Does the President Alone Have the Power to Heal the Economy?

In some areas — such as energy and immigration — he can make big changes unilaterally. On the economy, it’s much harder.

National Journal
Catherine Hollander
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Catherine Hollander
Nov. 7, 2013, 4 p.m.

Two years ago, Pres­id­ent Obama de­clared to the res­id­ents of an east­ern Las Ve­gas neigh­bor­hood, “We can’t wait for an in­creas­ingly dys­func­tion­al Con­gress to do its job. Where they won’t act, I will.” Weeks earli­er, GOP law­makers had blocked Obama’s $447 bil­lion Amer­ic­an Jobs Act.

The first of­fi­cially “We Can’t Wait” ac­tion that Obama took, an­nounced in that speech, was to make it easi­er for some homeown­ers to re­fin­ance their mort­gages. Since then, the ad­min­is­tra­tion has taken an ad­di­tion­al 43 solo steps to “sup­port middle-class Amer­ic­ans,” ac­cord­ing to the White House web­site. These range from a re­cess ap­point­ment of Richard Cordray to head the Con­sumer Fin­an­cial Pro­tec­tion Bur­eau to in­vest­ing $4 bil­lion in mak­ing build­ings more en­ergy ef­fi­cient. Oth­er ini­ti­at­ives are in the works.

But the White House can’t — and hasn’t — moved the needle on the na­tion’s slug­gish growth and high un­em­ploy­ment with these man­euvers. What the ad­min­is­tra­tion can do by go­ing it alone is to af­fect a tar­geted group of in­di­vidu­als (as it did by in­tro­du­cing new wage and over­time pro­tec­tions for roughly 2 mil­lion home-care work­ers in Decem­ber 2011), speed up spend­ing on cer­tain pro­jects, try to make the gov­ern­ment more ef­fi­cient, and set the stage for fu­ture in­nov­a­tion. These steps are not eco­nom­ic game-changers in the short term.

Eco­nom­ic ex­pect­a­tions for the we-can’t-wait ac­tions were al­ways small in scope, even with­in the ad­min­is­tra­tion. White House Com­mu­nic­a­tions Dir­ect­or Dan Pfeif­fer ex­plained when the ini­ti­at­ive was launched, “These steps aren’t a sub­sti­tute for the bold ac­tion we need to cre­ate jobs and grow the eco­nomy, but they’ll make a dif­fer­ence.”

It’s not the only place the ad­min­is­tra­tion has staked a go-it-alone strategy. Na­tion­al Journ­al re­por­ted last month how Obama’s use of his ex­ec­ut­ive au­thor­ity on gun con­trol, cli­mate change, health care, and na­tion­al se­cur­ity made him one of the most power­ful pres­id­ents ever. But on the eco­nomy, the pres­id­ent can only nibble around the mar­gins without Con­gress, and even there, the im­pact is tough to see in the data. “I would give the ini­ti­at­ives a high grade, but I would ap­ply it to a very small corner of the prob­lem,” says Jared Bern­stein, a former eco­nom­ic ad­viser to Vice Pres­id­ent Joe Biden. “In terms of mov­ing the macro eco­nomy, they tend to be of too small a scale.”

It’s clear from look­ing at the White House list how small-scale many of the items have been. The $4 bil­lion in­vest­ment in en­ergy ef­fi­ciency is just 0.024 per­cent of the $16.6 tril­lion U.S. eco­nomy; an­oth­er move freed up $473 mil­lion for in­fra­struc­ture pro­jects.

Kath­ar­ine Ab­ra­ham, who was a mem­ber of the White House Coun­cil of Eco­nom­ic Ad­visers from 2011 to 2013, groups the ac­tions in­to four broad cat­egor­ies: put­ting more money in­to con­sumers’ pock­ets; mak­ing the en­vir­on­ment bet­ter for busi­ness; mak­ing gov­ern­ment more ef­fect­ive; and ac­cel­er­at­ing in­vest­ment in trans­port­a­tion and in­fra­struc­ture.

Eco­nom­ists in­ter­viewed by Na­tion­al Journ­al said the last of those ob­ject­ives has the most prom­ise for boost­ing the strug­gling re­cov­ery be­cause it can provide an im­me­di­ate in­fu­sion of cash in­to the eco­nomy. Con­sumers might in­ject some new life in­to the eco­nomy with ex­tra money in their pock­ets from, say, re­fin­an­cing or get­ting a sum­mer job through a new pro­gram aimed at young people. A more ef­fi­cient gov­ern­ment is cer­tainly an ad­mir­able aim, but elim­in­at­ing in­ef­fi­cien­cies could also re­duce jobs, off­set­ting some of the eco­nom­ic be­ne­fits of pro­ductiv­ity.

The Na­tion­al Ad­dit­ive Man­u­fac­tur­ing In­nov­a­tion In­sti­tute, a pub­lic-private part­ner­ship and the first of 15 in­cub­at­or-type man­u­fac­tur­ing in­sti­tutes the White House wants to cre­ate, is one we-can’t-wait ini­ti­at­ive that eco­nom­ists say might help re­vive the eco­nomy. NAMII spe­cial­izes in 3-D print­ing, a tech­no­logy that is seen as re­volu­tion­ary but has a num­ber of kinks to be worked out. The hope is to spur a tech­no­lo­gic­al re­volu­tion and breathe new life in­to man­u­fac­tur­ing. This is a long-term hope.

With the short term in mind, the White House an­nounced in early 2012 a pi­lot pro­gram to help small-busi­ness ex­port­ers gain cred­it and a more stream­lined pro­cess for ex­port­ers look­ing to delay or re­duce duty pay­ments on for­eign mer­chand­ise. “They’ve done … some smart things on man­u­fac­tur­ing, and we’ve seen some growth in the sec­tor,” Bern­stein says. (Man­u­fac­tur­ing activ­ity ex­pan­ded for the fifth-straight month in Oc­to­ber, ac­cord­ing to the latest In­sti­tute for Sup­ply Man­age­ment na­tion­al sur­vey.) “Are they re­lated? You know, maybe a little bit at the mar­gin, but I wouldn’t push it too far.”

The White House says it’s try­ing to move the ball for­ward any way it can, in the hopes that these small steps will add up to something big over time, demon­strate to Con­gress the po­ten­tial of cer­tain ini­ti­at­ives, and help a chunk of Amer­ic­ans in the mean­time. A few, says a seni­or ad­min­is­tra­tion of­fi­cial, have the po­ten­tial to trans­form the eco­nomy. NAMII is one; Se­lect­USA, a Com­merce-State De­part­ment ef­fort to en­cour­age for­eign and do­mest­ic com­pan­ies to in­vest in the U.S., re­quired a re­or­gan­iz­a­tion of the gov­ern­ment, one that could per­man­ently change the way busi­ness is done, the of­fi­cial said.

Even if growth is stuck for now, it’s polit­ic­ally smart for the White House to fo­cus on the eco­nomy. Ac­cord­ing to the Pew Re­search Cen­ter, 86 per­cent of the pub­lic in Janu­ary ranked “strength­en­ing the eco­nomy” as a top pri­or­ity for Con­gress and the White House in 2013, al­though the ad­min­is­tra­tion’s act-uni­lat­er­ally at­ti­tude has drawn cri­ti­cism from the Right for sub­vert­ing reg­u­lar pro­cesses.

A White House fo­cus alone isn’t enough. In terms of the mac­roe­conomy, the White House has lim­ited powers. It needs Con­gress to get in­to the act.

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