Obama’s economy: The fierce debate

This article is part of a series on Barack Obama’s presidency, nine years after he announced his White House bid on Feb. 10, 2007. To read the rest of the series click here.

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Seven years after President Obama’s inauguration, the debate about whether he saved the economy or held back its recovery is in full swing.

Obama has been taking a final-year victory lap, touting a national unemployment rate that has fallen to 4.9 percent as the latest sign of success for his economic stewardship. 

{mosads}Yet critics in Obama’s orbit, including Democratic congressmen and a former member of his Cabinet, suggest more could have been done if Obama had worked harder with lawmakers and members of his administration.

Rep. Collin Peterson (Minn.) — one of two Democrats still in office out of the 11 who voted against the stimulus
legislation — said the White House made zero effort to bring him, or other centrist Democrats, on board in the fight over the stimulus.

“They just wrote us off, I think,” he said. “I can’t even tell you who in the administration is supposed to be lobbying me.”

It’s a criticism of Obama that has remained steady for his entire presidency: He doesn’t work well with others, whether they are Republicans or Democrats, who disagree with him.

“This is very much a my-way-or-the-highway White House, and this is a president who would rather win the argument than get something done,” said Douglas Holtz-Eakin, head of the American Action Forum and the top economic adviser to Obama’s Republican opponent in 2008, Sen. John McCain (Ariz.).

Obama allies say such criticism is unfair and blame Republicans for failing to work with Obama since day one.

“There’s no question that had Congress enacted the president’s economic proposals, the economy would be in a stronger position today,” said Alan Krueger, a Princeton economist who was a top economic adviser to Obama.

 

$800 billion stimulus

The $800 billion stimulus package was Obama’s first big legislative achievement — and the high-water mark for his influence on the economy. The most ambitious legislative project in
decades, it aimed to create millions of jobs while putting down payments on major Obama initiatives, such as clean energy and education reform

The combination of an aggressive Federal Reserve and the stimulus pumping in huge sums of money surely helped support the ailing economy. Outside analysts estimate the American Recovery and Reinvestment Act injected anywhere between 1 percent and 4 percent of gross domestic product (GDP) into the economy. And economists Alan Blinder and Mark Zandi calculated that without the emergency steps taken at the end of 2008 and beginning of 2009, the U.S. would have lost twice as many jobs, the deficit would have doubled and the recession would have lasted twice as long.

Despite that, the massive package ended up hurting Obama and his party politically.

The White House touted 2010 as a “recovery summer” and then watched as job creation numbers came in below expectations. 

That fall, Democrats were routed in the elections, losing the House majority and barely holding on to Senate control.

GOP leaders in Congress decided to oppose the stimulus and have continued to batter Obama’s moves on the economy.

Criticism has also come from the left, where some say Obama should have gone further. Other centrist Democrats were wary of the stimulus’s price tag and argue they were kept out of the loop.

Obama let his inner circle of economic advisers craft the major details of the stimulus package rather than hold substantial consultations with his Cabinet, according to former Transportation Secretary Ray LaHood.

“I was not really involved in putting the stimulus bill together,” LaHood said in an interview. “I wasn’t in those meetings. Nobody really asked me what I thought the figures should be.”

Obama did not convene his first Cabinet meeting until April 20, 2009, two months after the stimulus bill passed Congress.

 

Pelosi’s influence

LaHood said he would have pushed for more spending on infrastructure projects, which he argued would have given a bigger immediate jolt to the economy and pulled in more votes in Congress — making the stimulus more of a bipartisan exercise and insulating Democrats from responsibility.

In his book, “Seeking Bipartisanship: My Life In Politics,” he faulted the White House for ceding too much control over the strategy and design of legislation to then-Speaker Nancy Pelosi (D-Calif.), who largely excluded Republicans from drafting the bill and removed some tax cuts preferred by the White House.

