BASEL – Any assessment of Barack Obama’s eight-year US presidency should start at the beginning: his first inauguration, on January 20, 2009. The US economy was in free-fall: financial markets had seized up, GDP was shrinking, and employment was plummeting, with some 800,000 jobs being lost each month. And two ill-conceived and badly executed foreign wars were underway.
In short, upon entering office, Obama confronted conditions more adverse than any incoming president had faced in many decades. True, Franklin D. Roosevelt inherited the Great Depression and Abraham Lincoln took office as the Civil War erupted. But who else entered the White House facing both an economic and a national-security crisis?
To tackle the economic crisis, Obama launched a fiscal stimulus and rescue programs for the financial system and the auto industry – policies that complemented and reinforced the US Federal Reserve’s aggressive and innovative monetary easing. Republicans nearly unanimously opposed the stimulus. And almost everybody was critical of the rescue programs, urging Obama either to nationalize the banks and auto companies or let them collapse.
Against all odds, the Obama administration made the middle path work. The recession ended in June 2009 – an achievement for which the administration did not get enough credit, despite the clarity of the turnaround. In the last quarter of 2008, economic output had declined by an astonishing 8.2% per annum. Yet, almost immediately after the stimulus program was implemented, the output decline and employment losses slowed sharply. The bottom came in June 2009, with output growth turning positive in the next quarter.