The economy may be showing signs of improving, but try telling that to the millions of Americans still struggling to make ends meet. That disconnect is one of several problems President Barack Obama faces as he prepares to deliver his second State of the Union message -- an event that coincides with the rising power of the Republican Party following last year's midterm elections.

Obama has the daunting task in his speech of refuting GOP claims that he's antibusiness -- while at the same time trying not to alienate his liberal supporters. His midterm move to the political center is becoming more apparent every day. The president recently picked General Electric (GE) CEO Jeffrey Immelt to head an economic advisory group, and he has named former Commerce Secretary and JPMorgan Chase (JPM) exec William Daley as his new White House Chief of Staff.

Then and Now

But before discussing where Obama wants to take the country, it's important to remember where it has been. Upon taking office, Obama inherited two costly wars and an economy that had violently imploded just months before. The abrupt downturn brought an end to two venerable Wall Street firms, Lehman Brothers and Bear Stearns, and it sent U.S. automakers General Motors (GM) and Chrysler into bankruptcy. Credit markets were frozen so solid that even creditworthy firms such as GE had difficulty borrowing. The government lent these firms trillions of dollars to keep them solvent.

That was then. Now, investors are apparently growing more confident with Obama's stewardship of the economy. A recently released survey of investors, traders or analysts by Bloomberg News found 53% percent of those polled now view the president favorably, up from 49% in November.

"He inherited an economy that was in a really bad place," says Chad Stone, chief economist Center on Budget and Policy Priorities, a liberal think tank. Stone declined to assign Obama a grade on his economic policy, because '"things were a lot worse off than originally thought."

Here's a review of where the economy has progressed, and where it continues to falter, under the current administration:

Stock Market: The S&P is up 50% since Obama took office. In 2008, the index fell 37%. Helping the rebound is the extension of the Bush-era tax cuts -- and the realization the government has made a profit on many of its bailouts. Still, the S&P is up only 2.3% over the past five years, leaving the retirement savings of many investors in tatters.

Taxes: Extending the Bush tax cuts added $700 billion to the deficit over the next decade and preserved the estate tax, which Republicans wanted to eliminate. But without these extensions, the average tax bill would have jumped by several thousand dollars. Research from Moody's found that rich people tend to save their tax cuts rather than spend them.

Deficit: Obama inherited a $1.3 trillion deficit when he took office, and it's projected to be $1.27 trillion in the current fiscal year, down from $1.56 trillion in fiscal 2010. The president has proposed a two-year pay freeze for all civilian federal workers -- an act that will reportedly save $2 billion over the remainder of this fiscal year, $28 billion over the next five years and more than $60 billion over the next decade. Last week, the conservative House Republican Study Committee released a plan to cut federal spending by $2.5 trillion over the next 10 years.

Housing: A survey released in December by and RealtyTrac found 58% of Americans believe the housing market will rebound after 2012. For now, though, foreclosures continue at a record pace -- despite the slowdown caused by the concerns over the robo-signing scandal. RealtyTrac says 2.9 million homes were foreclosed upon in 2010, up 23% from 2008. But the news wasn't all bad. According the National Association of Realtors, December existing-home sales rose 12.3% from November to a seasonally adjusted annual rate of 5.28 million. But that figure is down 2.9% from December 2009. In comparison, existing-home sales in 2008 dropped 13.1% to 4.9 million, the lowest since 1997.

Personal Bankruptcies: U.S. consumer bankruptcies increased 9% in 2010 compared to the previous year, according to the American Bankruptcy Institute. But compare that to the nearly 33% increase in filings nationwide in 2008 over 2007.

Jobs: This is the big one, and all indications are that Obama will focus much of his speech on jobs and competitiveness. In December 2008, just before he entered office, the economy shed 673,000 jobs, according to the Bureau of Labor Statistics. In December 2010, the economy added 103,000 jobs, a figure that surprised some economists and sent the unemployment rate down to 9.4%, its lowest level since May of 2009. A recent Gallup Poll found a slight improvement over this time last year in the number of Americans who believe that "now is a bad time to find a job."

Their pessimism is understandable. As Stone of the Center on Budget and Policy Priorities notes in a recent blog post, "We estimate that the rate of job growth would have to roughly triple between now and the end of 2015 just to restore labor market conditions -- five years from now -- to what they were at the start of the recession (roughly a 5% unemployment rate and higher labor force participation)." That's a tall order for sure. But at least there's hope: The latest National Association for Business Economics survey found that 42% of companies say they expect to increase hiring in the next six months.

Increase your money and finance knowledge from home

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

Introduction to Economic Indicators

Measure the performance of the economy.

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:
The Platzner Post

If it wasn't for the GOP/Teahadist Party blocking everything, the recovery would be at a faster pace!!!

November 20 2011 at 2:18 AM Report abuse rate up rate down Reply

Less income coming in an no jobs for people over age 40 means war is coming

January 26 2011 at 10:09 AM Report abuse +1 rate up rate down Reply

He freezes all low level govt jobs paying under15/hr . Meanwhile he flies his family to Hawaii at a cost of 65k each way.Don't forget HE FLEW ALONE to meet them there this year.This doesn't include the massive carbon footprint left by this "green" pres.He preeches economizing and blows over 1m on family travel.

January 26 2011 at 9:36 AM Report abuse +1 rate up rate down Reply

when gov't increases spending ten fold, while allowing income (employment) to decrease ten fold, do the math. tell a liberal that and see the blank stare.

January 26 2011 at 8:39 AM Report abuse +2 rate up rate down Reply

Yep , just ask Obama , Bush did it .

January 26 2011 at 6:50 AM Report abuse +1 rate up rate down Reply

Good Golly..... No mention of production?... Making stuff? .... That's what underlies an economy, and also (imagine that) creates the need for jobs. A job does not come out of thin air.... there has to be a reason for the job.

January 26 2011 at 6:34 AM Report abuse +1 rate up rate down Reply
hello steve


January 26 2011 at 6:33 AM Report abuse +2 rate up rate down Reply

How the State of the Economy Has Changed Under Obama."""""""""""" Unemployment jumped to 10.1% and has been over 9.4% for over 20 months. The only reason the stock market is going up is because we have a new congress. Lets face liberals you lost last Nov 2010 and will lose again in 2012.

January 26 2011 at 6:18 AM Report abuse +2 rate up rate down Reply
1 reply to shutuplyinglibs's comment

the stock market is going up because of the new congress? It went down to 7,000 under a republican president, senate, and congress! My God how stupid can you get

January 26 2011 at 7:41 AM Report abuse -3 rate up rate down Reply

Blah,Blah,Blah - same old clap - trap from an economist like Paul Krugman !!! What does he have to say to those that have been out of work for two years and have NO possibility of going back to work - remember that during the Great Depression of the 1930's, 85 - 90 % of the population HAD JOBS - add into the present unemployment figures the number of people that are NOT counted because they have given up looking or don't qualify for any more benefits, and you get the REAL picture of just how bad this economic downturn really is !!! Not until Gov't gets it's nose out of private business will we get an economic rebound - I can spend my $ MUCH better than the Gov't can spend my $ !!!!

January 26 2011 at 6:14 AM Report abuse +2 rate up rate down Reply


January 26 2011 at 6:12 AM Report abuse rate up rate down Reply