100 Days: Results not in on Obama's economic efforts

McClatchy NewspapersApril 26, 2009 

WASHINGTON — Faced with a U.S. economy in freefall, President Barack Obama crammed many big economic initiatives into a frenetic first 100 days and won high marks from experts for effort, but mixed reviews for accomplishment.

Obama fired the head of General Motors and demanded that GM and Chrysler retool their turnaround plans as the price of more taxpayer aid. He and other leaders of the world's most industrialized nations forged a unified approach to move the global economy forward, pledging to provide $1.1 trillion to a beefed-up International Monetary Fund.

His new initiatives included a $787 billion economic stimulus package that's the largest spending jolt since Franklin D. Roosevelt's New Deal of the 1930s. Like FDR, he's working to halt home foreclosures and ease mortgage refinancing for some 9 million Americans; Obama's program has a price tag of $275 billion.

He's also pushing Congress to enact a budget with large ambitions — to reshape health care, to curb carbon emissions, to expand education — at a cost that will run trillion-dollar federal budget deficits every year for a decade and double the national debt, the nonpartisan Congressional Budget Office projects.

On another front, Obama's adding a host of new banking measures whose combined scope is exceeded only by Roosevelt's closure of the banks to reopen them under a new regulatory regime.

"The parallels with FDR are really quite striking; it's just that he faces a much more complicated world than FDR," said Douglass C. North, an economic historian at Washington University in St. Louis.

North praised Obama's relentless and largely successful effort to calm the panic, but said the president's actual accomplishments in his first 100 days have been spottier, and will play out over a longer time. North won the 1993 Nobel Prize in economics for his work on U.S. and European economic history.

The Obama administration fumbled its long-awaited bank rescue program by releasing it in fits and starts, North said. The missteps forced Obama repeatedly to restate his confidence in Treasury Secretary Timothy Geithner.

Obama also was forced to scale back his ambitions for bank intervention, because Congress won't give any more tax dollars to the troubled sector. That's forced a complete redesign of the program to remove so-called toxic assets from bank balance sheets, still getting started — while credit still isn't flowing sufficiently to consumers and businesses.

"We haven't had success in getting banks to expand lending, which obviously was the whole point" of the rescue program, North said.

The specter of trillion-dollar annual budget deficits chills many analysts.

"The permanent scar that this is going to leave is the increase in debt and interest payments, and that will continue for some time," said Robert Bixby, the executive director of the Concord Coalition, a budget watchdog organization. "You look at the president's budget, and interest costs exceed defense spending by the end of the 10-year budget, so it's not something that can be ignored."

Others experts are more forgiving.

"I think the economic policy response in the first 100 days has been unprecedented. Even during the Reagan era, I don't think any other president had policies that measured up to what Obama has done," said Mark Zandi, the chief economist for Moody's Economy.com. "The totality of what he's done is quite incredible. It's a reflection of the severity of the crisis that we're in."

Immediately after his election, events forced Obama's transition team to work closely with the Bush administration, and many of Obama's 100-day efforts are built upon a foundation prepared by or with his predecessor.

Whether Obama's policies will work won't be known for months and years, but hopeful signs are starting to appear even as a full-scale recovery remains distant.

"All in all, there are some so-called green shoots starting to sprout, and that probably has more to do with the severity of the freefall since September rather than any stimulus thus far," said Ed Yardeni, a prominent economic analyst who's been critical of Obama's efforts.

Ronald Reagan was the last president to push so many sweeping economic changes in such a short time. He slashed taxes, ramped up defense spending and rolled back federal regulation.

Runaway inflation had to be tamed, and Reagan gave Fed Chairman Paul Volcker a green light to take drastic measures to quash it, which sent the economy into a deep freeze that was the worst crisis since the Great Depression.

"The Obama people have a much tougher job," said Murray Weidenbaum, Reagan's chief economic adviser and an architect of the low-tax, small-government philosophy that came to be known as Reaganomics. "They've got both a credit crunch or crisis and the longest, deepest recession in the economy simultaneously."

While Reagan inherited high inflation, he also enjoyed the public support to crush it, Weidenbaum said. Obama has less support for rescuing banks and spending heavily to reverse the economic slump, he said.

What Obama does have working in his favor, Weidenbaum said, are communication skills similar to those that served Reagan so well.

"He comes across as someone who understands both the problem and the administration's response," Weidenbaum said.

Clifford Young shares that view. As a senior vice president for the polling firm Ipsos, Young has found that like Reagan, Obama's popularity transcends his party and his policies.

"When I see an individual whose approval ratings are stronger than his government's approval ratings, that's an indicator of a very powerful and strong messenger," Young said. "We see that in Obama today."

The importance of Obama's salesmanship can't be understated.

"I think the most positive thing you can say about him is he has inspired an enormous amount of confidence in people, and that's a big plus in a situation where everybody thought the world is falling apart," North said.

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