In January 2009, when President Obama took office, the U.S. economy was hemorrhaging 800,000 jobs a month. The unemployment rate continued to rise during Obama’s tumultuous first year, peaking at 10 percent that October.
That feels like a long time ago. Today’s jobs report showed that the economy added 280,000 jobs in May, a record 63rd straight month of employment growth. The private sector has added 12.6 million jobs during that stretch, and unemployment is now 5.5 percent. Meanwhile, the housing market has bounced back, inflation has remained low, and the federal budget deficit has steadily decreased.
But there’s still a nagging sense of national disappointment about the economy, a widespread feeling that wages are too low, inequality is too extreme, growth is too sluggish, and the American Dream is slipping out of reach for the middle class. Obama’s approval rating is still below 50 percent, and Republican presidential candidates are all running against Obamanomics, denouncing the last six years as an era of public-sector overreach and private-sector stagnation. Jeb Bush argued this week that the economy has actually gotten worse on Obama’s watch.
Jason Furman, the chairman of White House Council of Economic Advisers and an Obama aide since the hope-and-change campaign of 2008, thinks that’s crazy. But as one of the primary architects of the massive stimulus package that most economists believe helped end the Great Recession--and most Americans believe was a pork-stuffed waste of money--he knows it's not an uncommon argument.
In an interview with POLITICO’s Michael Grunwald, Furman laid out the case for Obamanomics, arguing that the president hasn’t gotten enough credit for saving and improving the economy, that he’s delivering on his promises of hope and change.
Furman also discussed his problems with Republicans on economic and budget policy, the prospects of doing a tax deal with Paul Ryan, and his disagreement with his old boss Larry Summers about the future of economic growth. And he explained the next big ideas in Obamaworld and perhaps the Democratic Party—on immigration, on trade, and on a 21st-century education system that’s government-funded from the cradle until age 20.
MG: The Republican presidential candidates are running around saying the economy is terrible and everybody knows it, no matter what the numbers say. What would you say to them?
JF: The fact is, the economy has made a really remarkable recovery against the pretty tough odds that you face when you see the type of financial crisis we saw. If you look at past episodes of crises like this, the Great Depression being the most notable, you wouldn’t have thought that our unemployment rate six years after the crisis would be nearly back to where it was prior to the crisis, that our economy would be substantially larger than it was before the crisis, and that real wages would be rising for workers.
MG: There’s been a lot of talk of job-killing Obamacare, job-killing stimulus, job-killing financial regulations, job-killing energy regulations. Everything is job-killing. So how is it going on jobs?
JF: In 2014, we saw the fastest pace of job growth since the 1990s. And it’s actually even more impressive than just that stat would tell you, because the demographics now are more people hitting retirement years and retiring. And notwithstanding that, we had the fastest job growth we’ve had since the late 1990s. The unemployment rate was declining at a pace that it hadn’t since the 1980s, and the streak of job creation we’re on is the longest streak this country has ever had. So I don’t think anything in these data support the various Chicken Little stories we’ve heard over the years.
MG: So the obvious question: If things are so good, why do people feel so bad? It’s not just people who want to be the next president saying it’s hard out there.
JF: First of all, people are more confident and more optimistic today than they have been at any point in time since the financial crisis…But people have also been struggling with decades of subpar wage growth, with decades of increasing inequality, and that problem has not been solved.
MG: You hear from Hillary and from the other Democrats running that we’ve lost the middle class in the country. Is that true, and what is the state of the middle class? Is it as terrible as everyone says?
JF: I wouldn’t say the middle class is worse off than 40 years ago. A lot of things have gotten better. The economy has generated gains. But those gains have been very unequally divided, and have come slower than in previous decades. So what we can do to expand the economy more quickly and better connect those gains with the middle class has been essential to the president’s agenda. That’s what he’s still pushing for.
MG: So what have you done for the middle class today for the last six years and has it helped?
JF: Rescuing the economy from a second Great Depression, that helped everyone in our country.
