Obama Makes Case for Economy at Home by Pointing Overseas

U.S. President Barack Obama
U.S. President Barack Obama. A month before the midterm elections, the president is touting the nation’s economic strength in a bid to remind voters how far the U.S. has come since he took office in the midst of the worst slump since the Great Depression. Photographer: Andrew Harrer/Bloomberg

A month before congressional elections, President Barack Obama is making an appeal to American pride in promoting his economic policies, arguing that the U.S. is outpacing the recovery in other nations.

“Our economy isn’t just primed for steadier, more sustained growth,” Obama said today in a speech at Northwestern University in Evanston, Illinois. “America is better poised to lead and succeed in the 21st century than any other nation on Earth.”

It’s a tough sell to voters. Obama has struggled to gain credit for his performance amid slow gains in wages and incomes for ordinary Americans. For them, the economy is the preeminent concern even as the news is dominated by the Ebola virus, tensions with Russia, and the fight against Islamic extremists.

The president reminding voters how far the U.S. has come since he took office in the midst of the worst slump since the Great Depression.

“The United States has put more people back to work than Europe, Japan, and every other advanced economy combined.” Obama said. That progress, he added, has been “a direct result of the American people’s drive and determination, and the decisions made by my administration.”

The White House tweeted out excerpts of the speech as Obama spoke with the hashtag #AmericaLeads.

Obama presented a summary of progress over the past six years along with his longstanding proposals to bolster growth, including raising the minimum wage, spending on transportation projects and investing in education.

Cumulative Impact

“If we do these things systematically, the cumulative impact will be huge,” he said. “More people will feel this recovery, rather than reading about it in the newspapers.”

He also defended regulatory expansions under his administration, citing rules imposed on the financial industry to “discourage a casino-style mentality on Wall Street.”

While Obama said the address wasn’t an “official campaign speech,” he cited the “starkly different visions” of the economy between Democrats and Republicans. He mocked a recent comment from former Republican Vice Presidential Nominee Paul Ryan in the Weekly Standard that the need for new tax cuts for high-income earners is “even more pressing now” than during the era of President Ronald Reagan’s tax cuts during the early 1980s.

“Where’s the empirical evidence for that?” Obama said. The Republican position is “a little hard to swallow” after a recovery in which most of the winnings have gone to the wealthy.

Broad Gains

The U.S. economy has made broad gains and companies are thriving, even if few of the benefits have trickled down to typical families.

Payrolls this year are expanding at the fastest pace since 1999, growing by an average of more than 215,000 jobs per month. The jobless rate declined to 6.1 percent in August, the lowest since 2008. The U.S. economy has returned as an engine of global growth, surging at a 4.6 percent annual rate in April through June, after contracting 2.1 percent in the first quarter.

Companies in the Standard & Poor’s 500 Index are the healthiest in decades, with the lowest net debt-to-earnings ratio in at least 24 years, $3.59 trillion in cash and marketable securities and record earnings per share. The S&P 500 index has almost tripled since March 2009.

EU, Japan

At the same time, economies in Europe and Japan are sluggish. The recovery for the euro area -- including France and Italy -- stalled, with gross domestic product unchanged, from the first quarter to the second, according to Eurostat, the European Union’s statistics office in Luxembourg. Japan contracted by the most in more than five years, with GDP shrinking an annualized 7.1 percent, data from the government Cabinet Office in Tokyo show.

Still, wage increases for ordinary Americans have been limited. Adjusted for inflation, average hourly earnings in August were up only 0.4 percent from a year earlier.

“Income growth in this recovery has been a lot weaker than past recoveries,” said Laura Rosner, a U.S. economist at BNP Paribas SA in New York and a former New York Fed researcher. “We’re also seeing record levels of income inequality.”

Household Income

Five years since the June 2009 start of the economic recovery, middle-class incomes still haven’t returned to pre-recession levels. Annual median household income in July was still more than $2,600 lower than at the December 2007 start of the recession, according to Sentier Research, a consulting firm based in Annapolis, Maryland.

Middle-class families are also poorer, with median net worth in 2013 more than 40 percent lower than in 2007, according to the Federal Reserve Board’s triennial Survey of Consumer Finances. Many American families have yet to see their home values fully recover from the real estate crash and most middle-income families haven’t directly benefited much from the stock market surge.

Last year’s median net worth of $81,200 was the lowest since 1992 when adjusted for inflation. Median net worth for minority families has declined more sharply, by 43 percent over the prior six years to $18,100, the lowest level since 1989, according to the Federal Reserve.

Democrats Suffer

The economic rebound has been especially weak for key Democratic constituencies. Their enthusiasm is crucial in the November election because midterms typically draw fewer voters, making turnout of party loyalists especially important.

In the first five years of the recovery, median household income fell 4.6 percent for women living alone, 5.6 percent for Hispanics and 7.7 percent for blacks compared with a 3.1 percent drop for the country, according to Sentier.

Just over a third of Americans approve of the president’s handling of the economy, according to a Gallup survey conducted Aug. 7-10. His average approval rating on the issue since re-election is 38 percent, the lowest of any presidential term since President George H.W. Bush’s 35 percent average score.

Consumer confidence fell last week to a four-month low as Americans grew more pessimistic about the economy and their finances. The decline in the Bloomberg Consumer Comfort Index has been concentrated among lower-income households, who typically vote Democratic.

Recovery’s Tempo

“The tempo of the recovery has really picked up and is starting to translate more to people,” said Jason Furman, the chairman of the White House Council of Economic Advisers. “But people also feel how much work there is to be done, and it’s reflected in their attitudes.” He called Obama’s emphasis on the relative strength of the U.S. economy “useful context to compare to other countries that are facing similar challenges.”

The public’s attitude could damage Obama’s Democratic allies in the election. A Pew Research Center survey last month shows 83 percent of registered voters say the economy is “very important” in casting ballots, beating all other issues.

Presidents tend to lose popularity on their handling of the economy during a second term, in part because they are “old news” at that point and judged more harshly, said Bruce Buchanan, a presidential historian at the University of Texas in Austin. “Economics is a touchy subject” with “expectations always above performance.”

Obama spoke a day before the Labor Department is set to release September employment figures that will give a timelier read on the economic recovery.

Employment Data

Even as the economy reached a milestone in May with employment exceeding the pre-recession peak, 29 of 50 states have yet to match that accomplishment, according to Labor Department data compiled by Bloomberg.

The headline jobs figures also mask underlying weakness in pockets of the labor market. Long-term unemployment, or the share of the jobless who have been out of work for 27 weeks or longer, declined to 31.2 percent in August while remaining twice the historical average in records dating to 1948.

The underemployment rate -- which includes part-time workers who’d prefer a full-time position and people who want to work but have given up looking -- was 12 percent in August, still above the 8.8 percent rate in December 2007.

“More people are working, but they’re not working as much as they would want to,” Rosner said. The labor market recovery, she added, “is very much incomplete.”

Before the speech, Obama stopped at a $50,000-per-person fundraiser for Illinois Governor Pat Quinn, who is running for re-election in November.

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