POLITICS

State of the Union conundrum: Can Obama take credit for economy?

As Obama cites growing economy, some say it's too early for him to claim credit

President Obama will lay out an ambitious vision Tuesday for government's role in American life, from such everyday concerns as how to pay for mortgages, tuition and doctors' bills to broader issues including the climate and national security.

The hopeful portrait will come in a sweeping State of the Union address that is focused on ways to strengthen the middle class. It is meant to give Obama a chance to claim credit for the rebounding economy.

"We've seen manufacturing come back, we have cut our deficits, gas prices have dropped," Obama said in a video sent to supporters Monday. "Now that we have fought our way through the crisis, how do we make sure that everybody in this country is sharing in this growing economy?"

That implicitly victorious message sets up another question, though, and a debate that will probably flourish for the remainder of Obama's time in office: Are his policies working, or is it too soon to brag?

White House advisors think the shift is right on time. They're looking at research that reflects the public's steadily improving view of the economy following improvements on the metrics Obama cites.

A Gallup Poll survey last week found that 41% of Americans were "very" or "somewhat" satisfied with the nation's economy, up from 28% a year ago. Public opinion of the president is usually closely tied to how the economy is viewed. If the economy continues to grow, as most forecasters expect, Obama is likely to see at least some more improvement in his own approval ratings.

During his address to Congress, Obama is expected to declare that the outlook is bright for a big American "comeback." The word has shown up repeatedly in recent weeks as the White House embarked on an unusual strategy of openly discussing the policy initiatives the president will introduce, on such issues as housing, education and tax reform, rather than unveiling them during the speech.

It's a new tone in Obama's message on the economy, and one that he avoided on the campaign trail during last fall's midterm election. With wages stagnating and many Americans still out of work, he instead spoke of solutions rather than suggesting that the economy had mended completely.

Even as he begins to boast about the economy, Obama must be careful what he takes credit for. Although the budget deficit last year was the lowest since 2007, the drop was due in part to spending cuts that Obama opposed.

Obama also points to job growth as a sign of the American economy's resurgence under his six years of economic stewardship, but the employment numbers alone don't quite reveal the true state of the economy. When Obama came into office, the unemployment rate was nearly 8% and rising. It was 5.6% in December, the lowest of his presidency, but still above where it was before the Great Recession.

Perhaps more important, median household income has fallen and not rebounded under Obama's tenure.

And when the president points to his rescue of the auto industry and gains in manufacturing, the Alliance for American Manufacturing warns of going too far too soon.

"It is indeed the strongest period of manufacturing job growth since the early 1990s," said the group's president, Scott Paul. "But the administration fails to mention that we've only recovered one-third of the good-paying manufacturing jobs that were destroyed in the recession. We still have a long way to go."

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FOR THE RECORD

Jan. 20, 5:28 a.m.: An earlier version of this article identified the president of the Alliance for American Manufacturing as Scott Gold. His name is Scott Paul.

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Although Obama's statistics show a recovery is underway, said Michael Strain, an economist at the conservative American Enterprise Institute, it doesn't necessarily follow that he deserves the credit.

"Certainly, the stimulus prevented the unemployment rate from going higher than it would have," Strain said. "But that's very different from arguing what it would have looked like under better policies."

If Obama hadn't burned so much political capital on passing his landmark healthcare law, Strain said, he might have been able to do more when it became clear the stimulus was insufficient.

"Both parties didn't pay nearly enough attention to unemployment and jobs, so I don't want to suggest that Republicans were great," he said. "But we have a system built on the concept of presidential leadership, so more of the blame goes to him."

He added: "More should have been done, and it should've been done differently."

In their previews of the policies to come, White House aides have talked about eliminating tax loopholes that benefit wealthy individuals and big corporations and using the savings to invest in such areas as child care and assistance for college costs. Obama also wants an infusion of federal money into road and bridge projects.

Robert Greenstein, president of the left-leaning think tank Center for Budget and Policy Priorities, applauds Obama's policy choices and his timing.

Greenstein says he sees the country moving out of a period of total focus on economic trouble to one in which Washington contemplates how to heal systemic problems.

"It's very useful and bold — and took some guts — to put that proposal on the table," Greenstein said. Few policymakers have been willing to talk about addressing capital gains taxes and shifting revenue from them to middle-class tax credits, knowing the GOP opposition is so strong.

"But there are times when you're focusing on what can you pass in the next 90 days and times when you're setting the stage for a bigger debate that will probably play out for the next several years," Greenstein said, noting the president was clearly doing the latter. "Part of the function of the president should be to lay out what he or she sees as the best policies for the country and then explain to the public why that is."

Republicans are also interested in a tax overhaul and new infrastructure projects, but it may be difficult for them to reach agreement with the Democratic president. In his first extended remarks after becoming Senate majority leader, Republican Mitch McConnell of Kentucky said the first priority of a new GOP-led Congress would be pursuing "common-sense jobs ideas."

The American public doesn't seem to be convinced of either party's approach.

Asked which way the country should head, 35% said the U.S. should follow Obama's lead, and 34% said it should follow the lead of the GOP in Congress. The rest either wished for some other choice or said they did not know.

Selling his economic policies is his top priority as he delivers his seventh State of the Union, Obama said in his video Monday.

"We are well-positioned for the future," he said. "The key is making the right choices."

christi.parsons@latimes.com

kathleen.hennessey@latimes.com

David Lauter in the Washington bureau contributed to this report.

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