Obama Nudges Economy, But Policies Stir Fierce Debate

The economy’s bad. Really bad. But it could be worse.

Though unemployment is at 8.5 percent and expected to rise even higher, a few signs of recovery are brightening a bleak landscape:

Home prices in February didn’t drop as badly as had been expected; big banks are starting to turn a profit; the stock market appears to have halted last month’s ghastly freefall.

So if the economy really is close to touching bottom — and that’s hard to conclude since the first quarter of 2009 saw it contract 6.1 percent — or if it is already heading up again — consumer confidence and spending is on the rise — the big question is:

What did the Obama administration have to do with any of it?

Economists say President Obama and his administration nudged the economy in the right direction in his first 100 days in the White House. But whether his initiatives will have significantly sped up the natural recovery of the economy and whether those gains justify the massive deficits in the years to come, will continue to be the debate for the ages.

“You’ll never absolutely know for sure, because we’ll never know what would have happened if we hadn’t done the stimulus,” said James Horney, director of federal fiscal policy at the Center on Budget and Policy Priorities. “There’s an improvement in the sense that it looks like we’re not heading for the really severe meltdown that people are afraid of.”

Obama has won mixed reviews for his bold, yet risky, economic policies. Economists see the $787 billion stimulus package either as a necessary engine for job growth or a colossal invoice on future generations that could have been avoided. The financial bailout, inherited but expanded from the Bush administration, is seen as either the only way to get lenders lending or a wasteful handout to the very actors who caused the economic collapse.

Plus it’s hard to score the direct impact of those policies so early on. The host of economic indicators used to gauge the recovery of the U.S. economy have been sending mixed signals for months.

As of late April, Obama officials as well as economists say they see the light at the end of the tunnel, though at this point it looks more like a pinprick in the ceiling.

Obama said earlier this month that the economy is showing “glimmers of hope.” Treasury Secretary Timothy Geithner wrote in a column last week of “encouraging signs that the global economic downturn may be slackening.”

It’s hard to tell to what degree that language is a response to the backlash the Obama administration felt soon after his inauguration from critics who said he was sounding alarmist about the danger of economic collapse. Obama made a notable shift to optimism after that period.

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