MG: Yeah, well, what have you done for us lately?
JF: Well, tax cuts for college, tax cuts for lower-income families with children, making the middle-class tax cuts permanent to give families more certainty, and paying for all of that with higher taxes on high-income households that returned to what they were in the 1990s. In terms of education, attending college is a key step to the middle class. There’s a lot of concern about student loans, that’s something that we’re continuing to work through, but the really big step there is income-based repayment for loans, making sure that no one has to pay back more than 10 percent of their income in interest payments. A whole bunch of other steps. Going forward, a lot of what we’re trying to do is help more families participate in the workforce. So: expanded child care, tax benefits for secondary earners, more flexible workplaces.
MG: Republicans want to repeal Obamacare, saying it will create a big economic boon.
JF: That’s another place where you’ve seen extraordinary unsung success. Health cost growth is at the lowest rate it’s been in 50 years. Health costs have consistently outpaced inflation for as long as we’ve measured them, but now they’re basically in line with inflation. Premium growth has slowed from double digits a decade ago to tied for the lowest on record now. A whole lot of things have caused that, but there’s no doubt in my mind that the Affordable Care Act has contributed to that.
MG: I saw a poll that said, I think, 75 percent of Americans think the deficit is increasing. Somehow people aren’t getting the message that it’s actually decreasing. Why is that?
JF: I think the most important thing is that everyone opens up POLITICO, reads this interview, and finds out that the deficit was 9.8 percent of GDP In 2009, and last year was 2.8 percent of GDP. It’s fallen by 70 percent as a share of the economy. What’s particularly important is it’s not just a temporary thing. If you look at the Congressional Budget Office’s estimate of the deficit over the next 25 years and the next 75 years, they’re considerably smaller than what they thought it was going to be five years ago. And a big part of that change is the steps we’ve taken to slow the growth of health care [costs], but also higher taxes on high-income households.
MG: But nobody seems to know that. Is this a failure of the economic advisers to the president? Is the president not such a great communicator after all?
JF: I’ve spent a lot of time looking at the deficit numbers. I haven’t spent much time looking at polls on what people think about the deficit. Our job is taking steps to bring it down, and it’s down. It’s still an issue over the long run, but a much less pressing issue than it has been.
MG: Ben White had an interesting piece about how the job prospects for kids graduating from school today aren’t what they were 30 years ago. He wrote the job market is certainly better than six years ago, but it basically sucks. And meanwhile, college is getting so expensive. Is this a failure by you guys?
JF: First of all, we shouldn’t lose the big picture for the weeds. The unemployment rate for college graduates is much lower than for non-college graduates. Wages are much higher. College remains one of the best tickets to the middle class, to a more secure economic future. Some of the issues we’ve seen are, first of all, we’ve seen a very rapid growth in college costs. A lot of that is in the for-profit sector, where frankly, quality can be pretty uneven. That’s one of the reasons why we’ve regulated in that particular area, put in place rules to get those schools to up their game.
MG: Have they yet?
JF: Well, you’ve seen big changes in that sector already, even in anticipation that the rules are coming, as a lot of those programs are trying to improve themselves. But addressing that sector through regulations is going to be an important step. Another is the income-based repayment I was talking about for student loans.
MG: Let’s talk about what the president can do in his last year and a half. Trade seems to be the next thing on the docket. The left is very upset. What’s the response? How is this going to help people who are still struggling?
JF: I’d go back to my diagnosis of challenges we’ve had with incomes in the last 40 years. Those challenges have stemmed from inadequate productivity growth, inadequate sharing in that growth, and inadequate labor force participation. Trade helps address at least one of those, potentially more. It will make our economy more productive. Expand the economic pie more quickly. It also will help address the quality of jobs we’ve been struggling with for a long time. Jobs in export-intensive industries pay up to 18 percent more than other jobs. The other thing is on the consumer side: trade doesn’t matter a lot to high-income households as consumers. High-income households aren’t consuming a lo