Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared on January 13th in Project Syndicate.
At the end of his time in office Barack Obama merits an enumeration of some of his many accomplishments. The recollection should start as he started, on January 20, 2009: the pilot taking the cockpit just when the plane was in an uncontrolled dive.
The circumstances were the most adverse faced by any new president in many decades. He inherited two ill-conceived, ill-executed and intractable foreign wars, which had done nothing to bring to justice the main perpetrator of September 11. He inherited an economy that was in free-fall, whether measured by the seizing up of finance markets, the fall in GDP, or the hemorrhaging of employment. (The rate of job loss was running ran at 800,000 per month.) True, Franklin Roosevelt inherited the Great Depression and Abraham Lincoln took office just as the Civil War broke out. But what other president has come in facing both an economic crisis and a national security crisis?
The rapid policy response to the economic crisis included — in addition to aggressive and innovative monetary easing by the Federal Reserve — the Obama fiscal stimulus (the American Recovery and Reinvestment Act, passed by the Democratic Congress in February 2009) and rescue programs for the financial system and the auto industry. Republicans were near unanimous in opposing the stimulus. And almost everybody was critical of the rescue programs – urging either nationalization of the banks and auto firms, on the one hand, or letting them go out of existence on the other. There was and is insufficient recognition of how the Obama Administration succeeded, against all odds, at making the middle path work: jobs were saved, while shareholders and managers suffered consequences of their mistakes and the government got its money back after the recovery.
Most importantly, the free-fall ended promptly. The timing and clarity of the turnaround is much more visible than one would think by listening to debates on what was the right counterfactual to evaluate the effect of Administration policies. Economic output in the last quarter of 2008 had suffered a shattering 8.2 % p.a. rate of decline and job loss was running at 600,000 per month. The loss in output and jobs levelled out almost immediately after the February stimulus program. The bottom of the recession came in June 2009; output growth turned positive in the next quarter. Job creation turned positive early in 2010 and employment growth subsequently went on to set records all the way through the end of Obama’s time in office, adding more than 15 million jobs.
By the last half of Obama’s second term, the unemployment had fallen by half, to below 5% (2015 and 2016), wages were rising (by 2.9% nominal over the 12 months to Dec. 2016); and real median family income was finally growing too (by a record 5.2% in the most recently reported year, with lower-income groups advancing even more).
It is certainly true that the recovery was disappointingly long and slow. Reasons include the depth and financial nature of the 2007-08 crash and the early reversal of the fiscal stimulus after the Republicans took back the Congress in the 2010 election and blocked Obama’s further efforts. 2011-14 are the years when the economy really could have used infrastructure spending and (the right) tax cuts, but it would seem that Republicans only support fiscal stimulus when they are the ones in the White House — including when the economy is no longer in recession.
Obama’s other two biggest accomplishments in those first two years before the Congress starting blocking everything he tried were the Dodd-Frank financial reform bill and the Affordable Care Act (Obamacare). In both cases, they would have been better without a succession of steps by the opposition party to weaken them, both at the stage of passing the legislation and subsequently. But each of those important reforms nonetheless succeeded in moving the country more clearly in the right direction than most people realize. Dodd-Frank in a variety of ways helped make less likely a repeat of the 2007-08 financial crisis. Among other things, it increased transparency for derivatives, raised capital requirements for banks, imposed additional regulations on “systemically important” institutions, and, per the suggestion of Senator Elizabeth Warren, established the Consumer Financial Protection Bureau (CFPB). Obamacare has succeeded in giving health insurance to 20-million-plus Americans who lacked it (for example, due to pre-existing conditions) and the cost of health care contrary to most predictions and perceptions slowed noticeably.
In the area of foreign policy, he made the tricky decisions that resulted in the elimination of Osama bin Laden (a goal in which George W. Bush lost interest, in his eagerness to invade Iraq). In 2015, just as the press was saying Obama was a lame duck, he achieved a string of foreign policy successes: a much-needed nuclear agreement with Iran, normalization of relations with Cuba, important progress to address global climate change, and agreement on the Trans-Pacific Partnership (TPP).
