Regardless of whether or not this presidential election is a referendum or a choice, President Barack Obama deserves to be reelected on both counts. On the economy and foreign affairs, the Democrat has shown himself to be a better candidate than any of Mitt Romney’s public personas.
The first issue of Barack Obama’s presidency was his handling of the economic collapse which is also his strongest case for reelection. The crisis left a classic liquidity trap in which demand had dropped to very low levels and interest rates had already been lowered to the minimum. This required an immediate Keynesian approach.
By passing the Recovery Act and injecting $787 billion into the American economy only three weeks after his inauguration, the president stopped the ongoing hemorrhaging and quickly stabilized the markets. Despite near unanimous Republican political stonewalling, the president got billions of dollars into green energy investment, health information technology, middle-class tax relief and more.
Investigators found minimal fraud and waste and given the impact it had on the economy, both short and long-term, the spending in sum appears to have been worth it: The economy rebounded with the stimulus saving or creating around two and a half million jobs. The recovery only really slowed down once governors began to institute austerity at the state level and Congress refused to renew any form of stimulus because of the perceived failure of the first round as well as its large impact on the deficit.
However, the Recovery Act was uncommonly large because the slump was too — and it turns out more massive than the stimulus. The oft cited “promise” that unemployment would be at 6 percent right now is a canard, citing a projection, not a promise, by the transition team based on the belief that gross domestic product loss in late 2008 was 5.4 percent. It turned out that the contraction rate was 8.9 percent — unheard of since the Great Depression. Thus, a larger stimulus was economically necessary, though politically impossible.
Having no stimulus? That would have resulted in a Second Great Depression, permanently less revenue and a larger weight in the safety net — much worse for the deficit than temporary spending.
We know this because countercyclical spending has been economic orthodoxy since the 1930s. Democratic and Republican presidents alike have always spent money in some form to juice a down economy. When they haven’t, it has stagnated. This creates a natural deficit but that’s okay — interest rates are low during liquidity traps and are historically so right now.
(Given that the task of economic stimulus is evidently incomplete, pursuing it or not remains the choice for the future.)
Other issues are dwarfed by the president’s averting of economic catastrophe, yet still have large importance — especially in contrast to the plans of Mitt Romney and the congressional Republicans. Read more “Barack Obama Deserves Second Term”