhaps he was right.
Or perhaps the political, economic, and cultural system of the U.S. is simply a lot more robust than it looks.
Noah Smith is an assistant professor of finance at Stony Brook University and a freelance writer for finance and business publications.