The White House labored Thursday to explain a first-quarter economic report showing the weakest growth in two years, even as President Obama was trumpeting his mastery of the economy in a New York Times Magazine interview.
The Department of Commerce reported that U.S. gross domestic product rose 0.5 percent in the first quarter of 2016, the third straight sluggish start to a year. Consumer spending and business purchases both fell, continuing trends that could have ominous implications for Hillary Clinton’s presidential campaign as she tries to claim the mantle as Mr. Obama’s successor.
Jason Furman, Mr. Obama’s top economic adviser, blamed the first-quarter slowdown on “weak foreign demand and low oil prices,” and some private economists say growth should pick up later this year. But Republicans were quick to trumpet the disappointing number as an indictment of the administration’s economic stewardship.
“Today’s GDP report showing the weakest period of economic growth in two years is the latest sign the Obama economy isn’t working,” said Republican National Committee Chairman Reince Priebus. “Despite all of the evidence Obama’s liberal policies are leaving middle-class families behind and holding back growth, Hillary Clinton thinks this president doesn’t get enough credit and wants to double down on his failed agenda.”
House Budget Committee Chairman Tom Price noted the nonpartisan Congressional Budget Office is forecasting the economy will continue to “underperform” in the years ahead if current fiscal policies are maintained.
“The failed economic policies and regulatory oppression of the Obama administration have contributed to a weakened economy that continues to frustrate the efforts of American families, workers and businesses to make ends meet,” the Georgia Republican said. “This will make it harder for Americans to get ahead.”
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White House press secretary Josh Earnest said that congressional Republicans were in part to blame for the weak growth, saying the economy would be stronger if Congress had agreed to Mr. Obama’s proposals for higher spending on infrastructure projects three or four years ago.
“The reason that opportunity was missed was because of Republicans’ stubborn refusal to consider any priority that President Obama has identified. That’s unfortunate,” Mr. Earnest said.
Private economists said the first quarter number was uninspiring, although the economy remains on track for at least modest growth this year.
“The economy essentially stalled in the first quarter, but that doesn’t mean it is faltering,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania, told the Reuters news service. “Some of the restraints to growth are dissipating. Growth is likely to accelerate going forward.”
But Nariman Behravesh, chief economist at IHS Global Insight, said the GDP number pointed up a major factor in the role the economy will play in November’s presidential race.
“Why is it that voters are feeling so blue when we have an economy that is close to full employment?” he said. “Part of the problem is a divide between people with college degrees who are doing fairly well and people with high school degrees who are not doing so well.”
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Debating Obama’s record
The first-quarter number presented a political and PR problem for the White House, coming just as President Obama appeared to be trying to burnish his own legacy overseeing the economy since the global financial crisis of 2008.
The president told a group of college journalists Thursday that his record on the economy is among his proudest achievements.
“I’m proud about the work we did to save the economy,” Mr. Obama said. “Right after we came in, we were in a free fall and could have experienced a worldwide depression.”
He expressed a similar view while discussing his legacy last week with British youth, boasting, “Saving the world economy from a great depression, that was pretty good.”
The president also urged the budding journalists to write “good stories” about the government, using his administration as an example.
“It is very hard to get good stories placed,” Mr. Obama said. “People will assign you stories about what’s not working. It’s very hard for you to write a story about, ‘Wow, this thing really works good.’”
In an interview with The Times’ magazine, Mr. Obama said he believes the U.S. economy is in better shape than Americans appreciate.
“I actually compare our economic performance to how, historically, countries that have wrenching financial crises perform,” the president said. “By that measure, we probably managed this better than any large economy on Earth in modern history.”
In the magazine interview Mr. Obama expressed frustration by the suggestion from Republicans that the economy is faltering under his administration.
“I mean, the truth of the matter is that if we had been able to more effectively communicate all the steps we had taken to the swing voter, then we might have maintained a majority in the House or the Senate,” he said.
The president also believes his administration could have helped more people if he had sold his policies more effectively.
“The fact of the matter is that our failure in 2012, 2013, 2014 to initiate a massive infrastructure project — it was the perfect time to do it: low interest rates, construction industry is still on its heels, massive need — the fact that we failed to do that, for example, cost us time,” Mr. Obama said. “It meant that there were folks who we could have helped and put back to work and entire communities that could have prospered that ended up taking a lot longer to recover.”
The missed opportunities, he said, “keep me up at night sometimes.”
There are some hopeful signs for the economy: The dollar’s rally appears largely over, oil prices are firming up, and the bulk of the inventory liquidation is out of the way. In addition, the jobs market remains fairly robust.
Employment gains averaged 209,000 jobs per month in the first quarter. The disconnect between GDP growth and employment implies productivity remained weak in the first quarter after sinking in the final three months of 2015.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 1.9 percent rate. That was the slowest in a year and was down from the fourth quarter’s 2.4 percent rate. Households have been cutting back on purchases of long-lasting manufactured goods like automobiles despite cheap gasoline.
“Consumer spending will rebound in the second quarter on the basis of solid growth in income and lower energy costs, which are an underappreciated tailwind that could offset much of the drag from weak global growth,” said Kevin Cummins, senior economist at RBS in Stamford, Connecticut.
⦁ This article is based in part on wire service reports.