LaHood believes the stimulus legislation succeeded in helping save the U.S. economy from collapse. But in hindsight, he and others realized additional money for infrastructure could have boosted the economy even more.

“When they saw how we used the money and how effectively it was used and how many people went to work on roads and bridges and transit … I heard from a number of people on the economic team that they wished it would have been $480 billion instead of $48 billion,” LaHood told The Hill.

Pelosi said it was aides at the White House, not members of Congress,  who were responsible for setting the amount of transportation spending.

“These same advisers at the White House, they were against the infrastructure. They were against it because they didn’t want to increase the deficit,” she said in an interview with The Hill. “So I don’t know who they are. But they were a problem to us.”

 Pelosi said she had prepared a much bigger stimulus package but it was trimmed down to increase its chances of passing the Senate.

“Our members have been furious with the president’s advisers in the White House who encouraged him not to do the infrastructure because it will look like big spending, A, and, B, now they’re writing op-eds about why we should do more infrastructure,” she said.

Other Obama administration officials dispute LaHood’s contention that the Cabinet had little input.

“I was very pleased with the thoughtfulness and the collaborative process at the White House and on the Hill — with the outcome on the dollars and the good those dollars did,” said former Education Secretary Arne Duncan, who received about $100 billion in stimulus funding for his department.

“I just tried to articulate what the need was and let others working across the entire spectrum figure out the numbers.”

“He was exceptionally good about forcing broader debate, and he had a pretty diverse group around him,” one senior official from the first term, who declined to be named, said of Obama. “All of us where overwhelmed from ideas from the outside, and he was incredibly good about hearing all of them.”

As new Cabinet members were appointed, they were asked in briefings with administration officials to make additions to the stimulus package, according to Jason Furman, chairman of Obama’s Council of Economic Advisers. But he said he didn’t recall many ideas from incoming members that were not already part of the proposal.

 

Income inequality

 In the last half of Obama’s presidency, worries about a growing gap between the haves and the have-nots have moved to the forefront.

While the economy has recovered, wages have remained flat. That means the lion’s share of those gains has gone to the top of the economic food chain, and income inequality has only worsened under Obama.

Furman acknowledged that “the crisis continues to cast a shadow,” particularly when it comes to wage growth, which has lagged behind GDP and jobs numbers.

“This looming shadow is then layered on top of an economy, which for several decades has had this problem,” he said.

Other administration allies are quick to point out that inequality was an issue well before Obama came to office, dating back to the 1980s. And fixing an economy in recession became the predominant concern.

“In the depths of an awful downturn, you had to worry about growth first and distribution second,” said Jared Bernstein, who was Vice President Biden’s chief economic adviser at the start of Obama’s tenure. “All you’re thinking about is turning those negatives into either positives, or at least smaller negatives.”

And Furman said the president has pushed, with varying success, to address that gap elsewhere via policies including healthcare reform and raising the minimum wage.

“The wage issue is one of his motivations when he ran in 2008; [he] was talking about how the typical household in 2007 had a lower income when the recession happened the time before,” Furman said.

Furman did note wages grew by 2.5 percent at the end of last year, adding that pay increases usually follow GDP and job growth in the aftermath of economic crises.

 

Unending debate

Obama allies paint the president’s efforts as bold, deliberate steps to save an economy on the brink.

“The extremely aggressive way in which the administration punched back at the great recession from the minute they hit the ground had a very clear and positive impact,” Bernstein said.

But his critics aren’t nearly as generous.

“I don’t think he deserves as much as they think he deserves. I’ve had this conversation with his advisers,” Holtz-Eakin said. “Any president would have acted … on the campaign we were thinking hard about we would do.”

Obama clearly believes the economic improvement that was the central issue of his time in office will ultimately vindicate him.

“I think history will remember the Obama presidency as one which rescued the economy,” said Krueger. “I think the American people already appreciate that. He was, after all, reelected.”

Mike Lillis contributed.