WASHINGTON — There is no mystery about Barack Obama's greatest presidential achievement: He stopped the Great Recession from becoming the second Great Depression. True, he had plenty of help, including from his predecessor, George W. Bush, and from the top officials at the Treasury and Federal Reserve. But if Obama had made one wrong step, what was a crushing economic slump could have become something much worse.
It is Obama's unfortunate fate that the high-water mark of his presidency occurred in the first months, when the world flirted with financial calamity. The prospect of another Great Depression was not far-fetched.
In its just-released annual report, the White House's Council of Economic Advisers explains why. Recall the dreadful numbers.
In the first quarter of 2009, as Obama was moving into the White House, monthly job losses averaged 772,000. The ultimate decline in employment was 8.7 million jobs, or 6.3 percent. Housing prices and stock values were collapsing. From their peak in February 2007 to their low point, housing prices dropped 26 percent. Millions of homeowners were "underwater" — their houses were worth less than the mortgages on them. Stock prices fell roughly by half from August 2007 to March 2009.
The starkest of these was the fall in households' net worth. It dropped by $13 trillion, about a fifth, from its high point in 2007 to its trough in 2009. This decline, the CEA notes, "was far larger than the reduction [adjusted for inflation] ... at the onset of the Great Depression."
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What separates then from now is that, after 18 months or so, spending turned up in 2009 while it continued declining in the 1930s. This difference reflected, at least in part, the aggressive policies adopted to blunt the downturn. The Fed cut short-term interest rates to zero and provided other avenues of cheap credit; the Troubled Asset Relief Program, enacted in the final months of the Bush administration, poured money into major banks to reassure the public of their solvency.
Still, Obama's role was crucial. Against opposition, he decided to rescue General Motors and Chrysler. Throwing them onto the tender mercies of the market would have been a huge blow to the industrial Midwest and to national psychology. He also championed a sizable budget "stimulus." Advertised originally as $787 billion, it was actually $2.6 trillion over four years when the initial program was combined with later proposals and so-called "automatic stabilizers" are included, says the CEA.
More generally, Obama projected reason and calm when much of the nation was fearful and frazzled. Of course, he didn't single-handedly restore confidence; but he made a big contribution. So did the underlying flexibility and resilience of the U.S. economy.
In its report, the CEA contends that the recovery from the Great Recession is mostly complete. This seems plausible. Since the low point, employment is up 15.6 million jobs. Rising home and stock prices have boosted Inflation-adjusted household net worth by 16 percent. Gross domestic product (the economy) is nearly 12 percent higher than before the financial crisis.
Many Americans still seem disappointed. They feel insecure and short-changed. The financial crisis and Great Recession left deep scars that haven't yet been fully healed by a recovery that often seemed halting and unreliable. They also don't give Obama much credit because they disagree with him on other issues or disapprove of the general contentiousness of his presidency. Any semblance of bipartisanship broke down.
As a result, his impact is underestimated. Suppose we had had a second Great Depression with, say, peak unemployment of 15 percent. Almost all our problems — from poverty to political polarization — would have worsened. Obama's influence must be considered in this context. When historians do, they may be more impressed.