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President Obama On the Issues
A Hutchinson Report News Special Series
This is the first in a week long Hutchinson Report News special series on President Obama's position and actions on the major foreign and domestic policy issues. The issue spotlighted today is jobs and the economy. Friday we will spotlight energy.
President Obama took office in the middle of the worst economic crisis since the Great Depression, at a time the economy was losing over 700,000 jobs a month and in the midst of what we now know was the worst 6-month period for GDP growth in over 60 years. To respond to the crisis, the President signed the American Recovery and Reinvestment Act helping to create jobs and making the investments we need to out-innovate, out-educate and out-build the competition so we can create true economic security for the middle class. According to the non-partisan Congressional Budget Office, the Recovery Act supported as many as 3.5 million jobs across the country by the end of 2010. In the face of this crisis, the President took immediate, bold, and effective action, signing the Recovery Act into law less than a month after taking office, and continued efforts to restore confidence in our financial system. And despite claims to the contrary, these efforts were successful in preventing another Depression, and returning our economy to growth. We’ve seen 12 consecutive quarters of GDP growth, and 30 straight months of private-sector job growth, for a total of 4.6 million new jobs over that period. A range of independent estimates have confirmed the effectiveness of the President’s actions. According to the non-partisan Congressional Budget Office, the Recovery Act supported as many as 3.5 million jobs across the country by the end of last year.
Princeton’s Alan Blinder and Moody’s Chief Economist Mark Zandi estimate that without the financial interventions and Recovery Act, we would have entered another Depression - there would have been 8.5 million jobs less in 2010, and GDP would have been about 6.5 percent lower. Through the Recovery Act, which was enacted on February 17, 2009, the President helped deliver crucial support to the economy in three ways. The single largest part of the Act — more than one-third of it — was tax cuts. Ninety-five percent of working Americans have seen their taxes go down as a result of the Act. The second-largest part — just under a third — was direct relief to state governments and individuals. This funding helped state governments avoid laying off teachers, firefighters and police officers and prevented states’ budget gaps from growing wider. On an individual level, the Act ensured those hardest hit by the recession got extended unemployment insurance, health coverage and food assistance. The remaining third of the Recovery Act financed the largest investment in roads since the creation of the Interstate Highway system; construction projects at military bases, ports, bridges and tunnels; long overdue Superfund cleanups; clean energy projects; improvements in outdated rural water systems; upgrades to overburdened mass transit and rail systems and much more. SEE 100 RECOVERY PROJECTS THAT ARE CHANGING AMERICA To speed economic recovery and create jobs, every major target of the Recovery Act was reached on time or ahead of schedule.
The President’s goal of paying out 70 percent of all Recovery Act funds by September 30, 2010 was a particularly important milestone. In reaching this goal, the Recovery Act put billions of dollars into people’s hands and injected much needed funds into the economy in less than two years. Effective implementation of the Recovery Act depended on funding projects that would put every dollar to good use. The Recovery Act did not include earmarks. Instead of letting politics dictate which projects were picked, a competitive, merit-based approach that rewarded innovation and effectiveness was used to make decisions. In addition, many Recovery Act programs attracted additional funding from outside the Federal Government in order to promote economic growth. Overall, about $100 billion in funding will ultimately be matched by more than $280 billion in additional investment from outside the Federal Government, much of it from the private sector. This provided desperately needed money to projects and businesses that otherwise might not have been funded. By the Numbers: How the Recovery Act Helped the Economy The Recovery Act was designed to put Americans back to work and combat the largest downturn in the economy since the Great Depression. When the Recovery Act passed, the economy was in freefall. In the fourth quarter of 2008, real gross domestic product plummeted by an annualized rate of 6.8 percent. In the first quarter of 2009, the economy lost more than 2 million jobs. The ranks of the unemployed were increasing and the speed of job loss was accelerating. Since the passage of the Recovery Act, this trend has turned around. Figure 1 shows monthly private-sector job gains or losses since the start of the recession. In the depths of the recession, the country was losing 780,000 jobs per month; now, we’ve seen 30 straight months of private-sector job growth, for a total of 4.6 million payroll jobs over that period. .
The trend in gross domestic product (GDP) growth shows a similar reversal after the passage of the Recovery Act. Figure 2 shows the real quarterly growth of GDP at an annual rate since the beginning of 2008 into 2012. GDP was contracting at a rapid pace in late 2008 — its fastest rate in decades — but it experienced a sharp turnaround following the passage of Recovery Act, leading to 12 straight quarters of growth. .Non-partisan economic analysis confirms the crucial role of the Recovery Act. Figure 3 shows the Congressional Budget Office’s estimates of the Recovery Act’s impact on employment since the start of the recession. As the figure shows, the Act has played an important role in bolstering employment since its passage in 2009. At the height of its impact, the CBO estimates the Recovery Act raised payroll employment by as many as 3.5 million jobs. The assessment that the Recovery Act has played a key role in supporting employment and output has also received support from a wide range of independent and private-sector forecasters. .And the President’s efforts did not end with the Recovery Act.
The President remains focused on jobs even while undertaking a historic reform of health insurance, a large reform of support for higher education, the most sweeping financial reforms since the Great Depression, and pushing for clean energy legislation. After the Recovery Act, the President signed at least six more important jobs bills into law in the following two years: incentives to encourage motor vehicle purchases in the summer of 2009, an expansion of the homebuyer credit and unemployment insurance in the fall of 2009, business hiring incentives in the beginning of 2010, a teachers jobs bill in the summer of 2010, a small business tax cuts and credit expansion bill in the fall of 2010, the tax agreement in December 2011 that included historic tax cuts for American families and businesses, as well as the Payroll Tax Cut at the beginning of this year.
The President is committed to continuing support for American families in difficult circumstances. That’s why he called on Congress to pass the American Jobs Act, which will build on these efforts by extending and expanding tax relief, infrastructure investment, and unemployment insurance reform. Independent, private-sector economists predict that the American Jobs Act would create over a million jobs.