President Barack Obama gets mediocre marks for his handling of the economy, and Mitt Romney easily outpolls his Republican rivals in an Associated Press survey of economists. The economy — and who bears responsibility for it — is likely to be a decisive issue when voters to go the polls next November.
The economy is still struggling to recover from the Great Recession of 2007-2009. The housing market remains weak, and a debt crisis in Europe threatens growth in 2012. The unemployment rate is at a recession-level 8.6 percent, up from 7.8 percent when Obama took office in January 2009. That month, the recession was already more than a year old. Half of the 36 economists who responded to the Dec. 14-20 AP survey rated Obama's economic policies "fair." And 13 called them "poor." Just five of the economists gave the president "good" marks. None rated him as "excellent."
The economists' criticisms vary. Some say Obama was distracted by his health care overhaul. Others say his $862 billion stimulus program was poorly designed. Still others fault him for not pushing for an even bigger stimulus when the economy proved weaker than expected.
The AP economists expect economic growth to pick up to 2.4 percent next year. That would be an improvement from the under-2 percent growth expected for 2011. But the economists foresee little improvement — a dip to 8.4 percent — in the unemployment rate by Election Day.
Asked which of the Republican presidential candidates would do the best job managing the economy, two thirds of the economists named Romney, one chose former House Speaker Newt Gingrich. The rest didn't pick anyone at all.
Allen Sinai, president of Decision Economics, says Romney, who ran a private equity firm before turning to politics, is the "hands down" choice among Republican presidential contenders squaring off in the Jan. 3 Iowa caucuses. "Romney's a technocrat," Sinai says. "He's not an ideologue. He has a history in the real world of business."
The Iowa presidential caucuses, which kick the GOP nominating process into high gear, begin Tuesday and polls show Romney in a strong position. Romney has based his campaign on the notion that he has the best chance of beating Obama on the economy because of his private sector experience.
Here's more about what the economists, mostly from banks and other financial firms, independent consultancies and academia, had to say about:
Some economists say the Obama administration didn't push hard enough for more government spending or tax cuts to stimulate growth. "They've generally tried to take the right kinds of measures but have often failed to lead with enough vigor to overcome political obstacles," said William Cheney, chief economist at John Hancock Financial Services.
Others say the president tried to do too much, especially by pushing early for legislation to overhaul the nation's health care system instead of focusing on policies to promote growth and create jobs. "Health care reform wasn't necessarily the most important thing to be dealing with when you're in the midst of the worst recession since the Great Depression," said Joel Naroff, president of Naroff Economics.
Some critics say Obama's 2009 stimulus program relied too much on public works projects that were slow to get going. Decision Economics' Sinai says the president should have favored more tax cuts that put money in Americans' pockets immediately.
Sinai notes that public works projects failed to pull Japan out of a long economic slump that began in the 1990s and continues today. After the money is spent, "you're left with deficits and debt. And someday if you need new government stimulus, you can't afford it. And that's where we are now," Sinai says.
Republican strategist Rich Galen says the GOP has successfully painted Obama as a reckless steward of taxpayer money: "In a Tea Party era where Big Government is the enemy, throwing money at problems is the enemy," he says.
An Associated Press-GfK poll of American adults earlier this month found that 60 percent of American adults disapprove of Obama's performance on economic issues.
Jamal Simmons, an adviser to the Obama campaign in 2008, said the president must remind voters how bad things were when he took office. The economy lost more than 820,000 the month Obama was sworn in, the biggest drop since October 1949.
Since the job market hit bottom in February 2010, it has produced nearly 2.5 million jobs — 117,000 a month. "Is it enough? Absolutely not, but it certainly ain't what it used to be," Simmons says. Perhaps Obama can take heart from President Ronald Reagan's experience. The unemployment rate was 8.5 percent — a tick away from where it was last month — a year before Reagan was re-elected in a 1984 landslide.
"You have to look at where you would have been if he hadn't gotten the stimulus package through," said Maury Harris, chief economist at UBS Securities. "We might be a lot worse off."
Many of those who chose Romney couldn't cite any of the former Massachusetts governor's economic proposals. Nevertheless, his background won over the economists. Romney graduated from Harvard Business School and served as CEO of Bain & Company, a management consulting business in Boston, and Bain Capital, a spinoff investment firm, in the 1980s and 90s. "He has the experience that the other candidates lack," says Harris of UBS Securities.
Some of his Republican rivals have taken unconventional positions. Texas Rep. Ron Paul advocates abolishing the Federal Reserve and returning to the gold standard. Texas Gov. Rick Perry has said it would be "almost treasonous" for Bernanke to try a third round of bond purchases to jolt the economy before November's election.
Among Romney's chief economic plans: repealing the Obama administration's health-care law; cutting the corporate tax rate from 35 percent to 25 percent; and making permanent tax cuts on dividends, interest and capital gains from President George W. Bush's administration. "He thinks about the economy in a more global way" than his GOP rivals, Naroff said. "He's not a rigid ideologue."
But Romney's business experience is also vulnerable to criticism. His Republican rivals have blasted him for profiting from putting companies through bankruptcy and laying off workers. "At a time when the American public is suspicious of corporate wealth and power, that could do real harm to Romney," Simmons says. The economists were not asked to evaluate Obama's economic policies against Romney's or any other Republican candidate.
The economists gave good marks to Federal Reserve Chairman Ben Bernanke: 13 rated Bernanke as excellent, 14 as good and nine as fair. He was praised for taking extraordinary steps to calm financial markets after the collapse of Lehman Bros. in 2008 and to jolt the weakest economy in 70 years. "He's been dealt a tough hand, but played it as well as anybody could," said Scott Brown, chief economist at Raymond James & Associates.
The economists praise Bernanke for his aggressive response to the financial crisis in the fall of 2008. He slashed short-term interest rates to zero, made loans to cash-strapped banks and bought Treasury and mortgage bonds to push down interest rates and calm financial markets.
"The Fed's response (to) the financial crisis and recession was dramatic and swift," said Sean Snaith, an economist at the University of Central Florida.
When the economy stalled in the second half of 2010, Bernanke launched another round of bond purchases to push long-term rates lower. He has sometimes had to overcome dissent from others on the Fed's rate-setting board. And Bernanke's Fed has had to take the lead in economic policymaking because Congress and the White House are so often ensnarled in partisan bickering.
Still, some economists say Bernanke's Fed has gone too far, that zero interest rates are hurting retirees and savers without delivering many economic benefits. "Perhaps the greatest criticism might be that the Federal Reserve has tried to do too much — trying to offset the impact of necessary budget cuts, European debt problems and other factors out of its control," said Lynn Reaser, chief economist at Point Loma Nazarene University.
AP Business Writer Daniel Wagner contributed to this report.