Grading Obama’s Early Test

President Barack Obama has faced an early challenge in his administration, and he handled it faster than George W. Bush and better than Bill Clinton. All three men came into office committed to doing something big. Clinton was going to “fix” healthcare. He put Hillary in charge and it didn’t work out. Bush wanted to push through a big tax cut. At first during his campaign, his rationale was that there was a budget surplus, and hard working Americans deserved some of their money back. Then, as the economy slowed down right before he took office, Bush argued that we needed a big tax cut to stimulate business. Bush got what he wanted, but it took awhile.

Obama, of course, has pushed a stimulus package as a way to create 3.5 million jobs and get the economy humming again. And he did it. Fast. One hopes that this package does all that the President has promised.

One also hopes that in his zeal to be successful, Obama hasn’t made things more difficult for himself (and the rest of the country). Obama certainly showed an ability to speak boldly on this matter. He warned that if Congress didn’t pass the stimulus package, the damage to the economy might be irreversible. He also said that if it wasn’t passed things would be bad for a long time. This was a little confusing. To say the damage was “irreversible” seems to indicate that things would never get better, but setting that aside, the rhetoric does seem a little overblown.

Things will get better with the economy. This country has always gone through business cycles. I read somewhere that we have had eleven economic downturns just since the Great Depression. This also means that we have had several economic upturns (one of which occurred during George W. Bush’s administration, despite the economic impact of 9/11 and the spending of billions upon billions of dollars on Iraq).

Dealing with the economy is not an exact science. Some “experts” were predicting that we’d be paying $5.00 a gallon for gas today. And they failed to anticipate the slight growth in retail sales in January.

One of the biggest factors in the health of the economy is consumer confidence. If Americans feel good about their job security, they spend more money, which stimulates the economy. If people are worried, they hold on to their money, businesses slow, and the economy recesses. When people are worried, it’s bad for business. When businesses are worried, they produce less, and they lay people off.

The point here is that when politicians start comparing our current circumstances to the Great Depression, it scares people, which is bad for the economy (and it’s not true—the Great Depression was MUCH worse than our current circumstances). To say there is a scenario by which the economy might never improve is theoretically true, but it is also overblown and so scary that it is counterproductive.

The President’s rhetoric was kind of dangerous, but it probably helped him score his political victory, and when the economy bounces back he’ll claim some of the credit. Hopefully, by that time he and Congress will have figured out a reasonable way to pay for all of this economic stimuli.