"Ignore the Haters: Obama Helped Save the U.S. Economy"

Ignore the Haters: Obama Helped Save the U.S. Economy

by Danny Vinik at the New Republic

http://www.newrepublic.com/article/119781/obamas-economic-record-strong-even-though-wages-are-stagnant

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The most consequential economic policy of Obama’s presidency was the American Recovery and Reinvestment Act—a.k.a., the stimulus. Right-wingers deride it, but economists widely agree—92 percent of them, according to a Chicago Booth poll—that the unemployment rate was lower in 2010 than it would have been absent the stimulus. As Paul Krugman has argued (ad nauseam) over the past few years, this made sense based on traditional economic theory. When the financial crisis hit, Americans cut back on their spending, forcing businesses to fire employees, who then cut back on their own spending. As this process repeated itself, it created a “hole” in demand. The stimulus was designed to fill that hole. It wasn’t big enough, but that really wasn’t Obama’s fault. As Mike Grunwald, the man who wrote the book on the stimulus, has written, Obama faced political opposition in Congress to pass any stimulus larger than $800 billion. He did the best he could.

For many Americans, it’s hard to imagine that the stimulus worked. The unemployment rate peaked at 10 percent and real wages have been stagnant even as unemployment came back down. When Obama touts the current 5.9 percent jobless rate, many financial analysts roll their eyes. Yes, the unemployment rate has fallen, they note, but labor force participation is also at its lowest point since the late 1970s. A falling unemployment rate is not good if it’s the result of workers dropping out of the labor market. But not everybody who’s decied to stop looking for work has done so for the same reason. Some of them are baby boomers who are retiring, some are millennials who have gone back to school, while others really are prime-aged workers too discouraged to search for work. Meanwhile, millions of Americans have found work. When Obama says “our businesses have created 10 million new jobs,” it’s a legitimate testament to how far we’ve come.

To judge Obama’s economic policies based on the economy’s actual performance ignores the limitations of the presidency. He cannot pass laws. And when he does want to pass legislation, he has to work with Republicans to do so. This brings us to the most damaging economic policy of Obama’s presidency: the sequester. This was the ransom Republicans earned for taking the debt-ceiling hostage in 2011. Many liberals blame Obama for this. And they have some good reasons. Rhetorically, and maybe substantively, the White House became too concerned with reducing deficits in 2010 and 2011. This crucial mistake moved the Overton window in the GOP’s favored direction of spending cuts. In the 2011 debt ceiling negotiations, the president refused to call the Republicans’ bluff that they would allow the government to default and instead accepted a terrible deal.

Even so, Obama never wanted the sequester and consistently sought a deal to eliminate it. He predicted that the sequester would damage the economy—and he was right. By one estimate, the sequester cost Americans 1.2 million jobs in 2013 alone. The Murray-Ryan budget relaxed some of those spending cuts, but the majority are still intact and will continue to hurt economic growth. Is it fair to blame Obama for the economic damage of the sequester? Maybe a little bit, but most of the fault lies with the GOP.




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