Kenneth (kensmind) wrote in potus_geeks,
Kenneth
kensmind
potus_geeks

Presidents and Economics: Barack Obama and the Great Recession of 2008

Presidents never come into office planning to hit the ground running in response to a crisis. Abraham Lincoln never wanted to have a civil war waiting for him, George W. Bush never wanted a terrorist attack on US soil, and Barack Obama never wanted a great recession waiting for him when he took office, I think all of those are safe bets. For President Obama, most of his first term was spent addressing serious economic issues.

obama-fiscal-cliff

During his first two years in office, Obama signed into law economic stimulus legislation in response to the Great Recession of 2008 in the form of the American Recovery and Reinvestment Act of 2009 and the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Other major domestic initiatives in his first term included the Patient Protection and Affordable Care Act, often referred to as "Obamacare" and the Dodd–Frank Wall Street Reform and Consumer Protection Act. In November 2010, the Republicans regained control of the House of Representatives as the Democratic Party lost a total of 63 seats. After a lengthy debate over federal spending and whether or not to raise the nation's debt limit, Obama signed the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012.

On February 17, 2009, just four weeks after his inauguration, Obama signed the American Recovery and Reinvestment Act of 2009 into law. This legislation created a $787 billion economic stimulus package aimed at helping the economy recover from the deepening worldwide recession. The act includes increased federal spending for health care, infrastructure, education, various tax breaks and incentives, and direct assistance to individuals.

Obama-Geithner

In March, Obama's Treasury Secretary Timothy Geithner convinced the President to push for passage of the Public-Private Investment Program for Legacy Assets, a law containings provisions for buying up to two trillion dollars in depreciated real estate assets. Obama intervened in the troubled automotive industry in March 2009, renewing loans for General Motors and Chrysler to continue operations while reorganizing. Over the following months the White House set terms for both firms' managed bankruptcies, including the sale of Chrysler to Italian automaker Fiat and a reorganization of GM, giving the U.S. government a temporary 60% equity stake in the company, with the Canadian government taking a 12% stake. In June 2009, he signed into law the Car Allowance Rebate System, known colloquially as "Cash for Clunkers".

Spending and loan guarantees from the Federal Reserve and the Treasury Department authorized by the Bush and Obama administrations totaled about $11.5 trillion, but only $3 trillion of this was spent by the end of November 2009. Obama and the Congressional Budget Office predicted budget deficits for 2010 of $1.5 trillion or 10.6% of the nation's gross domestic product (GDP) and $1.34 trillion for 2011.

Under President Obama, the U.S. debt ceiling has been increased to $17.2 trillion as of February 2014. On August 2, 2011, after a lengthy congressional debate over whether to raise the nation's debt limit, Obama signed the bipartisan Budget Control Act of 2011. The legislation enforces limits on discretionary spending until 2021, establishes a procedure to increase the debt limit, creates a Congressional Joint Select Committee on Deficit Reduction to propose further deficit reduction with a stated goal of achieving at least $1.5 trillion in budgetary savings over 10 years, and establishes automatic procedures for reducing spending by as much as $1.2 trillion if legislation originating with the new joint select committee does not achieve such savings. By passing this legislation, Congress was able to prevent a U.S. government default on its obligations.

The unemployment rate rose in 2009, reaching a peak in October at 10.0% and averaging 10.0% in the fourth quarter. Following a decrease to 9.7% in the first quarter of 2010, the unemployment rate fell to 9.6% in the second quarter, where it remained for the rest of the year. Between February and December 2010, employment rose by 0.8%, which was less than the average of 1.9% experienced during comparable periods in the past four employment recoveries. By November 2012, the unemployment rate fell to 7.7%, decreasing to 6.7% in the last month of 2013. During 2014, the unemployment rate has continued to decline, falling to 6.3% in the first quarter.

Gross Domestic Product (GDP) growth returned in the third quarter of 2009, expanding at a rate of 1.6%, followed by a 5.0% increase in the fourth quarter. Growth continued in 2010, increasing 3.7% in the first quarter, with lesser gains throughout the rest of the year. Overall, the economy expanded at a rate of 2.9% in 2010. The Congressional Budget Office credits Obama's stimulus plan for economic growth. The CBO released a report stating that the stimulus bill increased employment by 1–2.1 million, but as the report concedes, "it is impossible to determine how many of the reported jobs would have existed in the absence of the stimulus package."

Within a month of the 2010 midterm elections, Obama announced a compromise deal with the Congressional Republican leadership that included a temporary, two-year extension of the 2001 and 2003 income tax rates, a one-year payroll tax reduction, continuation of unemployment benefits, and a new rate and exemption amount for estate taxes. The compromise overcame opposition from some in both parties, and the resulting $858 billion Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 passed with bipartisan majorities in both houses of Congress before Obama signed it on December 17, 2010.

The recovery of the economy and fall in the rate of unemployment was likely a significant factor in Obama's re-election in 2012. Since 2010, he has had to work with a hostile congress, due in part to an inability on his part to reach out to the opposition the way that some previous presidents have, and due in part to divisions within the Republican Party, with those willing to work with the President meeting with retribution from the Tea Party.

In December 2013, Obama declared that the next big economic issue to be addressed is growing income inequality, which he called the "defining challenge of our time". He called on Congress to bolster the safety net and raise wages.

DeficitsUnderObama

It is almost impossible to fairly analyze President Obama's performance on the economy. Modern social media has contributed to an extremely polarized political climate that often precludes any notion of fairness. It is also practically impossible to assess any president's performance when it comes to the economy without the benefit of subsequent history. It can fairly be said that President Obama was inclined to take action. This was not an inexpensive process, as the graph above demonstrates. It will be the prerogative of future historians, distanced from today's emotionally charged political climate, to make the case for whether or not this was money well spent.
Tags: barack obama, economics, george w. bush
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