The aggressive actions helped build a floor under the most severe economic collapse since the Great Depression, many economists agree. Yet the president’s policies have not ignited anything close to the robust jobs growth needed to overcome the huge losses the downturn caused.
Since the economy emerged from the deep recession in June 2009, employers have added an average of 87,000 jobs a month, according to the latest government figures. That is not quite enough to keep pace with the normal growth in the labor force, let alone significantly reduce the unemployment rate.
Overall, the economy has just over 1 million more jobs than it did in February 2009, Obama’s first full month in office, according to the Bureau of Labor Statistics.
The tepid pace of job creation is perhaps the president’s biggest political vulnerability as his reelection campaign enters its final weeks. The unemployment rate was stuck above 8 percent for 43 consecutive months before falling to 7.8 percent in September. And nearly 5 million Americans have been out of work for six months or more.
With the economy struggling through one of the weakest recoveries on record and employers adding jobs at a slower pace than a year ago, projections are that the nation’s unemployment rate will not return to normal levels for years to come.
A ‘feeble’ recovery
Analysts say the persistent high level of joblessness is a prime factor in the income and wealth declines that have continued
for most Americans, even after the recession. Obama, who came into office promising to bolster the middle class and reduce inequality, has presided over a turbulent economy that has done neither.
While big business has experienced record profits in recent years, and the stock market is approaching its pre-recession peak, the share of people employed or looking for work has fallen to its lowest level in decades, according to the Labor Department.
“This was not a normal recession. It was a credit crisis that left many people deep in debt, and the economy was dropping like a rock when the president took office,” said Steven C. Kyle, a Cornell University economics professor. “His policies have addressed the dropping-like-a rock part. But the recovery has been much slower than anyone would like. It has been as feeble as the most feeble recoveries we have seen.”
On the stump, the president acknowledges that the job market is far from strong. But he also notes that his early policies helped repair an economy that shed 818,000 jobs in the month he took office.
“I think the American public accepts that those measures were necessary, and they were important in helping us avoid another depression,” said Brian Deese, an Obama economic adviser. “I think the challenge is that those measures are not sufficient and that we are not anywhere near where we need to be, which is why the president has been pushing Congress on a host of other jobs measures.”
Obama also has pursued structural changes aimed at helping working people, his aides said, such as the health-care overhaul and increases in federal student aid. They pointed out, too, that the president has fostered growth in manufacturing work for the first time since the late 1990s.
Still, the slow rate of job creation has prompted criticism from across the political spectrum. Many liberals say that even at $787 billion, the original stimulus was too small. And they say its lack of direct job creation by the government and its heavy reliance on tax breaks — for first-time home buyers, small businesses, college students and 95 percent of wage earners — blunted its impact.
“The initial stimulus deserves very high marks, but it could have been more effective with fewer tax cuts,” said Larry Mishel, president of the Economic Policy Institute, a liberal-leaning research organization. “In some ways, it has to do with Obama’s political tactic of incorporating things he thinks the opposition wants, thinking they would say yes. But as we saw, they didn’t.”
Those problems were compounded, some critics say, by the administration’s rhetorical turn to deficit reduction and its initial reluctance to campaign for new measures to supplement the stimulus plan.
“Key figures in the administration thought it was time to pivot to fiscal consolidation,” said Damon Silvers, policy director for the AFL-CIO, a labor federation that has worked closely with the Obama White House. “The administration started talking about moving to deficit reduction in late 2009 and early 2010.”
Even so, the administration wrested $630 billion more in economic stimulus from Congress as job creation continued to flounder years after the recession. Those initiatives cut payroll taxes for workers, gave tax breaks to small businesses, extended benefits for the jobless and sent aid to hard-pressed states. Still, state and local governments have shed more than 600,000 jobs during the president’s term, which has proved to be a major drag on the economy.
For GOP, too much debt
Conservatives and their Republican allies, meanwhile, argue that the economy’s problem is not a lack of stimulus. Instead, they blame what they see as Obama’s embrace of an activist government that rings up too much debt and puts too many constraints on private businesses.
The GOP built a solid wall of opposition to the original stimulus bill, which squeezed through Congress with zero Republican votes in the House and just three in the Senate. Since Republicans won control of the House in 2010, they have blocked most of Obama’s other job-creation plans.
They also have pushed back hard against Obama’s vision for a deficit-reduction deal. The president has called for unspecified, long-range cuts in programs including Social Security and Medicare, coupled with new taxes on high-income earners. Economists say a debt-reduction deal would help lift the cloud of uncertainty that is slowing the economy.
But GOP lawmakers argue that any new taxes would damage the fragile recovery. They say the nation should attack its staggering debt by just slashing spending, leaving them at an impasse with the president.
By the time Obama proposed his $447 billion American Jobs Act last year, it was widely agreed that it had virtually no chance of being enacted. “At that point, the politics were such that nothing was moveable,” Mishel said.
The measure includes incentives for small businesses to hire new workers; $50 billion for roads, bridges and mass transit; $25 billion to upgrade schools; and billions more to support state and local government jobs. Independent analysts have said the proposal would create hundreds of thousands of jobs.
But Republicans say that with the nation deep in debt, whatever jobs the plan created would come at an unaffordable price. GOP presidential nominee Mitt Romney has criticized the proposal as “a lot of money, a lot of political bluster but very little positive impact on the economy.”
Stimulus still unpopular
That anti-stimulus posture has been hardened by a promise made by Obama’s economic team as it took office. It said the unemployment rate would not rise above 8 percent if the stimulus bill were enacted. In fact, the economy was deteriorating much faster than the team members and other forecasters knew, and the jobless rate eventually peaked at 10 percent.
A broad range of economists agree that the stimulus prevented unemployment from spiraling even higher. But that view is not widely shared among the public. A
Pew Research Center poll
this year found that a plurality of Americans still disapprove of the stimulus.
The disagreement over the effectiveness of government intervention in the economy has become one of the major fault lines in the presidential campaign.
Romney says government should mostly get out of the way by lowering tax rates and regulation, giving businesses more room to innovate, grow and employ more people.
Obama says more public investment — in things such as infrastructure, education, research and training — will eventually lead to strong growth, an expanding middle class and new jobs.
“I won’t pretend the path I’m offering is quick or easy. I never have,” Obama said in his Democratic National Convention acceptance speech. “You didn’t elect me to tell you what you wanted to hear. You elected me to tell you the truth. And the truth is, it will take more than a few years for us to solve challenges that have built up over decades.”