Needless to say, the man who assumes the Presidency this month has said he will reverse most of these initiatives, if not all. In some cases, he will do exactly that. TPP is certainly dead, at least for the time being. (And four years from now will probably be too late to revive it, as East Asian countries may by then have responded to America’s withdrawal from the region by joining China’s trade grouping instead.)
In other cases, real-world constraints will make it harder to translate crowd-pleasing sound-bites into reality. Repealing Obamacare is apparently top of the list. But the Republicans are likely to be stymied by the absence of an alternative that does not take health insurance away from those 20 million Americans nor raise the net cost. Some important innovations, such as the switch to electronic patient record-keeping and more emphasis on preventative care, are bound to survive. Perhaps the eventual outcome will be relatively minor changes in the substance of the Affordable Care Act, together with a new name – the analog of building a big beautiful wall on a quarter-mile of the Mexican border as a sort of stage set suitable for photo opportunities.
Similarly, it is hard to see how pushing harder on China would produce desirable results. To take the most laughable example of ill-informed policy positions, if the Chinese authorities were to acquiesce to Mr. Trump’s demands that it stop manipulating its exchange rate, its currency would depreciate and its competitiveness would improve.
Similarly, if the Administration tries to carry out its promise to tear up the nuclear agreement with Iran, it will quickly find that US sanctions are ineffective without the participation of our allies. Iran could rapidly renew and accelerate its nuclear program. That is what happened with North Korea when George W. Bush essentially tore up the “agreed framework” upon taking office in January 2001.
Do the voters hold presidents accountable? Bush made other serious mistakes in economic and foreign policy as well in those early years, of course, with the predictable consequences for the economy, budget, and national security. Yet his poll numbers soared in his first term.
Conversely President Obama’s popularity sagged during much of his eight years. Yet he leaves office with substantially higher poll ratings than most presidents at this stage and – unusually – with much higher ratings than his successor, let alone his predecessor at the end. So apparently the person who occupies the White House does eventually receive the credit he is due for the intelligence of his policies and the content of his character, even though it takes longer than it should.
This post written by Jeffrey Frankel.
Hillary should’ve won in 2008. I’m sure, the economy would’ve performed much better, the federal debt would’ve been much smaller, our foreign enemies would’ve been much more contained, and the country would’ve been much less racially divided, intolerant, and hateful. However, I guess, most Americans wanted a black president, just because he was black, although Obama was an admirable person. Unfortunately, the American people would’ve likely made the mistake of electing Obama in 2016, if Hillary won in 2008. Fortunately, Trump has executive ability and has shown willingness to work with the other side. Trump can make the Obama legacy look even worse.
What a beautiful love letter. Coming out of Harvard Kennedy School, it is not surprising. Those nasty Republicans, yeah, they oppose everything that Obama wanted, and thus, Republicans should be outlawed, yeah!
Where to start with this utter nonsense of blog entry. How about this: Hillary Clinton opposed TPP as well, because Bernie Sanders was opposed, and she wanted his voters. Of course, the Harvard prof does not mention anything of it.
How about this as well: Frankel is an Econ prof, right? No mention of “moral hazard” when talking about bailouts – this is in every textbook of micro, but apparently at the Kennedy School they skip those chapters.
Then, Frankel talks about the “disappointingly slow economic growth”. He never allows the possibility that perhaps, just perhaps, it was Obama’s policies themselves that caused such slow growth. He never allows the possibility that perhaps, just perhaps, we did have some growth, *despite* the actions taken by the Obama Administration. Yes, I know, this is too much of “opposition” talk, and we cannot have that, because the world is better without opposition to Obama.
As for the Affordable Care Act – again, Jeff, are you an economist? No talk about costs – only about how many people it covers. In Economics, a central concept is “opportunity cost”, and “trade-offs”; I know these may be novel concepts at Harvard, but they are central in the discipline. You see, North Korea has universal health care coverage, too, and so does Cuba. But at what cost? You never spell it out. There are some papers by Casey Mulligan at the University of Chicago that discuss this. But, he is Chicago, I know, a university that is unknown (or if known, it is despised) in the Cambridge, Mass. circles.
