The United States economy is increasingly the envy of a struggling world and President Barack Obama is in the early stages of a yearlong effort to grab credit for it and reverse persistently stagnant approval ratings as his tenure winds toward a close.

The economy created another 252,000 jobs in December, a record 58th straight month of private sector gains. The jobless rate dropped to 5.6 percent, nearly back to normal after peaking at 10 percent in October of 2009. And the economy turned in a robust 5 percent growth rate in the third quarter of last year.


But how much credit does the president actually deserve for all this?

After all, the $18 trillion U.S. economy is a massive beast that rises and falls on tectonic forces well beyond the reach of short-term Washington policy changes.

( POLITICO's State of the Union 2015 coverage)

Republicans say the economy is finally – and only partially – shaking off the impact of Obama policies like the Affordable Care Act, tax hikes and financial reform, all of which they contend slowed down growth. And they point to paltry wage gains once again evident in the December jobs report. Democrats say that’s sour grapes from partisans whose warnings of a disastrous “Obama economy” look increasingly ridiculous.

Economists – on the left and right and in the middle – say the facts suggest a vastly more complex middle ground. Obama deserves significant credit for some shrewd and politically difficult moves early on his presidency, economists say, including the stimulus and the automobile and Wall Street bailouts.

And he also gets mostly high marks for later efforts to defend the Federal Reserve’s independence while holding off Republican demands for more stringent austerity spending cuts of the type that helped drive Europe to the brink of economic disaster.

His efforts to revive the housing market get much more mixed reviews. As do his tepid efforts at pushing for any kind of real corporate tax reform that might have unleashed more capital spending. And he hardly emerged as the promised “repairer of the breach” capable of transcending the bitter partisan fights that knocked the economy badly off course in 2011 and 2012.

“Some of the early moves by the Obama administration clearly helped get us to where we are right now, especially the government being the spender of last resort after the crisis,” said Beth Ann Bovino, chief U.S. economist at Standard & Poor’s. “But the Federal Reserve also played a very big role. And this is also the natural shape of a slow recovery from a deep financial crisis and recession that is finally getting some traction.”

Early moves on stimulus, autos and Wall Street

It’s no coincidence that Obama began his latest economic road trip this week in Detroit, site of the resurgent auto industry, the most obvious area where Obama can claim credit for gains. “The auto industry has proved that any comeback is possible,” Obama said at a Ford plant near Detroit. “America’s resurgence is real.”

And by all accounts that is true for America’s carmakers, which sold 16.5 million new units in 2014, the highest number since pre-recession 2006. This is not all Obama, of course. Cheap gas and the natural economic cycle all play a big role. But Fiat-Chrysler reported a 16 percent sales jump, and it might not exist at all if Obama had not overruled some of his top advisors and pursued a bailout for the company. Obama offered some new details of that decision in an interview with the Detroit News earlier this week, saying Chrysler was the sickest of automakers and some in the administration thought it should be allowed to fail. The president disagreed.

“The Fiat proposal was plausible enough and the game plan they had for rebuilding Chrysler was sound enough and the workers in those Chrysler plants were hungry enough and dedicated enough that it was worth taking a bet on them and I’m glad we did,” Obama told the paper.

Even conservative economists have a hard time faulting the $80 billion auto-bailout, which wrapped up at the end of last year with a loss of around $9 billion for taxpayers but gains of hundreds of thousands of jobs and economic growth both directly at automobile companies and the scores of smaller manufacturers who supply them.

“If we don’t bail out the auto manufacturers you could argue we don’t get any of that growth,” said James Pethokoukis, an economic scholar at the conservative American Enterprise Institute.

Conservatives don’t talk that much about Obama’s “failed stimulus” anymore, with most mainstream economists crediting the $800 billion spending package with limiting the severity and duration of the downturn. The package still gets heavy criticism on the left for not being big enough. Many Obama loyalists agree with this critique in theory but say it was politically impossible to get any more money through Congress.

And they argue that when you include the extension of most of the George W. Bush era tax cuts in 2010 as well as credits for homebuyers and other efforts, the actual size of the stimulus was closer to $2 trillion.

Conservatives, meanwhile, shrug off the stimulus, saying it was standard issue recession-fighting policy that any president would have pursued. “I guess they can claim some credit for doing the obvious,” said Douglas Holtz-Eakin, an economist at the conservative American Action Forum and former advisor to John McCain’s presidential campaigns. “The real question is what else have they done since 2010 except complain that Republicans blocked everything they wanted to do? The Affordable Care Act was not pro-growth and neither was Dodd-Frank,” the 2010 financial reform law.

Holding the line on spending cuts

The counter to Holtz-Eakin’s argument offered by Democrats and many economists is that Obama shifted into an important defensive role after Republicans took the House in 2010, limiting the GOP’s ability to enact even larger spending cuts than the $900 billion over 10 years included in the 2011 “Budget Control Act” in return for a debt ceiling increase.

The prevailing economist view is that the spending cuts were ill-timed given the fragile nature of the recovery at the time. Europe’s experience with pursuing austerity spending cuts in the face of high deficits bears this argument out. Greece, after rounds of austerity, still may leave the euro zone, sparking possible crisis. And the continent is struggling with anemic growth and falling prices, a dangerous combination.

