|(Jason Lee Illustration)|
Bounce back deserves a bow
YESTERDAY, OUR mechanic-in-chief turned his attention to jump-starting the jobs engine of the economic clunker he has hauled out of the ditch.
As he outlined his new job-creation ideas, President Obama treated himself to a pat on the back in the form of a guided tour through the dark days of the recent past - and a detailed recounting of all his team has done to combat the deep recession he inherited.
And make no mistake, Obama has reason to be happy.
To be sure, a strong recovery has yet to take root. Still, many economists believe the recession has ended. Fewer and fewer jobs are being shed each month; in November, what was once a torrent slowed to the relative trickle of 11,000. The unemployment rate itself actually dropped just a bit, to 10 percent. Temporary help, often a precursor to permanent hiring, is on the upswing. Meanwhile, the Dow, which tripped, tumbled, and slid from around 11,500 in September 2008 all the way to below 6,600 in early March, has climbed back to over 10,000.
“It is hard to celebrate 10 percent unemployment, but things were looking really awful last winter when they passed the stimulus,’’ said Dean Baker, co-director of the Center for Economic and Policy Research, a progressive think tank. “We were in free fall at that point, losing 650,000 to 700,000 jobs a month.’’
Obama’s stimulus package clearly worked, said Mark Zandi, chief economist at Moody’s Economy.com and a former adviser to John McCain’s presidential campaign. Citing positive third-quarter growth, he added, “I don’t think it is any accident that the recession ended when the stimulus was providing its maximum benefit.’’
Not only did gross domestic product grow an estimated annual rate of 2.8 percent in that quarter, but economic forecasters now think the economy will start creating full-time jobs in the first quarter of next year.
“We think the stimulus did make a big difference,’’ said Nigel Gault, chief US economist at IHS Global Insight.
The Lexington economic research and forecasting firm estimates the $787 billion stimulus package added about 2.1 percent (in annualized growth) in the second quarter, reducing that period’s contraction to 0.7 percent. In the third quarter, the firm calculates that the stimulus sparked 2.5 percent in growth, or almost all of the quarter’s estimated 2.8 percent expansion.
Although the president was stingy with bipartisan plaudits yesterday, some praise must also go to the Bush administration. Notwithstanding their exceedingly poor fiscal stewardship, George W. Bush and his team do deserve credit for recognizing that the severity of last fall’s financial crisis required setting aside conservative principles in favor of a strong government response - a point lost on many congressional Republicans. Meanwhile, Federal Reserve Chairman Ben Bernanke, a Bush appointee who has been renominated by Obama, has demonstrated unusual creativity in stabilizing key aspects of the financial system.
In yesterday’s speech, Obama announced the winding down of one much-reviled bailout initiative begun under Bush, the $700 billion Troubled Asset Relief Program. Although TARP incited wild-eyed howls about socialism, in the stunned aftermath of Lehman Brothers’ collapse it steadied a number of major institutions that were teetering like dominos and helped restore confidence in the system.
What’s surprising is how quickly banks have moved to repay the TARP dollars, if only because doing so frees them from executive pay limits. Overall, that bailout program will cost the government at least $200 billion less than previously thought, leaving the president room to call for redirecting TARP funds to his job-creation proposals.
As Obama recognized with yesterday’s speech, there’s much more to be done to restore the economy to the kind of health required to substantially reduce unemployment. And after that, the deficit, which got little beyond a rhetorical nod yesterday, looms large.
Still, as the end of Obama’s first year in office approaches, economic calamity has clearly been averted. The economy has turned an important corner and has started along the road to recovery.
And that’s an accomplishment that shouldn’t be obscured - not even by the other large challenges this president faces.
Scot Lehigh can be reached at email@example.com.