The U.S. economy ended 2009 with a bang, growing at a torrid pace of 5.7 percent in the final quarter of the year. That’s an impressive number at any time, but the Obama administration isn’t popping corks because, with at least 10 percent of Americans out of work, the nation’s mood is still in recession.
Many economists attribute the expansion to a one-time surge in business purchases of goods and equipment. Take away this “inventory bounce,” and growth was only around 2.2 percent, the same as the third quarter. And they worry that growth will sag when the government runs out of stimulus money this year.
In normal times, economic growth eventually translates into more jobs. But these are not normal times, and with the midterm election looming on the horizon, President Obama wants to goose the pace of recovery. His new budget for 2010 includes $100 billion to stimulate job creation.
In his State of the Union address, the president outlined a bundle of sensible if modest steps to induce community banks to lend to small business, speed up business investment in new plant and equipment, and encourage U.S. companies to create jobs at home instead of shifting operations overseas. All this could help on the margins, but in reality there is little that this or any president can do to plug the jobs gap.
According to Brookings Institute economist Gary Burtless, we need more than eight million more jobs to bring the unemployment rate down to 4.5 percent, or close to what economists define as “full employment.” Given the scale of the challenge, and the risk of a “double dip recession” as federal spending ebbs, some liberals are clamoring for another big stimulus package.
But the White House also has to keep an eye on America’s unprecedented run-up of debt. That’s why the president has called for freezing domestic spending in 2011 and endorsed a bipartisan commission to tackle entitlement reform.
Unlike his critics, Obama has to balance competing national priorities, not simply pick one at the expense of another. Given the economy’s hopeful trajectory, his decision to tweak job creation rather than massively expand government spending is the right one, and it deserves progressives’ support.
