The Obama administration has helped pull the U.S. economy back from the abyss with aggressive efforts to spur growth and stabilize financial markets, a top White House adviser said on Monday.
Defending policies that Republicans have attacked as ineffective, National Economic Council Director Lawrence Summers argued measures put in place by the administration, including a $787 billion stimulus package, had helped turn back the deepest U.S. recession since the Great Depression.
Thanks largely to the Recovery Act, alongside an aggressive financial stabilization plan and a program to keep responsible homeowners in their homes, we have walked a substantial distance back from the economic abyss and are on the path toward economic recovery, Summers wrote to House Republican leader John Boehner.
Obama is facing rising clamor to take new steps to lift the economy and jump-start job growth as the U.S. unemployment rate edges toward 10 percent.
The bleak jobs picture, and soaring fiscal deficits that reflect the cost of battling the recession, could put some of Obama's Democratic allies at risk in next year's congressional elections, unless voters are convinced they are doing all they can to help the economy.
Every American is asking this administration: Where are the jobs? Boehner said in a statement. The Ohio Republican noted the economy had lost roughly 3 million jobs since Congress had approved the stimulus package in mid-February.
Responding to a letter Boehner had sent Obama, Summers pointed to a slowing pace of job losses as evidence that the administration's policies were working. We have seen a substantial change in the trend of job loss, he said.
The U.S. economy lost jobs at a monthly average rate of 256,000 in the third quarter of this year, which Summers termed unacceptably high. But he noted it was nearly a third of the 691,000 jobs per month lost in the first quarter.
Rising joblessness poses a dilemma for Obama and his fellow Democrats. Republicans are pushing for additional tax cuts as the solution for the country's economic woes.
Speaking to a group of business economists in St. Louis, Summers said there was no higher economic priority than maximizing economic growth and job creation.
But he warned that heavy job losses cast a substantial shadow forward and the economy still faced a tough slog.
We need to recognize that lack of demand will be a major constraint on output and employment in the American economy for the foreseeable future, he told the National Association for Business Economics.
Economists surveyed by the group expect the jobless rate to top out at 10 percent early next year before falling.
In a nod to concerns about the large federal deficit, inflation and the value of the U.S. dollar, he cautioned against simply throwing piles of public money at the economic problems without considering the longer-term consequences.
No actions to combat short-term output gaps must be taken that call into question our commitment to sound money and noninflationary growth.
TOUTING OBAMA PLAN, BLAMING REPUBLICANS
Summers told Boehner that private forecasters have estimated that the stimulus program added 3 percentage points to second quarter GDP, tempering what would have been an even deeper economic swoon.
He also said they believe the unemployment rate would be 2 percentage points lower by the end of 2010 than it would have been without the stimulus plan.
Most forecasters estimate the economy resumed growth in the third quarter, although some still worry about the risk of a double dip recession in which the recovery stalls.
Summers took note of the improvement in U.S. stock market performance since early this year and of recent data suggesting the housing market, which was central to the financial market collapse, was stabilizing.
Hitting back at Republicans who are trying to lay blame on Obama for a record U.S. budget deficit, Summers said Obama inherited a deficit well in excess of $1 trillion when he took office. He said the policies of Obama's Republican predecessor, former President George W. Bush, led to the shortfall.
The bipartisan commitment to fiscal discipline that existed during the 1990s evaporated during the 2000s. Every major policy enacted during this period violated the principle of paying for new proposals, Summers wrote.
(Additional reporting by Emily Kaiser in St. Louis and Caren Bohan in Washington; Editing by Eric Walsh and Cynthia Osterman)