Don't Blame Obama For the Economy

Anthony Mirhaydari MSN Money October 28, 2010

For all the heat the president has taken for the economy, he has gotten some things right. And regardless of Tuesday's vote, history says we're in for an upswing.

To be sure, President Barack Obama is receiving the lion's share of the anger about the state of the U.S. economy. His approval rating is near its all-time low; his handling of the economy is rated even lower.

That's understandable: Unemployment stands near 10%, home prices continue to founder, job growth has stalled, and consumer confidence is falling again. Just 22% of those polled by CBS News recently believed the economy would improve anytime soon. And with the midterm elections less than a week away, there's a flock of opposition candidates to help the electorate focus on Obama's shortcomings.

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Though Obama inherited a mess, there are certainly things he could have done differently. More of his $787 billion stimulus package might have focused on fast-acting personal and business tax cuts. Obama himself conceded recently that "there's no such thing as shovel-ready projects," in reference to the infrastructure spending he proposed to stir the economy. And yes, he could have toned down the anti-Wall Street rhetoric. Msn.Video.createWidget('PlayerAd1Container', 'PlayerAd', 300, 213, {"configCsid": "MSNmoney", "configName": "player-money-articles-16x9", "player.vcq": "videoByUuids.aspx?uuids=0c435c35-79f1-4da9-9652-96b091919157,7d657d75-ed0d-4fb6-a1c9-bcb8a3b9d770,ac2e23d3-0d7f-4a11-b7f1-f73cb614e6e0,625ab5c4-e138-478a-83a3-f5dcaa6a94db,a6022d09-87ef-4a0f-a275-5c4f623f10f0,5f4efdf4-cd61-47a9-82a7-0df28147c182,e1695751-8853-43f7-9f3a-682812cc3746,ae765ce0-3d33-4e06-a60e-c034b55422fc", "player.fr": "iv2_en-us_money_article_16x9-investing-xxx"}, 'PlayerAd1');Msn.Video.createWidget('Gallery4Container', 'Gallery', 304, 150, {"configCsid": "MSNmoney", "configName": "gallery-money-articles", "gallery.linkbackLocation": "bottom_left", "gallery.numColsGrid": "3", "gallery.categoryRequests": "videoByUuids.aspx?uuids=0c435c35-79f1-4da9-9652-96b091919157,7d657d75-ed0d-4fb6-a1c9-bcb8a3b9d770,ac2e23d3-0d7f-4a11-b7f1-f73cb614e6e0,625ab5c4-e138-478a-83a3-f5dcaa6a94db,a6022d09-87ef-4a0f-a275-5c4f623f10f0,5f4efdf4-cd61-47a9-82a7-0df28147c182,e1695751-8853-43f7-9f3a-682812cc3746,ae765ce0-3d33-4e06-a60e-c034b55422fc;videoByTag.aspx%3Ftag%3Dmoney_dispatch%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1;videoByTag.aspx%3Ftag%3Dbest%2520of%2520money%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1"}, 'Gallery4');But Obama, and Congress, have been positive forces. And other presidents, including Ronald Reagan and George H.W. Bush, had lower economic approval ratings heading into midterm elections. Reagan's approval rating stood at 35% in September 1982, while Bush's stood at 36% in summer 1990. Gallup most recently put Obama's rating at 38%. Bill Clinton managed a 39% approval rating in October 1994, according to CBS News.

So while the electorate appears determined to punish Obama and the Democrats, it's not so clear how much punishment they deserve.The Obama upside In fact, some facets of Obama's economic strategy deserve credit.

The recession officially ended more than a year ago. Nearly 1.6 million jobs have been created over the past year -- more than in the previous decade. The effects of the financial crisis of 2007-09 are fading as credit starts to flow again. Despite long odds, the economy was pulled back from the precipice, dusted off and put back on an upward path thanks to the bank bailout (which turned a profit for taxpayers, by the way) and Obama's stimulus package.

Between summer 2009 and spring 2010, in fact, the situation was almost rosy. Consumers were reducing debt burdens. Banks were working through loan losses. Businesses were rebuilding inventories. The stock market was roaring.

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Then the global debt crisis struck. And the BP (BP, news, msgs) oil spill. And the government's lawsuit against Goldman Sachs (GS, news, msgs). The U.S. dollar moved higher as the euro plunged. This took the wind out of the U.S. economy's sails, sent stocks reeling and damaged exporters. Businesses hoarded cash instead of hiring and investing. The Obama administration's "summer of recovery" looked more like a winter of discontent.

This punch in the collective stomach came at a vulnerable time: The economy was going through a typical midcycle slowdown as the rapid rebound from the recession's low transitioned into slower, more-normal growth. But before business investment and consumer spending could kick in, confidence was shattered. There was little a politically weakened Obama could do besides scramble.