There is more – praise for the Iran nuclear agreement? Even Alan Dershowitz, longtime law prof at Harvard no less, was completely against it (he even has a book spelling out his arguments). Of course, good old Jeff makes no mention.
What about the Consumer Financial Protection Bureau? No mention of its despotic set up, its non-accountability.
There is much more of course – no mention of the IRS scandal, no mention of Benghazi, no mention of allowing Hillary Clinton set up a private server with classified information, etc etc.
So no, I do not like this blog post, sorry. As an Econ prof at one of the most prestigious universities, I think Jeff Frankel should act more as an economist and not as a political hack.
manfred, a perfect example of the type of “crap” President Obama had to deal with for 8 years. and he did it with dignity. the opposition, not so much. kind of like listening to the incoherent rants often broadcast in the conservative echo chamber. or the house.
Yes, yes, baffling. The world would be so much better off without opposition to President Obama. Even more, it would be much better if the United States would be a one party state, with no Republicans, no independent thinkers, no critics, only yes-sayers and effusive nodders to everything that President Obama proposes.
Evidently, baffling, it never crosses your mind that it is people with your mindset that are part of the problem, and not part of the solution. As for the dignity aspect, I don’t know; not sure there is dignity in using the IRS as a political weapon, and not sure there is dignity in the Benghazi story. I am not sure there is dignity in saying “I have a pen and a phone” and “I won”, as if he were saying “L’etat c’est moi”.
But, I know. Opinions differ.
Frontline had a very interesting piece on the Obama years last night. Well worth watching.
A key point is that Obamacare essentially created the Tea Party and destroyed any semblance of bipartisan cooperation. And it did not destroy bipartisanship in the Congress, but rather at the grass roots level. The voters, not elected officials, undermined bipartisanship.
And the Democrats were severely punished at the polls. The left was defeated in the House in 2010, in the Senate in 2014, in legislatures and state houses in the interim, all culminating in the White House defeat in 2016. The Democratic Party now holds fewer seats than at any time since the 1920s. And it all started with Obamacare.
Steven,
“And it all started with Obamacare.”
IMHO, I would amend this phrase to “And it all started with how Obamacare was passed.”
It passed without a single Republican vote in the Senate, and I think, a lone Republican vote (if I remember correctly, a rep from New Orleans, which is a heavily Dem district) in the House. And it passed that way, because President Obama said to Kantor “I won”, and the Triumvirate governing the US at the time (Obama, Pelosi, Reid) had no interest in bringing Republicans to the fold, and even less, listening to their ideas. Remember “Reconciliation”? Remember how Democrats maneuvered so that they could get around the 60 votes in the Senate (because they had lost that seat to Scott Brown in MA)? All of that, the “I won”, the Reconciliation maneuver, the haughtiness, etc left a bad taste, and yes, contributed to the formation of the Tea Party.
You have no memory. Remember how Sen. Grassley was caught on video bragging to his supporters how he fooled and strung Obama along by pretending to want to work with him on the ACA? Remember when McConnell told Sen. Coburn to sit down, shut up quit thinking about offering up suggestions to improve Obamacare? Remember that? McConnell made it perfectly clear that he came not to praise Obamacare, but to bury it.
Nancy Pelosi thought Obama was naïve because he believed he could bring Grassley and Coburn along. Pelosi warned him that they were “negotiating” in bad faith and the best thing to do was to just ram it through.
“It passed without a single Republican vote in the Senate, and I think, a lone Republican vote (if I remember correctly, a rep from New Orleans, which is a heavily Dem district) in the House.”
and repeal will probably occur in the same way, in a partisan manner hammered through because “i won”. will you have an issue with that approach, or are you a hypocrite?
This sounds like revisionist history. We have a few Tea Party types that visit this blog…or at least used to visit this blog. Back then they insisted that it was deficits that fed the Tea Party. Not that any of them ever studied a lick of macroeconomics. Of course, we now know that it was really big donor money that fed the AstroTurf Tea Party. The only connection between the Tea Party and Obamacare was the misinformation that funding Obamacare would come at the expense of Medicare. The geezers, as usual, we all about ME, ME, ME.
baffling: no, I have no issues with this approach nor am I a hypocrite. Democrats set the precedent – fine, now we all live by it.
manfred, you are demonstrating the basic definition of hypocrite.
