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Obama and the Economy: Is Hope All He's Got?

4 years ago
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What's President Barack Obama to do? The economic recovery is anemic, and Obama doesn't seem to have much ammo left. On Tuesday, the news of a sharp decline in consumer confidence sent stock prices falling. If Americans' ain't buying, then American companies ain't selling -- or hiring. Most recoveries are powered by consumer spending, and that's not happening here. New unemployment numbers are due Friday, and they're not expected to be upbeat. (Last month's jobs report would have been a real loser, had it not been for the hiring of hundreds of thousands of temporary census workers.)

With this sluggish recovery doing little to bring down near-10 percent unemployment -- and with the congressional elections only four months away -- the president doesn't seem to have many options to either try or talk up.

Look at the past few days. The G-20 summit ended up on a flat note. As Bloomberg Businessweek put it, most of the leaders there "generally sided with cutting spending and raising taxes, despite warnings from U.S. President Barack Obama and others that too much austerity too quickly could choke off the global recovery." Obama had pushed for economic growth through stimulation (read: government spending), but other leaders, such as German Chancellor Angela Merkel, called for spending cuts and tax increases to deal with deficits. (With the Greek crisis threatening economies in Europe -- and beyond -- this emphasis on budget-balancing is understandable, whether wise or not.) The meeting ended with a watered-down agreement, no vigorous plan for global economic recovery. Not much for Obama to show.

On Tuesday, Obama met with Federal Reserve Chairman Ben Bernanke and afterward made a statement that was a collection of the usual talking points: we're no longer losing 750,000 jobs a month, we're into a recovery, we still have a lot of work to do, etc. But Obama didn't have much to say about what that work is. He pointed to the Wall Street reform bill that is close to completion, but not yet over the finish line. And this reform bill, if enacted, is not likely to provide an immediate economic shot in the arm. He referred to "making sure" credit is flowing to small businesses, without specifying how that can be accomplished. And he mentioned passing extended unemployment benefits.

But that same day, the House of Representatives rejected a bill to prolong unemployment benefits for people who have been out of work for a while. The bill won a majority, 261 to 155, but it did not meet the two-thirds mark necessary for passage under a special emergency rule. If it comes up again for a regular vote, it ought to clear the House. But in the Senate, the legislation could run smack into a GOP filibuster. This extension, at best, would be a small dollop of stimulation.

The tussle over unemployment benefits reflects the basic divide in Washington. Republicans are claiming that spending is out of control, and they're continuing their crusade against any economic stimulus. Obama and Democrats want to keep on juicing the economy to prevent the weak recovery from stalling. Yet Rep. Steny Hoyer (D-Md.), the House majority leader, has said some Democrats are getting spooked by the rising deficit and national debt. That is, they fear a potential voter backlash.

The bottom line: Obama has not been able to mobilize world leaders, and he has not been able to mobilize Congress. Ask the average American voter this question: "What's the president's plan to improve the economy?" My hunch--and I apologize for not having conducted an independent poll on this matter -- is that most would say, "I don't know."

Another hunch: this failure is the result of Obama's failure to sell the original $800 billion stimulus package. Many economists believe that Recovery Act has saved or created about 2 million jobs. Basically, it slowed down (or halted) the economic free fall that began at the end of the Bush-Cheney administration. Yet it did not provide a bounce back. Consequently, for many Americans, especially the unemployed, its effects have been hard to see -- or feel.

The stimulus was passed in the first weeks of the Obama administration, while the White House was also bailing out banks, financial firms, and automakers. Spending to stimulate the economy (good) was lumped together with lending to save corporate reprobates (bad). Exploiting this confusion, the Republicans waged a fierce campaign against the stimulus - -with some GOPers recklessly, relentlessly and falsely charging that the stimulus has not created a single new job. That lie had an impact.

Obama and his crew were caught flat-footed. They lost the message war regarding the stimulus. A major accomplishment ended up a political tar baby. According to polls, much of the public hasn't absorbed the lesson of the Recovery Act: economic stimulation can work. Thus, additional revving seems a losing proposition. The White House has recently mounted a PR initiative called "Recovery Summer" to show off the jobs the measure created or saved. But how many of your neighbors have discussed "Recovery Summer" while grilling?

Obama is now stuck with a skeptical public, an ever-hostile congressional opposition, and global leaders obsessed with not becoming the next Greece. There's also not much room left for additional monetary maneuvering (lowering interest rates). The pundits repeatedly opine that as the BP oil spill continues, Obama cannot afford to appear impotent (even if he cannot plug the damned hole himself). That's even more so with the economy. Yet his tool kit for fixing the economy is rather light these days. At the moment, Obama's best bet may be hope.

You can follow David Corn's postings and media appearances via Twitter.

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