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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.

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50 Comments

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mjackson3566

Everyone has to face the facts. Pres.Obama does nothing but TALK, TALK, TALK, THAT IS IT. HE IS A GREAT SPEAKER THAT WILL SAY ANYTHING. Now as for doing anything, WRONG! HE IS DEAD IN THE WATER! What a bad president we have, but not for long. Next election he is GONE. I don't know if the Democrats will even put him in the election seat, he has caused them too much pain and embarrassment.

August 27 2010 at 2:22 PM Report abuse +1 rate up rate down Reply
kev

Former Treasury Secretary Paul O'Neill was told "deficits don't matter" when he warned of a looming fiscal crisis.
O'Neill, fired in a shakeup of Bush's economic team in December 2002, raised objections to a new round of tax cuts and said the president balked at his more aggressive plan to combat corporate crime after a string of accounting scandals because of opposition from "the corporate crowd," a key constituency.

O'Neill said he tried to warn Vice President Dick Cheney that growing budget deficits-expected to top $500 billion this fiscal year alone-posed a threat to the economy. Cheney cut him off. "You know, Paul, Reagan proved deficits don't matter," he said, according to excerpts. Cheney continued: "We won the midterms (congressional elections). This is our due." A month later, Cheney told the Treasury secretary he was fired.

The vice president's office had no immediate comment, but John Snow, who replaced O'Neill, insisted that deficits "do matter" to the administration.

Source: [X-ref O'Neill] Adam Entous, Reuters, on AOL News Jan 11, 2004

July 04 2010 at 9:55 AM Report abuse +1 rate up rate down Reply
Tommy

I can't wait until the Republicans are in the White House again. They have an agenda that started with Reagan that needs to be finished so that we can start all over again and blame our problems on the Democrats.

June 30 2010 at 11:47 PM Report abuse +7 rate up rate down Reply
1 reply to Tommy's comment
mjackson3566

VERY TRUE!

August 27 2010 at 2:23 PM Report abuse +1 rate up rate down Reply
dc walker

I didn't vote for Bush, either time, but everyone keeps saying he spent money. I guess that was to help with the clean up of the trade towers, the pentagon, beefing up the airports, 335 embassies and consulates around the world, military bases here and around the world, government buildings throughout the US; nuclear power plants, navy yards, new offices abroad that scrub manifests in cargo and airplanes, new offices in the US to scrub manifests from here. He went after Saddam who was buying nuclear triggers from us in 1990 and was lobbing scuds at his neighbors, took 700 tanks into Kuwait seizing $40 billion in military hardware including 150 surface to air missiles on his way to Saudi Arabia and burnt oil fields on his way out; gassed 65,000 Kurds and then tried to go after Al Qaeda in Afghanistan. Yes, he spent money but at least I could see where the money went. Where did the stimulus go? 20,000 criminals in prison were able to get money for first home buying, an IRS center in Andover, MA got $92 million to expand their center with an amphitheater, pond and art gallery, etc. I've worked in the gov since Johnson to Bush Jr. but this guy, I try hard but I just can't support a man who does not listen to anyone. Heaven help those people in the Gulf.

June 30 2010 at 10:36 PM Report abuse +2 rate up rate down Reply
sysaphus71

What is true and will remain true is inexperience and bluster never carries the water..
it will always be it's undoing...if, AND THAT MAY BE A BIG IF we can make it thru this administration without a major event that causes a meltdown financially, then the mistakes made will be corrected. The public once exposed to the truth will always(usually) make the right decisions....we are in a period of Carter on steroids
This will subside because too many people WANT AND ARE SEEKING THE TRUE STORY,
NOT THE PALAVER FED TO THEM on the nightly news or Oprah.... If we make it thru the mess ...this experience might just be the best thing that could have happened,
The public will be wary to fast talk and grand sweeping platitudes with no details...all hat and no cattle will not make the grade anymore.

June 30 2010 at 9:39 PM Report abuse +6 rate up rate down Reply
jtzeph

Lets stipulate that both TARP and the Stimulus bill were warrented. There is an argument to be made that panic could have engulfed the credit markets and "revulsion" an economic term for the suspension of belief in credit instruments could have ensued. Now I do not agree with this assertion, but it is a cogent perspective. What I have not seen from any pro-government liberal is the real life corrolary to this, which is that this type of intervention distorts the marketplace and its pricing mechanism. The current markets in assets ARE TOO HIGH IN PRICE and the government is not allowing the clearing transactions to occur to reliquify the system. FDR did the same thing as did the Japanese in the 1990's. What occured was 10 years of stagnation while mispriced assets languished on balance sheets freezing the capital required for recovery. The Credit markets KNOW this and if growth prospects look dim the ability of sovereign nations to make the interest payments on debt levels near 100% of GDP{ see Greece} are problematic. Keynesian "pump priming" is inoperable, first because his theory called for countercyclical policies throughout the business cycle{ie. running surpluses during recoveries} and increasing debt with little prospect of a true recovery may cause "revulsion" of US Treasuries.

June 30 2010 at 7:45 PM Report abuse +2 rate up rate down Reply
Ed

When one adds it all up, there is no question but that it is George W's fault, certainly not Obama's.

June 30 2010 at 5:49 PM Report abuse -13 rate up rate down Reply
1 reply to Ed's comment
Kenneth

Here is a better way to put it. When the people add it all up this November and again in 2012 they will let you know whose fault it was!

June 30 2010 at 6:46 PM Report abuse +9 rate up rate down Reply
walkingman50

The economists that say the stimulus has 'saved or created 2,000,000 jobs are not to be trusted. Unemployment was at 6.9% when stimulus was passed and now it is at 9.9%. At 1,500,000 jobs per percentage point that equals 4,500,000 jobs lost since stimulus passed. Math so simple an economist can do it even Paul Krugman (maybe).

June 30 2010 at 4:27 PM Report abuse +14 rate up rate down Reply
1 reply to walkingman50's comment
walkingman50

democrat deductive reasoning - yes things are terrible now BUT you should have seen how bad it could have been !!! Proving a hypothetical ??

June 30 2010 at 9:17 PM Report abuse +3 rate up rate down Reply
judeduff

I have heard people use the phrase "Recovery Summer" at barbecues, but only as the punchline to a joke. The only tool Obama ever needed was to get out of the way of the private sector and let it recover on its own like it always does. Instead, he has over-regulated, threatened, and impeded any progress that might have been made. Companies are NOT going to hire people with the threat of higher taxes, Obamacare costs, and Cap and Trade hanging over their head. Obama cannot create private sector jobs, but he can create an environment that is friendly to job growth. Instead, he has done everything possible to demonize business owners and put stumbling blocks in their path. He couldn't have made things harder for the private sector if he was trying. At this point, I have to either believe he is trying to make things worse or he is the most incompetent leader we have ever had. You choose.

June 30 2010 at 3:01 PM Report abuse +19 rate up rate down Reply
ettu

Well, let's HOPE he still has some, because the American people are losing theirs, along with a great deal more.

June 30 2010 at 2:23 PM Report abuse +15 rate up rate down Reply

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