Manfred I think the question is where to start with your nonsense.
Regarding TPP. The post was about Obama, not Hillary, not Bernie. So your points, while true enough, are irrelevant.
Regarding moral hazard. There is a risk of moral hazard with bailing out banks. But moral hazard was hardly the only risk. And it was a future risk. Most sane people regard immediate and real risks as a higher priority than future and potential risks. Perhaps you’re not a sane person. In any event, the GOP hardly did anything to discourage moral hazard in the future. Making what are clearly empty threats to not bail out banks in the future only encourages moral hazard because the threats are known to be empty. You might want to learn some game theory. Where I fault Obama is that his team did not prosecute any bankers/thieves. Prison time and firing squads (as in China) are the best remedies for moral hazard. The real moral hazard is when an incoming President Trump selects and rewards the very same predatory bankers/thieves by putting them in his Cabinet. Now that’s moral hazard raised the nth power.
Regarding the slow economic growth. I would agree that Obama’s 2009 policies paid too much deference to Republicans, who were clearly clueless about fiscal stimulus in a ZLB world. Or perhaps they weren’t clueless so much as malevolent in their hatred for Obama. Afterall, there was that famous GOP dinner planning session the night of 20 Jan 2009. Remember that? Still, the US did outperform other countries and actually did slightly better than should have been expected coming out of a financial recession. But after 2010 the Congress was controlled by ignorant Tea Party types, so what’s a President to do.
As to the ACA, here you are just rambling. And it’s pretty clear from your ramblings that you have never read a serious paper or textbook on health economics. Obamacare does in fact spell out the costs of the program as well as the opportunity costs of not having universal health insurance. You just need to be less lazy and take the time to read. And oh BTW, Obamacare saves money according to the CBO. Did you know that?
There was no IRS scandal except that the IRS especially targeted liberal groups much more than conservative groups. No conservative PACs were shut down by the IRS, but three liberal PACs were.
Finally, Clinton did not set up her server to handle classified information. A small amount of classified information got onto her serve via something known to those of us who actually work with classified data as “spillover.” It’s very common.
“Where I fault Obama is that his team did not prosecute any bankers/thieves. ”
i have to agree. prosecution could have produced a pr change. it would have been difficult, as the right did not want business leaders to be held personally accountable. but the public outrage that led to the tea party may not have been so powerful if we were able to prosecute in a fair and effective manner. unfortunately, the finance and business lobby have been effective at eliminating many rules that could result in direct prosecution of individuals. it is a shame mortgage fraud in the millions could go unpunished, but stealing $5k in cash from a corner store is a felony.
The bankers weren’t prosecuted, because they did what the government wanted them to do, i.e. create a housing bubble.
The politicians should’ve been prosecuted, but they’re weren’t going to prosecute themselves.
Politicians/lawyers just shifted blame. That’s what they’re good at.
peak, its not surprising you take that position. you were one of those financial types who probably is guilty and cannot admit. if business people were so easily coerced, you would not see so much offshoring of workers and profits.
please explain the housing bubbles in other parts of the globe during the same time period. did those governments also participate in your conspiracy?
Many people are “guilty” of following laws. The U.S. and much of the world had severe recessions after 2007. Perhaps, you haven’t noticed asset prices fall in a severe recession. And, many countries are more socially liberal than the U.S.. Anyway, it’s a U.S.-centric world. When the U.S. sneezes, the rest of the world catches cold.
“The U.S. and much of the world had severe recessions after 2007. Perhaps, you haven’t noticed asset prices fall in a severe recession. ”
peak, i did not ask about the fall. i asked about the rise. you claim a bubble formed because of the democratic policies. bubbles arose throughout the world. in those nations, we did not have fannie and freddie supporting your “supposed” government mandates. you need to revisit your understanding of the cause of the bubble in the mid-late 2000’s. hint: a common theme was financial types searching for easy profits-without regard to long term risks.
