Did Obama Turn Around the Economy?

With November’s election fast approaching, the Republican candidates seeking to challenge President Barack Obama claim that his policies have done nothing to support recovery from the recession that he inherited in January 2009. If anything, they claim, his fiscal stimulus made matters worse. And, despite recent improvement, the level of unemployment indeed remains far too high. They do not blame George W. Bush for the recession that began two months after he took office in 2001. There hadn’t yet been time for bad policies to damage the economy.)

Obama’s Democratic defenders counter that his policies staved off a second Great Depression, and that the US economy has been steadily working its way out of a deep hole ever since. Middle-ground observers, meanwhile, typically conclude that one cannot settle the debate, because one cannot know what would have happened otherwise.

There is a good case to be made that government policies - while not strong enough to return the economy rapidly to health — did indeed halt an accelerating economic decline. By “government policies,” I mean not just the fiscal stimulus the new president steered through Congress when he took office, but also the Obama version of TARP, and Fed Chairman Ben Bernanke’s aggressive monetary stimulus. All three policy initiatives remain extremely unpopular with Republicans, and ambiguous among swing voters.

But the middle-ground observers are of course right that one cannot prove what would have happened otherwise. It is also true that it is rare for a government’s policies to have a major impact on the economy immediately. These things usually take time. One cannot infer the merit of a new president’s policies from the path of the economy during his first few months in office. (For example, I did