Grading Obama's economic performance

@CNNMoney June 14, 2011: 5:29 PM ET
The seven Republican presidential candidates at a debate on CNN Monday night.

The seven Republican presidential candidates at a debate on CNN Monday night.

NEW YORK (CNNMoney) -- If Republican presidential candidates at the debate on CNN Monday night agreed on anything, it was that President Obama is responsible for the problems in the U.S. economy.

It's clear that the economy has a lot of problems. Persistently high levels of unemployment and anemic growth has led economists on both the right and left to warn of the danger of a "Lost Decade."

But how bad has the U.S. economy really done under Obama? By some measures, the economy has bounced back sharply from where it was before the start of the Great Recession. Yet other readings show continued pain.

Gross domestic product. This broadest measure of the nation's economic health shows the economy has climbed out of the canyon it fell into at the depths of the recession. The inflation adjusted reading in the first quarter of 2011 is a touch better than when the recession began in the fourth quarter of 2007.

But the pace of growth has slowed in recent months, as rising energy prices and other shocks to the system, such as the Japanese earthquake, have raised fears that the economy could again fall into recession.

Still, the rebound in GDP is a prime reason that economists say that the recession ended two years ago. However, economists aren't sure how much impact Obama administration policies have really had on the economy.

"The clearest thing I can say is the Obama policies probably made the recession less severe," said Lakshman Achuthan, managing director of Economic Cycle Research Institute. "I can't say they put the economy where it is today. The business cycle recovery may have come in any event."

Jobs. Nothing is a bigger worry for average Americans and politicians than jobs. And that's an area where things have gotten worse during the past two years. Unemployment stood at 7.8% in January 2009 when Obama took office, but quickly shot up to 10.1% by November 2009.

Employers shaved nearly 4 million jobs from payrolls in the first six months of 2009, before most policies the Obama White House implemented had a chance to take effect.

Still, even though hiring has slowed recently, there have been some signs of improvement over the past year. Today, unemployment stands at 9.1%.

Businesses have added jobs for 15 straight months, growing private sector payrolls by 2.1 million jobs over that period.

Mark Zandi, chief economist with Moody's Analytics, said he believes that the Obama administration has a pretty good record on job growth, even if it has made some mistakes. An advisor to the McCain campaign, Zandi said he believes that the McCain administration would have pursued a similar stimulus package in early 2009 to try to jumpstart hiring.

"The mix might have been different, the size might have been smaller, though I'm not even sure of that," said Zandi. "But there was a consensus that some response was necessary."

Household wealth. The bursting of the housing bubble and the slide in U.S. stock markets during the financial crisis of 2008 combined to shave $16 trillion in wealth from American families between early 2007 and the end of the first quarter of 2009..

But since then, $8.7 trillion of that lost wealth has been recouped. Part of that has been due to a sustained rally for U.S. stocks. Despite a recent pullback, the S&P 500 has nearly doubled from the low point of 2009.

Americans have also been saving more and are working to reduce their debt. But both those trends, while good for the economy in the long term, have kept a check on spending and been a drag on growth in the near term.

Housing. The Obama administration has had perhaps the greatest trouble showing any improvement here, with even the president calling it "the biggest headwind on the economy right now."

While the foreclosure rate is down 32% from a peak in September 2010, homes continue to lose value. Housing prices hit yet another post-bubble low in the first quarter according to the widely-followed Case-Shiller home price index. Home building remains near record lows.

Congress passed a $5,000 tax credit for home buyers last year, hoping it would turn around the market, but it provided only a temporary lift to prices, sales and building.

Other efforts to promote mortgage modifications to lower payments of homeowners who owed more than their homes are worth have been spotty at best.

The auto industry. This has been the Obama administration's clearest example of success. General Motors (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler Group all are back on their feet and regaining some of the market share they lost.

All three made money in the first quarter, the first time all were in the black at the same time since 2004. And employment at auto plants and dealerships is up 100,000 since hitting a low point during the government-funded bankruptcies at GM and Chrysler in 2009.

While the automakers have repaid their government loans, the equity that Treasury took in the automakers has not been able to recoup all of the bailout money they received.

Taxpayers lost about $1.5 billion on the Chrysler bailout, and as GM stock stands now, they would fall about $11 billion short on the GM bailout.

But there would have been huge costs to the government in lost revenue and pension guarantees if both companies had gone out of business. Liquidations also would have caused bankruptcies at suppliers, leaving America with a much weaker job and manufacturing base. To top of page

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