Baffling, it’s a bubble only if it bursts.
Some countries didn’t have bubbles.
And, some countries benefited from the U.S. bubble till it burst.
Many economies are interrelated.
and barney frank caused the real estate bubble in spain. got it peak. why would i expect a banker who contributed to the problem to acknowledge the truth? i just find it sad that you would want to distort the truth. accept responsibility.
Why is it so hard for you to believe housing bubbles in only four states caused enormous damage beyond those four states?
You need to take responsibility Frank helped fuel the boom and then made the bust worse with Dodd-Frank.
Some countries regulated the housing market.
Unfortunately, the U.S. wasn’t one of them.
Congress added fuel to the fire instead.
Congress was too greedy on growth through housing for tax revenue.
Former New York City Mayor Bloomberg – a social liberal – stated:
“I hear your complaints,” Bloomberg said. “Some of them are totally unfounded. It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.
Now, I’m not saying I’m sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn’t have gotten them without that.
But they were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks to loan to everybody. And now we want to go vilify the banks because it’s one target, it’s easy to blame them and Congress certainly isn’t going to blame themselves.”
peak. you keep quoting bloomberg. he was wrong. repeating his quotes will not make his statement correct.
those empty condo buildings in miami in 2008 were not the result of congressional policy along with fannie and freddie. it was the result of fraud from the private sector.
Baffling, you’re still in a bubble.
slugs: not going to write a long reply, don’t have the time. Suffice to say that it seems to me that you and I have been living in two different countries at least since January 20, 2009 (or even before that date), that you and I read very different newspapers, and that you and I read very different economics textbooks and papers.
One has to wonder what greater accomplishments Obama could have made if he did not have to clean up the messes of the financial crisis and foreign wars of the previous republican administration. The oppositions attempts to sabotage his cleanup efforts were particularly appalling. His legacy over time will continue to grow in a positive sense. He certainly provided a symbol of Hope in a sometimes dark and dreary world.
As I stated before (in more detail), but it wasn’t posted, if Hillary won in 2008, the country, and the world, would be in much, much better shape. Trump has executive ability and has shown a willingness to work with the other side. So, I expect great changes.
Yes, it’s true. Obama has been a very effective President. In fact, Obama has been one of the most effective Presidents the Republicans have ever had.
The source of Obama’s effectiveness has been his supporters blind faith that he’s going to succeed or has succeeded, no matter what the evidence. Who can forget the Nobel Prize committee awarding Obama the Nobel Peace Prize at the beginning of his presidency in recognition of the great work he was going to do? Jeff and Obama’s other star struck supporters think that Republicans opposed Obama because they don’t want him to succeed. They can’t imagine that people don’t actually like Obama’s policies. They can’t believe that Republicans were elected by the public for the express purpose of opposing those policies.
But of course that’s the reality. Obama lost the House in 2010 primarily because of the unpopularity of Obamacare. Despite all the evidence, Obama kept pushing it and his loyal followers supported him. And Obama has kept pushing his unpopular policies for 8 years, producing a stunning record of achievement for the Republican Party: a net gain of 63 seats in the house, a pickup of 11 seats in the Senate, 13 governorships, and a whopping 947 state legislative seats, with control of 32 state legislatures.
Obama more than anyone else made Trump possible. The voters wanted someone who would reverse all his policies decisively. Obama’s blind supporters want to believe he has all these “accomplishments” but Obama has no “accomplishments” if they can be reversed so easily. His accomplishments are either built on a very weak foundation or imposed by his own executive fiat. That’s why they can be swept away.
Republicans hear that Obama may not stay quiet as ex-Presidents are wont to do. Great. Please don’t. Please stay front and center as the spokesman of the Democratic Party. Don’t allow them to move on to rebrand themselves. There are a lot of vulnerable Democrats in the Senate in 2018 and the opportunity to make it filibuster proof. With your help Mr. President the GOP will control the Supreme Court for a generation. With your help Mr. President the GOP can redraw district lines to make even further gains in state legislatures and the House.
You’ve done a lot for the Republcan Party over the last 8 years. Keep standing up for what you believe in Mr. President. You have more work to do.
