Don't despair.

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Obama's Economic Disappointment

Narayana Kocherlakota is a Bloomberg View columnist. He is a professor of economics at the University of Rochester and was president of the Federal Reserve Bank of Minneapolis from 2009 to 2015.
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President Barack Obama thinks Americans don’t properly appreciate the benefits of his economic policies -- a view he most recently expressed in an interview with the New York Times. Isolating the effects of any president’s policies is close to impossible. That said, it’s not hard to see why many people are disappointed with the performance of the economy during Obama’s time in office.

In January 2009, at the beginning of Obama’s first term, the nonpartisan Congressional Budget Office issued a 10-year forecast for the U.S. economy, including such indicators as unemployment, gross domestic product, the budget deficit, government debt and interest rates. Here’s a table comparing the CBO’s expectations for the year 2015 to what has actually happened:

The unemployment rate has come closest to expectations. Although it remained very high through much of the Obama presidency, it had fallen to near historical averages by 2015.

Elsewhere, the story is less positive. Total income growth in the U.S. has fallen well short of expectations, in both nominal and inflation-adjusted terms. And although Obama expressed pride in the recent decline in the federal budget deficit, it’s still much larger than the CBO forecast in 2009 -- as is the ratio of government debt to GDP.

No number expresses the economy’s weakness better than the yield on the three-month Treasury bill, which captures market expectations of what the Federal Reserve will do with interest rates over the next three months. Instead of recovering to near 5 percent as the CBO predicted, the yield was close to zero.

Some would say this simply means the Fed is holding rates too low in its efforts to boost the economy. Yet growth remains inadequate, and inflation is still below the central bank’s target. More likely, the low rates reflect the large amount on uncertainty among households and businesses -- uncertainty that even the Fed’s extraordinarily loose monetary policy cannot completely dispel.

Who’s responsible for the underwhelming economic performance? Blaming the president alone would be a big mistake. Many actors were involved, including Congress, the Fed, the president’s administration and foreign governments. Technological developments may well have played a role, too.

What matters is how we respond. Should policy makers be satisfied, as though this were the best that America can do? At times in his interview, Obama seemed to suggest that he thought so. I strongly disagree.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Narayana Kocherlakota at nkocherlako1@bloomberg.net

To contact the editor responsible for this story:
Mark Whitehouse at mwhitehouse1@bloomberg.net