Hope springs eternal
Barack Obama will enter the pantheon of great orators when he leaves office this month. It’s easy to forget how much optimism and genuine hope he inspired on the campaign trail. Even now, after a rancorous eight years in office, he has a profound skill to inspire with his words. What is less well remembered is was just how much of a rotten state the economy was in when he inherited the Presidency.
In many ways, The financial crisis and its aftermath have been the spectre haunting his Presidency. The financial crisis was not one of Obama’s making, but he had to deal with much of the wreckage. He oversaw the recovery of the US banking sector following its post-crisis bailout; a recovery that must be the envy of his European peers, who never have really sorted out their banks.
Another defining challenge was the political backdrop: the Republicans regained control of the House of Representatives two years into Obama’s first administration (i.e. following the November 2010 elections) and control of the Senate in the November 2014 elections.
These election results inevitably and seriously reduced his economic room for manoeuvre. But the 2010 result, the largest change of seats in an election since 1948, also reflected the impact of the financial crisis. Certainly this was Obama’s view: "There is no doubt that people's number one concern is the economy," he said. "What they were expressing great frustration about is that we haven't made enough progress on the economy."
The other issue that has shaped his Presidency is inequality. This issue has become more contentious recently because of the exceptional monetary policy of the Federal Reserve and other central banks. History will probably judge that (like his forebears) he probably could have done more to close the inequality gap. But the central bank policies that have exacerbated income inequality were, once again, a reaction to the financial crisis.
There may be significant areas of the country that aren’t feeling it but, overall, the US is far and away the closest of the developed economies to being ‘normal’ again. In the past two years alone, the US has created close to five million jobs. Wage growth has reached its highest level since mid-2009. The central bank is raising interest rates and the financial sector is in reasonable shape. And surveys suggest that the economy is continuing to gather momentum. And the rest of the world should benefit from that. Ultimately Obama could not match his words with deeds. His was a presidency defined more by dealing with the hand that he was dealt, rather than tackling head-on much of what he aimed to in his stump speeches. On the whole, he finessed it in a methodical and measured way, which served his country well.
Chief Economist - Aberdeen Asset Management
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