It is unfortunate that Jeffrey Frankel cherry-picks Obama’s accomplishments in the foreign policy arena.
It took him 8 years to empty Guantanamo — the symbol par excellence of American Exceptionalism.
The USA is still in Afghanistan — something only a Neo-Marxist in the Baran and Sweezy tradition could appreciate. In that story, states deliberately destroy social wealth in order to curb the constant crisis in the over production of goods and services.
The Obama administration completely misread the so-called ‘Arab Spring’. It was a reactionary populist effort to maintain food and fuel subsidies — not some glorious pro-democratic uprising. It would also help if liberals, self-styled progressives and journalists stopped ignoring the violent tactics of protesters.
The response to the Syrian Civil war has been inappropriate and has likely contributed to more deaths, and more refugees. In fact, overall US-sponsored ‘nation building’, which is often top-down violent regime change, has been just as unsuccessful as it was in the previous administration.
Obama drones and ‘death from above’ continued during the Obama years as it had during the Bush II years. If it was not for Da’esh, those leading the ‘War on Terrorism’ (sic), the USA and Israel, would still be killing more civilians than the ‘terrorists’.
The Obama administration mid-wifed the independent South Sudan. What a colossal bloody mistake that appears to have been. I am not suggesting mass sectarian killings would have continued in a South Sudan that was still part of Sudan proper but there likely would been fewer exterminations.
Yes, the nuclear agreement with Iran was an accomplishment. But it did not only ensure that Iran would not develop nuclear weapons, it kept Israel’s regional monopoly on nuclear weapons intact. In fact, if Israel did not have nuclear weapons it is unlikely the Iranians would have been tempted to develop their own nuclear warheads — assuming that is what they actually wanted to do.
I view the Israeli nuclear arsenal as highly destabilizing, one that has already cost the USA billions in foregone wealth as Iran straddles the Strait of Hormuz and has few military options other than to close the straits and send global oil prices shooting higher. Israel is not seeking to deter attack, Israel is defending itself as it actively establishes living and breathing facts on the ground. Israel is acquiring resources using nuclear weapons as a shield.
Obama was president in 2014 when the Israelis conducted a Gestapo-like sweep of the West Bank for Hamas militants after an Arab man murdered 3 rabbinical students in the West Bank. That matter could have been treated as a criminal matter as it should have been. But the sweep was necessary to undo the recent signalled return of Hamas to the side of Fatah in the Palestinian Authority. For seconds there, I was optimistic for ‘peace’ but that was quickly dashed.
House demolitions are at record highs; Obama committed to just under US$4B/year in military assistance to Israel.
His whining at Israel at the end of his mandate was rather pathetic and weak. He accomplished nothing but to remind the world that Israel is the tail that wags the American dog.
Despite the competence and spectacularly successful track record of US terrorism interdiction, Americans will be struck again. These, policies continued and supported by Obama, make that more likely.
He did accomplish much. Most important, Obama did indeed resurrect America’s tarnished reputation in much of the globe. People liked him and his impressive wife.
He supported the peace talks between the Colombian state and the Neo-Marxist guerrilla/narco-trafficking group the FARC-EP edging Colombia towards finally ending a half century civil war. The resolution of this conflict along with the establishment of formal relations with Cuba could help accelerate an end to violent left-wing national liberation movements throughout Latin America. This development is most significant.
Real federal excise taxes on fuel are lower than they have been in over several decades. Yet there was much lofty rhetoric about climate change…. Instead Obama went the populist route and quashed the Keystone XL pipeline that would have brought more Canadian heavy oil and synthetic oil to the US Gulf coast.
I would be tempted to critique the absence of a single buyer in Obamacare — there is nothing like a state-run monopsony to bargain drug and medication costs lower — except the politics was so rough, the fact that it was passed and implemented was nothing short of a miracle.
If Democrats wish to reassert their influence, they should completely re-design their foreign policy. Trump drew some Republicans who were disaffected with the failure of Iraq. Bernie Saunders attracted many who objected to American nation-building as well as unwithering support for Israel’s policies.