State of the Union: How Well Has Obama Handled the Economy?


This post by Suzanne McGee originally appeared on CBS' MoneyWatch.com.



6138626It's been a year since President Barack Obama took office at the height of the worst economic crisis since the Great Depression. Since his inauguration, Wall Street has stabilized, but Main Street remains fragile and job losses continue, albeit at a slower pace. MoneyWatch asked top economists, journalists, and bloggers how they'd grade the president's handling of the economy in his first year, a time of almost unmatched economic challenge. Their verdicts show a wide diversity of views, painting the portrait of a difficult policy environment and a sometimes-flawed policymaking process. Here are their assessments, in order from best to worst.


Mark Thoma
Professor of Economics, University of Oregon; Blogger, Economist's View and Maximum Utility
Overall Grade: B+
"I would have liked to see a bigger stimulus package; what was possible in political terms wasn't enough to generate job creation. As it emerged from the political process, the package was too heavily larded with tax cuts. The federal government could also have done a lot more to help the states by tying money to programs that would help create jobs.

"My biggest criticism overall is that when it came to stabilizing the financial markets, they just continued the policies begun under President Bush and Treasury Secretary Paulson. Had Obama nationalized the banks, the administration could have undertaken the same measures to support them going forward - but the benefits would have flowed to the taxpayers rather than the executives. They also dropped the ball by not pushing forward immediately with new regulation; now the financial industry's lobbyists have had time to muster their opposition. Still we can't forget how bad the situation was, and how many different challenges they had to address at almost the same time."

Mark Zandi
Chief Economist, Moody's Economy.com
Overall Grade: B
"You can't give him an A, because the economy is still losing jobs and unemployment is still in double digits and likely to rise further. But the administration's policies have been instrumental in bringing an end to the financial crisis and the recession. The stress tests, a Treasury Department initiative, really helped end the panic, and now many of the banks are overcapitalized. Now people think the banks are safe; the key will be getting them to lend to businesses and consumers again.

"The policies that haven't worked so well are the efforts to mitigate housing foreclosures, where they assumed that if lenders reduced payments, homeowners would agree to loan modifications and not default - they got that premise wrong. This remains a risk to the economy. I also would have liked to see a larger stimulus bill. Still, it's hard to be critical of that, given that the important thing last February was to get it done fast. The real question today is whether the policy uncertainty over regulatory reform, energy policy, tax policy, etc. will keep businesses from hiring."




Moisés Naím
Editor-in-Chief, Foreign Policy
Overall Grade: B
"This administration has fared best on the shorter-term issues, such as getting the country out of its immediate crisis - on that I would give them an A. Just remember, a year ago, we didn't feel that our money was safe in our biggest banks. The administration took a lot of unprecedented measures to stabilize the system, and now people are worrying about things like a double-dip recession instead of keeping their money in their mattresses.

"Of course, the economy is still frail and unemployment is still high, and I'd give the administration only a B when it comes to the structural changes that will ensure the economy's long-term health.

"Longer-term policies such as energy policy only get a C. There is no doubt that bank regulations and other policies need a massive overhaul that hasn't happened as yet. Certainly, however, the administration gets far higher marks than I would give Congress for handling the same problems."

John Keefe
Blogger, The Macro View
Overall Grade: B-
"No one since FDR has faced the kind of economic challenges that the Obama administration has had to deal with - and the economy wasn't the same then. I think they have to get an A for handling the banking stuff, notwithstanding the flak: it was done as well as it could have been.

"The employment situation is different. The administration can't act directly on that, all they can do is create an environment in which employers want to hire and are able to hire. And they haven't been good at restoring confidence, which means a C on that. The little things - the small rebates - are just trial balloons that they shouldn't have expected to have a major or long-term impact on the market. The economy, I think, may have to cure itself."

James Galbraith
Professor of Public Affairs and Government, University of Texas at Austin
Overall Grade: C
"Had they moved in on the banking sector like Franklin D. Roosevelt did - closed all the banks and reopened some of them under public management - that would have sent a clear message about just how bad the situation was. It also would have removed the incumbent management (so they wouldn't have been there to lobby against his proposed reforms and pay themselves huge bonuses), and produced a Congress that would have been more willing to act in a bold way. Instead, they ended up with an economy that has stabilized but not recovered, and a banking sector that is popping champagne corks.

"The administration's effort was remarkable, but it's achievement that matters, and now we're still left trying to address the jobs crisis and in need of another, longer-lived stimulus plan. And the administration is undermining its credibility now by talking about a recovery that most people aren't experiencing."

Barry Ritholtz
CEO, Fusion IQ; Blogger, The Big Picture
Overall Grade: C-
"I would have to give the president a B plus for stabilizing the job market, even though it still isn't improving. But when it comes to the bailout and to policymaking - well, that's a D. The problem here is the process itself; even though the Republicans never had 60 seats in the Senate, the Bush administration did a better job getting what they wanted from Congress than Obama has done.

I also think that a fatal mistake was for the president to surround himself with guys from his party's previous administrations - Robert Rubin was Larry Summers's mentor, as well as Tim Geithner's - and an even bigger policy error was to just extend and carry out the Bush bailout policies.

"The one constructive thing he did was to force GM and Chrysler into bankruptcy. He should have done the same with the big banks; been willing to say to hell with the banks, let's save the economy. Instead, something like 90 percent of the senior management of TARP recipients are unchanged - that is astonishing."

Allan Meltzer
Professor of Political Economy, Carnegie Mellon University; Visiting Scholar, American Enterprise Institute
Overall Grade: D
President Obama's biggest accomplishment has been his effort to introduce reforms in important areas; his biggest failure is the kind of reforms that he offered. The stimulus plan ignored what administrations of all political stripes have discovered, which is that temporary tax cuts have very little effect and that to really help the economy requires a permanent cut in business taxes. Also, a third of the stimulus program was to help the states, but all that resulted in was shifting the deficit back to the federal government. And is it sensible to talk about a cap-and-trade energy program, one that will raise costs for business owners, in the middle of a recession?

"The first priority has to be restoring full employment. Instead of pursuing policies that in the past have worked, the administration has left us with a huge deficit, very easy monetary policy, and problems that will come back to haunt him before the end of his first term."

David Rosenberg
Chief economist and market strategist, Gluskin Sheff
Overall Grade: F
The Obama administration clearly has failed in its first year of economic policy. By focusing so heavily on health care, they created tremendous uncertainty in the small business sector, which is responsible for two-thirds of the country's employment. What we were left with is a lot of short-term populist policymaking that produces short-term sugar highs in the quarterly GDP data, like the "Cash for Clunkers" program and the tax break for first-time home buyers. Those are ridiculous, given that the rate of home ownership is still historically high and that there are 20 percent more cars on the road than there are registered drivers. Meanwhile, unemployment levels are becoming a structural problem, as more people are jobless for longer. Nothing in the stimulus plan resolved the jobs issue.

"Eisenhower had a vision of building the interstate highway system; Kennedy of the space program; Reagan emphasized defense. We don't have any clear idea of how Obama's emphasis on clean technology ties in with job creation in the same way those strategic initiatives fostered jobs. And jobs, to any political leader, are like the three R's to a teacher. Fail at that, and it's an F."

More on MoneyWatch:
Looking Back: How Lehman's Fall Changed Your World
The Economy Continues to Lose Jobs
Obama Slaps Banks With Volcker Rule
Did the Fed Cause the Recession?
5 Economic Scenarios to Keep You Up at Night
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