Obama administration joyful but cautious over GDP growth
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
The Obama administration greeted today’s news of the turnaround in the gross domestic product with joy, but that happiness was tempered by caution because the economy remains a touchy political problem.
“After four consecutive quarters of decline, positive GDP growth is an encouraging sign that the U.S. economy is moving in the right direction,” Christina Romer, chairwoman of the Council of Economic Advisers, said in a prepared statement. “However, this welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered.”
Today’s Commerce Department report shows that the economy grew at a 3.5% clip in the third quarter. But much of the growth came because of government programs, including a tax credit for first-time home buyers and the popular “Cash for Clunkers” program that helped the beleaguered auto industry.
Romer acknowledged the importance of the government’s role in her statement.
“Analysis by both the Council of Economic Advisers and a wide range of private and public-sector forecasters indicates that the American Recovery and Reinvestment Act of 2009 contributed between 3 and 4 percentage points to real GDP growth in the third quarter. This suggests that in the absence of the Recovery Act, real GDP would have risen little, if at all, this past quarter,” Romer stated.
But that high level of government support creates a political problem since at some point the government will have to step back. Still, Congress is considering extending the home buyer credit and there have been calls for more government stimulus money to keep the fragile recovery going.
But the biggest political problem is the job market, expected to top 10% unemployment shortly. People tend to view jobs, a lagging indicator of the economy, as more important than overall growth or the stock market gains.
That political caution is seen in recent polls. An NBC News/Wall Street Journal poll this week shows that the nation is split, 47%-46%, in how President Barack Obama is handling the economy, though the president’s overall rating is more positive, 51% to 42%.
—Michael Muskal
Twitter.com/LATimesmuskal
