When President Obama took office in 2009, the economic outlook was bleak. We were losing nearly 800,000 jobs—the equivalent of laying off the entire workforce of West Virginia every month. The unemployment rate was headed to 10 percent. The auto industry and the financial system were on the verge of collapse. We were approaching a second Great Depression.
Fortunately, in the face of stiff opposition, the President took bold, determined action. He moved aggressively to repair our financial system and stabilize housing markets. He fought to get the Recovery Act through Congress, which made critical investments in infrastructure, energy, broadband, and education. It kept teachers and first responders on the job. It immediately cut taxes for middle-class Americans. And it helped the hardest-hit families make ends meet. Analysis by the Council of Economic Advisers suggests that at its peak, the Recovery Act increased employment by nearly 2.5 million jobs, and prevented millions of Americans from falling into poverty—more than 5 million in 2010 alone. At a time when a lot of people here in D.C. were urging us to stand aside and let Detroit collapse, the President engineered the rescue of the auto industry. Since that time the industry has added more than 600,000 jobs and the Obama Administration’s loans have been repaid in full.
That historic response paid off: we averted catastrophe and jumpstarted growth. Just six months after the President entered office, an economy that had been shrinking at an annual rate of more than 8 percent started growing again. American businesses have now created 15.5 million new jobs since early 2010. Unemployment has been cut in half to below 5 percent. The stock market has more than tripled. Rising home prices have replenished trillions of dollars in middle-class wealth. In 2015 alone, real median household income rose by 5.2 percent, and more Americans climbed out of poverty in 2015 than any other year since the 1960s. So far in 2016, wages have grown by 3 percent at an annual rate, much faster than inflation. And we have achieved all this progress despite significant economic headwinds from overseas.
The President’s policies have laid the foundation for a fairer and more durable economy. But at the same time, many Americans feel real anxieties. While many have benefitted from a decades-long economic transformation, some worry that the new economy does not have a place for them. They look at the disruptions that globalization and technology carry and worry that they might be left behind. While these forces have led to remarkable advances, they are also testing the basic promise of America—that every American who works hard has a fair shot at opportunity and economic security.
That is why we have been tackling these challenges from the first days of the Obama Administration. The President has always taken the long view—working to lay a new foundation for an economy that works for all Americans. It is why the President has taken important actions on education—upping our commitments to Pell grants, catalyzing change across the pre-K through 12th grade education system, and proposing universal pre-K and free community college. It is why the President signed into law Wall Street reforms to make our financial system safer and stronger. The Consumer Financial Protection Bureau has put nearly $12 billion back in the pockets of over 27 million consumers as a result of its supervisory and enforcement work. It is why the President has strengthened job training programs by working with employers, community colleges, and training providers to make sure that training dollars are focused on local, in-demand skills and available jobs. And it is why the President signed into law the Affordable Care Act, which has given another 20 million Americans the financial security that comes with health insurance, and made major progress in addressing the spiraling health care costs that were eating into Americans’ wages, harming our businesses’ ability to create jobs, and threatening our fiscal future.
Despite the dire predictions from some here in Washington, long-term investments in our economy have not slowed job growth or caused deficits to skyrocket. In fact, just the opposite. Job growth has been strong. Health care prices have risen more slowly than they have in 50 years. And we have cut annual deficits by about two thirds. But, of course, we know there is more work to be done.
After decades of neglect, we have an infrastructure deficit of over a trillion dollars across our transportation, water, electricity and aviation systems. Our outdated roads, bridges and highways alone impose a hidden tax on American families and businesses of over $150 billion per year through hours lost in traffic, wasted fuel, higher shipping costs, and lost wages and jobs. This year, commuters in Philadelphia and Houston will spend more than 48 hours—two full days— stuck in traffic.
We need to fix our business tax system. Our outdated tax code distorts business decisions, creating incentives for firms to locate production and shift profits overseas and to take on excessive debt. We need reforms to ensure that companies make business decisions based on their business prospects, not their tax strategies.
We also need to expand educational opportunities for young Americans. Our nation’s economy for the decades ahead will be built on the shoulders of today’s students, so it is critical that we prepare them for an economy that is evolving at lightning speed. Increased investments in early childhood education, expanding access to high-quality job training programs, like apprenticeships, and making college more affordable are all essential to ensuring that tomorrow’s workers can compete in an increasingly global economy.
Finally, we need to make sure that all workers benefit from the forces of globalization that have led to so much progress and economic gain around the world. Closer ties around the world have improved the lives of billions of people, but they have also led to disruptions that have hit certain workers and communities very hard. It may be understandable that some want to pull back from a globalized world. But given global supply chains, trying to cut ourselves off from the rest of the world will simply hurt workers and exacerbate inequality. Instead, it is critical that we make our economy more inclusive, through stronger protections and wages for workers; a robust safety net; durable education policies; and trade agreements that protect workers and the environment
The United States has the strongest and most durable economy in the world. We have the most desired products, the strongest exporters, the best workers, and the most innovative businesses. The President has been fighting since his first day in office to build upon those underlying strengths. By building on his successes, and facing directly the challenges that remain, we hope our successors can keep our nation on a path to a more prosperous future.
Director, National Economic Council
Harvard Law and Policy Review