EC:Mixed messages from White House on recovery

Tom Raum
ASSOCIATED PRESS

WASHINGTON

Tugged in different political directions, the White House is seeking credit for good economic news and trying to escape blame for the bad stuff. President Obama greeted as "obviously welcome news" a government report showing the economy grew 3.5 percent from July through September after four quarters of declines, an unofficial confirmation that the long, harsh recession has ended.

But he had to serve it up with a dose of political reality. Even though the downturn that began in December 2007 may be technically over, a high level of joblessness will persist for months, perhaps years, to come.

A sign of the fragility of the recovery was quick to come. Stocks, which had surged on the upbeat growth report the day before, tumbled on Friday, more than wiping out the previous day's gains.

A government report that personal spending fell by 0.5 percent in September, the largest drop in nine months, added to the gloom. And a new Obama administration assertion that its stimulus program had created or saved more than 650,000 jobs failed to supply any traction.

It's important for a president to voice optimism after good economic numbers. It can help restore consumer confidence - crucial for any recovery, since consumer spending makes up two-thirds of the overall economy.

Yet Mr. Obama couldn't be too upbeat, knowing another government report is looming - one due next week - that could show unemployment topping 10 percent in October after reaching a 26-year high of 9.8 percent in September.

"We got a long way to go to fully restore our economy," Mr. Obama said.

The administration's own economists expect the unemployment rate to hover around 10 percent through most of next year, a midterm election year.

And even in good economic times, the president's party nearly always loses seats in Congress in midterms.

Jobs are sure to be a big issue in those contests.

"Presidents are like everybody else," said American University political scientist James Thurber. "They want to go to heaven without dying, they take credit for the good news and try to run away from the bad news and blame it on the previous administration.

"But we're getting so heavily into this administration that they can't do that anymore," Mr. Thurber said.

Mr. Obama can hardly be blamed for saying that "steps we've taken have made a difference" toward bringing about a fledgling recovery.

His administration's $787 billion stimulus spending package, including the "cash for clunkers" auto program and tax breaks for first-time homebuyers, clearly has contributed.

Without the stimulus package, the nation's economic output as measured by the gross domestic product "would have risen little, if at all, this past quarter," said Christina Romer, chairman of the White House Council of Economic Advisers.

But also helping to dig the economy out was the stabilizing of banks and other financial institutions, a process that began under the Bush administration and the Federal Reserve, which kept interest rates low and pumped billions of dollars into the system.

High unemployment almost always persists after a recession. It is viewed as a lagging indicator since many employers will tend to give more work to current employees, including overtime, before hiring new workers in still-uncertain times.

The White House asserted Friday that more than 650,000 jobs have been saved or created under Mr. Obama's stimulus plan. However, since he took office in January, the economy has lost a net 3.4 million jobs. Since the recession began in December 2007, overall job losses have totaled 7.2 million.

Among the reasons the administration was muted in its response to the GDP figure of 3.5 percent growth - such a level may not be sustainable.

That's because growth of GDP - the value of all goods and services produced within the country's borders - was elevated by the cash for clunkers program that lifted car sales and by the tax credit for first-time homebuyers that helped home-building. The federal auto program has ended, and the homebuyers credit is set to expire at the end of the year. There are efforts in Congress to extend it, but the outcome is uncertain.

Also, while some companies ramped up operations in the third quarter to replace inventories they allowed to run down during the recession, that trend is expected to slacken in the coming quarters.

David Wyss, chief economist for Standard & Poor's in New York, sees about a one-in-five chance that the economy will slip back into a so-called double-dip recession. "But something has to happen to cause it," he said. "Left to its own, I think the economy is now in growth mode."

Ms. Romer, the White House economist, said in an interview with the Associated Press that if Mr. Obama isn't getting credit for the turnabout, it's because "the American people are still suffering greatly. The economy has been through just a horrendous year."

"I think people are going to wait and see the economy start to recover, and I anticipate they'll start to get a lot happier and perhaps give the president more credit for it," she said.
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