Along with all this short-term trouble, the truth set in that some of the biggest issues the economy faces, such as long-term unemployment, are due to structural problems -- something I discussed in a recent column. These issues will be much harder and take much longer to fix.

Included are things such as skill mismatches, the loss of productivity for idled workers and the difficulties involved with relocating the nation's work force when so many homeowners are "underwater" on their mortgages and can't afford to sell and move. A recent International Monetary Fund paper finds that up to 1.3% of the increase in the unemployment rate is attributable to this last factor alone. All that means the "natural rate" of unemployment could now be as high as 6.5%.

That's the bad news.

Fortunately, it's becoming increasingly clear that after drifting through the economic doldrums, America is ready to grow again thanks to the export-boosting power of its weakened currency. The dollar has plunged more than 25% against the euro since June. That should provide a boost to third-quarter gross domestic product numbers (due to be released Friday) and job creation in the months to come, just as a weakened euro helped Europe bounce back earlier this year.

Moreover, as far as the stock market is concerned, elections during a president's second year in office tend to mark the start of a rip-roaring bull market run. That should provide a boost throughout 2011. The Obama downside None of this will come fast enough to keep Democrats from being punished at the polls next week. Obama owns the current economy in the minds of voters. It didn't help that his advisers had sworn his stimulus plan would keep the jobless rate below 8% but were painfully wrong.

There are certainly areas where Obama has damaged the recovery, mainly because of uncertain policies on taxes and regulation. For example, his predecessor's tax cuts will expire at the year's end, and we don't know what will replace them. That's a terrible environment in which to do business and make big spending decisions.

These are same concerns that sapped confidence in the depths of the Great Depression in the 1930s. And that's what has Allan Meltzer so worried.

Meltzer, a Carnegie Mellon University professor of political economy and the author of "A History of the Federal Reserve," told me over the phone that he believes the current obsession with more economic stimulus from the Fed (something he views as dangerously foolish) is the result of policy errors by the White House. Indeed, he boils it down to a simple equation: Obama's missteps are causing Fed Chairman Ben Bernanke's missteps.

Meltzer believes more fiscal stimulus is the answer. He suggests a moratorium on tax increases and new regulation. That would let businesses and households stop worrying about increased costs for energy, health care or financing and instead focus on growth. It would also take a lot of uncertainty off the table.

Continued: Parallels to Franklin D. RooseveltMore from MSN Money

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Rate this Article Click on one of the stars below to rate this article from 1 (lowest) to 5 (highest). LowThank you for rating.UGR('ratCntrl')High var avgRating=0;avgRating=4.603774; if(avgRating!=0){avgRating=avgRating/2;avgRating=Math.round(avgRating*100)/100;var sDisplayText="Average rating: " + avgRating + " from ";var usersCount=53;sDisplayText = sDisplayText + usersCount;if (usersCount==1)sDisplayText=sDisplayText + " user";else sDisplayText=sDisplayText + " users";avgRatingElem=document.getElementById("averageRating");avgRatingElem.innerText=sDisplayText;} View all top-rated articlesE-mail us your comments on this article Discuss in a message board MSN Money InsightNew Investor CenterMarket DispatchesJubak's JournalTop Stocks blogCompany FocusContrarian ChroniclesSmart Spending blogFast AnswersDecision CentersStart InvestingMutual FundsFind Hot StocksSimple StrategiesPower ToolsInvesting for IncomeReal Estate InvestingStocks to WatchItronComcastNorfolk SouthernChevronCitigroupLas Vegas SandsLSITexas InstrumentsRecent Articles by Anthony MirhaydariCould the Tea Party save the economy? 10/20/2010How to build a million-dollar 401k 10/13/20103 small stocks ready to shine 10/06/2010More . . . Fund data provided by Morningstar, Inc. © 2009. All rights reserved.StockScouter data provided by Gradient Analytics, Inc.Quotes supplied by Interactive Data.MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.Msn.Video.createWidget('Gallery8Container', 'Gallery', 500, 230, {"configCsid": "MSNmoney", "configName": "gallery-money-article-site-wide"}, 'Gallery8'); 15CommentsNewestOldestBestWorstControversialusetocare34 minutes ago"The recession officially ended more than a year ago." Really! I certainly wish someone would have told me that a year ago. After almost 25 years in business, I have finally called it quits! When bush was in office I had 67 employed, and all was well. Now that Obamanation has officially screwed this country up past the point of no return, I just cant do it anymore. Thanks Barack, me and the family are really enjoying the fact that we live in our freaking car now! 0 0ReportSpamgordo148 minutes ago

I have a problem with, HOW do you think Barry and his crooks

in Congress have been positive forces....

Its more like Negative Forces....!

What kind of jobs has he created...? Part time jobs, More Big Government jobs....? Which are paid for by

American taxpayers...!

