The Economic Blame Game

Article excerpt

Byline: Robert J. Samuelson

Both the right and the left are wrong.

It is a ritual as predictable as the tides. With every election, we descend into soundbite economics. Rhetorical claims grow more partisan and self-serving. We are now deep in this process. President Obama's policies either averted another Great Depression--or have crippled the recovery. These debates confirm the dreary state of economic discourse. The right rejects the idea that sometimes government must rescue the economy from panic; the left sees salvation only in ever-larger government. The first is an invitation to anarchy; the second threatens long-term economic growth through higher taxes, regulations, or budget deficits.

When Obama took office in early 2009, the economy and financial markets were in virtual free fall. By summer, they were not. Only a rabid partisan can think that Obama's policies had nothing to do with the reversal. His forcefulness helped calm the prevailing hysteria.

True, many recovery policies came from the Federal Reserve, and others--notably the unpopular Troubled Asset Relief Program (TARP)--began under the Bush administration. Obama's contributions included the "stimulus program," a rescue of the auto industry, and a "stress test" for 19 large banks. The "stress test" explored whether banks needed big infusions of capital. Most didn't.

The process was messy, and although many details can be questioned, the overall impact was huge. Without government's aggressive response, gross domestic product would have dropped 12 percent instead of 4 percent, and 16.6 million jobs would have been lost instead of 8.4 million, estimate economists Alan Blinder of Princeton and Mark Zandi of Moody's Analytics. Unemployment would have hit 16 percent. These numbers, too, can be disputed (they seem high to me), but the direction is certainly correct.

Up to a point, blaming Obama for the sluggish recovery is also unfair. Millions of Americans were overborrowed. Paying down debts was bound to crimp the $10 trillion of consumer spending. Could anyone have realistically neutralized that? Nope. The right's sweeping indictment of Obama is wildly exaggerated. However, it's not entirely misplaced.

Confidence is crucial to stimulating consumer spending and business investment, and Obama constantly subverts confidence. In the past year, he's undone some of the good of his first months. …