Page last updated at 23:15 GMT, Tuesday, 28 April 2009 00:15 UK

Obama's first 100 days: The Economy

By Greg Wood
BBC News, New York

Tim Geithner and Barack Obama
Mr Obama was surprised by Mr Geithner's tax disclosure problems

You cannot accuse President Obama of lacking energy when it comes to economic policy.

But effectiveness is another matter.

His first 100 days contain at least one notable achievement - the $787bn (£539bn) stimulus plan.

The American Recovery and Reinvestment Act, to give it its proper title, was signed into law by the President less than a month after he took the oath of office.

It is the single biggest peacetime spending initiative in US history and was passed in record time.

But it failed to gain the bi-partisan support in Congress that President Obama was looking for and has become a rallying point for Republican opposition.

Rising unemployment

The administration claims that the Act is already having an impact, with the go-ahead given to numerous transport projects, such as road and bridge building. Money has also been used to save jobs in public services, like the police.

But evidence that it is making a big difference is lacking.

In the short term, the Act cannot reverse the recession; all it can do is cushion the impact of rising unemployment and lay the groundwork to support future growth.

The Act will also have one very serious negative effect.

It will add to the spiralling US budget deficit - forecast to hit a massive $1.75 trillion this year.

President Obama's first 100 days have been very mixed, with one notable achievement - the passing of the Recovery Act - but mistakes and muddled decision-making in other areas

The new administration has pledged to bring the budget back into balance once the economic crisis is over. But a record deficit is not an achievement President Obama would have wanted to mark his first year in office.

Far more problematical than the Recovery Act has been the new administration's handling of the Troubled Asset Relief Program (Tarp), the so-called Wall Street bailout.

After the previous administration changed its mind several times on how to use the Tarp, the financial markets were looking for decisiveness.

But Treasury Secretary Timothy Geithner's initial presentation to Congress was hesitant and lacking in detail, badly damaging his credibility during his first weeks in the job and even leading some to call for his resignation.

Geithner also managed to embarass the new President when it emerged that he had failed to pay more than $30,000 in back taxes. He apologised for his "careless mistake".

The new administration is experiencing real problems in filling other key positions at the Treasury, with two nominees for the job of Assistant Secretary dropping out. This left Timothy Geithner isolated, without the team in place that he needed to follow through his policies.

Tough stand

The second attempt at relaunching the Tarp - including the creation of private/public partnerships to buy up toxic assets from the banks - met with a more positive response from the financial markets.

But many within Congress still remain unhappy about it, claiming that the plan will leave US taxpayers with too much of the risk.

New GM vehicles sit on a lot at the GM plant in Lake Orion, Michigan
General Motors has had to submit new restructuring plans

As with the Recovery and Reinvestment Act, this part of the Tarp has yet to deliver results on the ground.

The jury is still out on Timothy Geithner.

Despite Wall Street's low reputation, it is still essential for any US Treasury Secretary to enjoy the confidence of the financial markets. He has yet to achieve that.

President Obama took a tough stand on the Detroit car makers, throwing out the original reconstruction plan submitted by General Motors and forcing the resignation of its chief executive, Rick Wagoner, prompting complaints that the government was interfering in the day-to-day running of the motor industry.

New plans have been submitted by GM and Chrysler to secure continued government aid.

But even if those plans are approved, there is no guarantee they can halt Detroit's long-term decline.

The biggest political row during the first 100 days was sparked by executive bonuses, especially those paid to senior managers at the insurance group AIG which had received a huge amount of taxpayers' money.

The administration pledged to pursue every legal avenue to block the bonuses. But the Treasury took the view that the payments had to be honoured because they were guaranteed by employment contracts.

That position angered many Democrats, who saw the payment of bonuses to those responsible for the financial meltdown as the ultimate symbol of Wall Street greed and cynicism.


Underlying all these issues has been the continued decline in the real economy.

The first few months of the administration have witnessed the biggest rise in the jobless total for a generation.

President Obama cannot be blamed for that. The causes of the current economic crisis lie some way in the past and more than $82bn from the Recovery and Reinvestment Act will go to help the unemployed and those on low incomes.

In terms of economic policy, President Obama's first 100 days have been very mixed, with one notable achievement - the passing of the Recovery Act - but mistakes and muddled decision-making in other areas.

That has been reflected in the reaction of the financial markets.

The Dow Jones Average has recovered from a severe dip in mid-March and returned to near its level on Inauguration Day, largely in response to the revised plan to relieve banks of their toxic assets.

But the message to President Obama on the economy, as he emerges from his first 100 days in office, is very clear.

People want to see results.

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