Monday, October 19, 2009

Obama's Report Card On The Economy

After only nine months in office, some may question whether President Obama’s administration has achieved much in changing the lives of Americans. NY Times commentator Alan Blinder believes that while any substantial achievements have yet to be seen, President Obama has been instrumental in pushing forward several macroeconomic and banking policies that may well create positive long-term changes in the future. See the following post from Economist's View.

Alan Blinder grades the administration's accomplishments on macroeconomic and banking issues:

Comedy Aside, an Obama Report Card, by Alan Blinder, Commentary, NY Times: First, “Saturday Night Live” parodies President Obama’s “achievements.” Then Mr. Obama wins the Nobel Peace Prize, bringing yet more head-scratching. Clearly, the nation’s attention is focused squarely on a question few presidents want to answer just nine months into their term: What has your administration accomplished?

I’ll leave foreign and military affairs to the Oslo Five and concentrate on domestic economics. ...

Stopping the Slide Let’s remember that the new president was dealt a dreadful hand on Inauguration Day — including a shattered financial system and a national economy teetering on the brink of disaster. The administration’s chief accomplishment to date surely is devising and executing — with huge assists from the Federal Reserve — a comprehensive program to pull us back from the abyss. ... Thus Job No. 1 — stopping the train wreck — appears to have been done rather well.

Enacting the Stimulus Package The much-maligned fiscal stimulus has been criticized from both the left (as too small) and from the right (as too big, especially the spending parts). My own judgment is that both its magnitude and composition were reasonable, though not perfect. But ... speed of enactment merits substantial weight in the overall grade. By that standard, the stimulus package scores well — especially considering that Republican obstructionism... Give it a B or B+.

Rescuing Banks ...[T]he Treasury secretary ... wisely resisted the siren songs coming from both the left (“nationalize the banks”) and the right (“let ’em fail”), opting instead for the high-risk “stress tests” of 19 big financial institutions. Today, all 19 are alive and breathing. None have been nationalized. ... Most are not just showing a pulse but also actually have pink in their cheeks. ... (In fairness, the Fed and other regulators deserve great credit for executing this delicate task so skillfully.)

So give the bank rescue plan an A–. The minus comes from being too soft on many banks and bankers, who failed us and then benefited from public largess.

Reducing Foreclosures Mr. Obama’s efforts to mitigate foreclosures have been more modest — and less successful. ... Give them a C.

Trying for Regulatory Reform While it is still only a set of proposals,... the Treasury worked at breakneck speed ... to produce an intelligent and comprehensive set of financial regulatory reforms after just five months in office. The ... proposals ... are not perfect. ... And I continue to be distressed that the president, having overloaded his plate, has been unable to devote enough time and effort to pushing the proposals through Congress — leaving the lobbyists far too much running room.

At this point, we can’t even guess what may pass. So give this policy an “incomplete,” noting, however, that the first draft shows promise.

Etc. In addition to these efforts on the macroeconomic and financial fronts, the president appears to be making some headway on health care reform... By contrast, the betting is against getting through Congress a cap-and-trade system for reducing carbon emissions.

On balance, then, this assessment leads to a Nobel-like verdict in the areas of financial regulation, health care and energy: the ideas have great merit, but any real achievements are hopes for the future. They don’t award prizes for that in Washington, even if they do so in Oslo.

Yet on the crucial macroeconomic and banking issues,... Mr. Obama’s accomplishments in just nine months are palpable and were very much needed. ...

Let me add one more category, how the benefits from the stimulus package and the bank bailout package have been distributed. With so many of the benefits of the financial bailout accruing to the same people and institutions that helped to cause the problems, with employment still lagging, and with social insurance programs to help those who cannot find employment coming under increased budgetary pressures, particularly at the state and local levels, it seems evident that the distribution could have been much better without compromising (and perhaps even enhancing) the speed of recovery.

This post has been republished from Mark Thoma's blog, Economist's View. Photo courtesy of Wikipedia Commons.

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