What are Barry positive numbers with unemployment..???

Anthony, you need to open your eyes, and take a good look

around... and clear your thinking...

0 0ReportSpambeabet1 hour agowhat i like to see is him work fare with brewer in az and clean the cartel. he did not need to sue that state. that is more of a mess then the obamacare is. that could have waited a bit. and the state that is protesting shame on u. hope u lose everything from some drug cartel. just like the thousand of people that have all ready died. 0 0ReportSpamgregor491 hour ago

...stumbled onto your piece by accident...won't be reading anymore of your tripe on purpose...you, sir, are an "Obama

butt-lick"...in the immortal words of the astute early 20th century American philospher, Bugs Bunny - "...what a maroon..."

0 0ReportSpamberg1093 hours agoYea Whatever Anthony....Obama didn't have anything to do with the stock market raise....1 trillion plus of free money to primary banks then to investments house to prop up the market this past year has move the market up.....printed money from the candy store fed to keep the market up and everyone feeling good.....all fraud and manipulation....that's what Obama and the Fed have done. This whole market is an absolute joke to the most people who truly understand what has been happening. 0 0ReportSpamLostOnEarth4 hours agoAnthony you are full of BS as usual. I hope they fire your incompetent arse. 0 0ReportSpamhavasu465 hours ago

You're correct but so what. When the Democrats are in power they buy votes by giving goods and services to lower middle classes that can't afford them. When the Republicans are in power they buy votes by spending money or cutting taxes for things businesses and upper middle classes want but can't afford. Both parties say we'll grow the economy to pay for all of this. That's what a Ponzi scheme does until there's not enough new people to get the money from. Guess where we are?

0 0ReportSpamsam1am5 hours agoAnthony -- blah blah blah..... any more accolades for the anointed one..... Oops I forgot you are on MSNBC --- the Obama official channel.... 1 0ReportSpam1HighPlains6 hours agoObama has just added 3 trillion to your children's debt.I would say that most of the readers of MSN money are not brain dead sheep that the elitist media caters to.Perhaps you should do a bit of homework before making a fool of yourself. 2 1ReportSpamATG21122776 hours agoMy business is down 85% off its peak. I have tax liens so I can't short sell. I am 280k upside down on my 435k " American dream House ", so who cares.I once had 9 people working for me, now I live like an illegal alien with no GL or workers comp and doing deals for cash only.Bama, dems, and reps can kiss my a8s9s9. f8u8c8k8o8f8f and d9i9e. 0 0ReportSpamDavid527 hours agoGet out of your hate bunkers and look at the recent political history of this country and you'll see the article makes some key points. Regan, Bush 1, Clinton, even Bush 2 headed to the middle the 3rd year in office (remember compassionate conservatism). If Obama has any aspirations for a second term, something yet to be seen, he will steer a mid-course, court the Reps and ride a muted economic wave. Simplistic talk show rhetoric appeals to the Cro-Magnon crowd, c'mon, put on your thinking caps and turn off the radio. 0 0ReportSpamOGRE ALEX7 hours ago1~But how much of the blame he deserves for this economic malaise is debatable.

2~Obama himself conceded recently that "there's no such thing as shovel-ready projects,"

3~ And yes, he could have toned down the anti-Wall Street rhetoric.

4~But Obama, and Congress, have been positive forces.

lil anthony needs to be taken to the "woodshed"!

1~You only have to examine the Freddie/Fannie funds he received and connect them to the cause of the economic crash. He was paid to look the other way, as were Dodd, Frank, Pelosi, etc.

2~ Actually, there were! Yucca Mtn Project was defunded as a reward to Reid for the Nevada votes. It was a work in progress and defunding it, despite a 75% Congressional vote into LAW, decimated not only the high paying jobs, but all their support players, and rental properties.

3~He took GSachs money and when it suited him he blamed it on them, got the SEC involved and let it drop. Its no wonder they started giving to GOP thereafter.

4~REALLY? That explains their dismally low ratings. The only people who approved of them are the recipients of the bonuses and tax payer funds that ended up in their bank accounts.

What confounds me is how so many people still are targetting Cheney and GWB, and ignoring what their own anointed pukes are pulling.

If the TEA Party doesnt make the difference, Im going to read more about the French Revolution.

I already ordered a Politician Processor:

Google:

bowling guillotine

0 0ReportSpamjohnny5227 hours agoI just like reading this bull crap. Obamo is taking over the world!!! Has not done anything right. 0 0ReportSpamwebeenrobbed7 hours agolike he needs help making excuses / won't be reading your column anymore .... 1 0ReportSpambuzzybucks8 hours agoYou have got to be kidding. 1 0ReportSpamAdd a commentReportPlease help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of ConductPlease use this form to notify the moderators. They will investigate your report and take appropriate action. 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