June 9, 2011 / 7:17 PM / 6 years ago

Analysis: Obama has options to aid economy but messaging key

<p>President Barack Obama delivers remarks at a DNC event at Austin City Limits Moody Theater in Austin, Texas, May 10, 2011. REUTERS/Jim Young</p>

WASHINGTON (Reuters) - President Barack Obama may still have a few plays left to spur flagging job growth, but he also needs to more effectively persuade Americans that he can fix an economy that many think is stuck in a deep rut.

Opinion polls show an increasing number of Americans disapprove of his handling of the economy, the nation’s dominant concern with unemployment at 9.1 percent, which will be a defining factor in Obama’s 2012 re-election campaign.

Potential Republican challengers have seized upon this, trying to portray the president as a failure in his stewardship of the economy.

But Obama has not exhausted all options to accelerate growth. Successfully crafting a significant budget compromise to raise the country’s legal borrowing limit would help investor confidence, and might win him some political space to advance other measures to encourage hiring, such as a payroll tax cut for companies.

Getting Congress to approve three long-delayed free trade pacts with South Korea, Colombia and Panama would be a tangible achievement that could boost exports and could also improve strained relations with the business community.

Finally, a more effective effort to ease the housing foreclosure crisis -- which has so far defied the Obama administration’s aid attempts -- would attack a major obstacle to a durable recovery.

But the immediate dip in Democrat Obama’s approval ratings this week after a weak May jobs report exposes damaging skepticism over his stewardship of the economy.

He cannot afford to let this become a question of competency and must retool his economic message, although White House press secretary Jay Carney said on Thursday he did not expect the president to alter his approach.

“The president will get nowhere by telling the American people that the economy is better than they think it is,” said William Galston, a senior fellow at The Brookings Institution who advised former President Bill Clinton.

“He needs to set a tone of sober realism and bipartisanship,” Galston said.

PAYROLL TAX BREAKS UNDER REVIEW

Part of the president’s problem is that there are some things he cannot change. The United States suffered a severe recession caused by a financial crisis and these events have traditionally taken many years to heal.

“It takes a long time to turn the economy around and Obama has had very little honeymoon,” said Diana Owen, an associate professor of political science at Georgetown University. “People are looking for instant gratification and the media are seeking instant answers.”

That does not help the president, who has to run on his economic track record next year. Obama acknowledged on Tuesday Americans’ frustration over the economy.

He ruled out a double-dip recession during a press conference at the White House but said that hiring remained too weak. He also voiced interest in seeking bipartisan agreement to continue some of the steps taken last year.

A senior administration official said on Thursday that the White House was considering a temporary cut in payroll taxes that employers pay on wages.

At the press conference, Obama mentioned payroll tax holidays, extending unemployment benefits and an R&D tax break as initiatives that had helped the economy.

With Republicans controlling the House of Representatives, any action to aid the economy or tackle the deficit needs their support.

DEMOCRATS PRESSURE OBAMA

But Obama is also under pressure from within the Democratic establishment to do a better job of talking about the economy.

“Voters do not think anyone knows how to or has the will to solve America’s profound and persistent economic problems. Not the Democrats and certainly not the Republicans,” Democratic pollster Stanley Greenberg wrote.

However, hope has grown that talks led by Vice President Joe Biden may yield agreement on large spending cuts, phased in over time. Republicans and many Democrats say they will not agree lifting the United States’ $14.3 trillion borrowing limit without deep spending cuts.

If a big deal was struck, it could give Obama room to push for an extension of a measure like the payroll tax holiday because it would aid his credibility on deficit discipline.

Without that, advancing any measure to lift hiring that adds to the short-term deficit, as a payroll tax holiday would, is likely to be a nonstarter with Republicans.

Public anxiety over the country’s soaring deficit has sapped Obama’s approval rating, polls show, and this could also undermine the benefits of any additional fiscal stimulus.

People are less inclined to spend extra money that the government has put in their pockets if they think the country cannot afford it and it will lead to higher future taxes.

Nonetheless, with the economy flagging, the Obama administration has got to be seen to take action.

“They’re playing with a weaker hand now but I would advise them to play it anyway,” said Galston.

Editing by David Lawder

Our Standards:The Thomson Reuters Trust Principles.
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