Obama's mixed economic legacy overshadows US presidential race
OMFIF Report – Press Release
12 September 2016
The final phase of the US presidential election is nearing and the economy is expected to play an important role in determining its outcome. Contenders Hillary Clinton and Donald Trump have set out their policies against a mixed economic backdrop.
On the surface, the US economy seems to be in recovery mode, with GDP growth steady, unemployment in decline, and the budget deficit under control. However, according to a new report by Darrell Delamaide, released today by OMFIF, the underlying condition of the US economy is far from strong.
The report, the second in OMFIF’s series on the economics behind the poll, examines President Obama’s economic legacy. Delamaide takes a critical approach: GDP has grown only marginally during Obama’s tenure, and that is mostly thanks to the expansionary policies of the Federal Reserve.
Similarly, the labour market has improved in some ways but not in others. While employment has been increasing, the participation rate stands at its lowest level in four decades, productivity remains weak, and the pace of hiring is well behind what it was during the Great Recession.
Obama’s record appears even more disappointing when compared with the optimistic tone set back in 2009, when the Congressional Budget Office forecast GDP growth of 20% for the next decade (twice as fast as the 10% actually seen), a budget deficit of 1.2% of GDP by 2015 (less than half of the 2.5% recorded), and government debt of 48% (instead it stood at 74%).
All this will have important implications for the forthcoming US presidential election. Voters’ dissatisfaction with the economy, and particularly the dual nature of the recovery, has already proven problematic for Clinton, whose 16m votes in the primaries are well overshadowed by the 27m won by Trump and Bernie Sanders, Clinton’s opponent in the Democratic primaries, combined. While different in many ways, the two candidates swayed voters with a common message about inequality and lack of economic opportunity.
David Marsh, OMFIF managing director, said: ‘On many accounts, Obama has been a success. Yet in the chronicling of his legacy, there will be few superlatives and no glory. Especially when it comes to the economy, the lack of progress with reducing income inequality and improving economic opportunity has left many voters dissatisfied. Against this backdrop, this is still a campaign where almost anything could happen.’
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