While the U.S. avoided even greater austerity, there is no question that the bitter fiscal fights that led to near-default and the first ever downgrade of the U.S. credit rating in 2011 and the “fiscal cliff” fight at the end of 2012 crushed business and consumer confidence and delayed the recovery. Democrats lay all the blame for this at the foot of Republicans. But economists outside Washington generally blame both the White House and Congressional Republicans for engaging in scorched earth political battle that damaged the economy.

“Business confidence basically tanked after all that and it’s taken a long time to come back and get capital spending started again,” said Bovino.

Obama, meanwhile, can also claim some credit for the rapid reduction in the size of annual budget deficits, though his more liberal supporters believe reducing deficits was the last thing the president should have been focused on. In addition to the spending cuts demanded by Republicans, Obama forced through increases in top level tax rates as part of the fiscal cliff deal at the beginning of 2013.

Those increases both failed to produce the economic disaster forecast by some Republicans while helping reduce the 2014 deficit to $483 billion, nearly a trillion dollars lower than the $1.4 trillion figure for 2009.

The national debt figure is now $18 trillion, compared with close to $11 trillion when Obama took office. And longer-term deficit figures are less rosy as neither Obama nor Congressional Republicans have done anything to address entitlement spending. But the debt itself began rising quickly before Obama took office. And annual deficits are expected to remain at reasonable levels as a percentage of the economy for years to come, well down from the nearly 10 percent of the economy they represented in 2009.

These figures are why Republicans are less focused on austerity spending cuts these days. Close observers noted that former Florida Governor Jeb Bush, in his newly launched political action committee web site, talked about growth and wages and jobs and barely mentioned spending cuts or taxes. Obama may have presided over the end of the age of austerity in the United States, a significant economic legacy.

Defending the Fed

Once Washington became almost totally dysfunctional on fiscal policy beginning in 2011, the Federal Reserve took over as an economic lifeline, with Chairman Ben Bernanke keeping interest rates essentially below zero and then pumping trillions of dollars into the economy through an unorthodox policy of “quantitative easing,” buying up giant piles of both government and private sector debt.

This helped drive money seeking higher returns into the stock market, igniting a bull run that has seen the Dow nearly triple from its recession low of 6,594.44 hit in Obama’s third month in office in 2009. The Dow closed Thursday at 17,907.87, not far off its all-time.

The Fed intervention was far from a perfect cure-all. It helped create enormous wealth for big shareholders but did not drive major corporate spending or push wages up much at all. The Fed did quickly drive unemployment down to near its target level.

But some of the gains came from people no longer looking for work. The labor force participation rate has dropped throughout Obama’s presidency and now stands at just 62.8 percent, the lowest level since 1978. Some of that is baby boomers retiring. But much is also frustrated workers either unable to find a job or unwilling to take a low-paying position. Republicans contend some refuse to work because Obama expanded safety net programs that can make collecting benefits preferable to taking minimum wage work. In addition, wages continue to grow at about 2 percent annually, basically zero when adjusted for inflation. This soft underbelly – flat wages and a shrinking labor force – is where Republicans will train their rhetorical and policy fire in Washington in 2015 and the presidential campaign trail in 2016.

But while the Fed’s efforts have not solved the economy’s problems, they almost certainly prevented a much worse recession. Europe lacked a similarly activist central bank and is now in far worse shape.

And Obama supporters say the president deserves some of the credit for standing behind Bernanke despite heavy criticism from the right – and some from the left – that his policies would devalue the dollar and drive up inflation. None of that happened. Obama re-nominated Bernanke, a Republican, in 2009 and helped surround the central bank chairman with mostly like-minded fellow governors. And after flirting with former Treasury Secretary Larry Summers, Obama nominated Bernanke’s preferred successor, then-vice chair Janet Yellen, in 2013. Yellen has continued Bernanke’s policies to widespread praise from economists and Wall Street.

Obama backers say history will remember him for helping insure that the Fed could take over when the rest of the federal government abdicated economic policy-making.

“He nominated these people to the Fed and then he protected them once they were there and he made sure Bernanke had allies,” said Austan Goolsbee, a University of Chicago professor who served as top Obama economic advisor until 2011. Goolsbee noted that no president can flip a switch and drive a faster economy. But he suggested Obama can legitimately take some credit.

“Most of what happens in the economy has nothing to do with Washington, 90 percent of it has nothing to do with Washington,” Goolsbee said. “But there are some things that are not crazy for him to take some credit for including manufacturing, holding off more austerity and defending the Fed.”

Falling short on housing

It’s also no accident that Obama’s second economic event this week focused on yet another effort to try and jump start the sluggish housing market. One of the biggest critiques of the administration is that while it vigorously pursued a $700 billion bailout of Wall Street it did significantly less to aid struggling home-owners after the housing bubble popped.

White House defenders say getting people to take advantage of the various mortgage assistance programs was difficult, as was deciding who was worthy of assistance and who was not. Still, critics on the left and right note that the administration’s mortgage refinance programs only directly helped a few million homeowners and did not fully address the foreclosure crisis.

And Obama’s proposal in Phoenix on Thursday was also quite modest, just a 0.5 percent cut to federal mortgage insurance premiums, enough to put an extra $900 or so a year in the pockets of people with qualifying mortgages. Meanwhile, Obama never got behind any one effort to reform housing finance giants Fannie Mae and Freddie Mac in a way that might have transformed the government’s now dominant role in the housing sector while bringing private capital back in and reducing the risk of future taxpayer bailouts. And the housing market itself has been a laggard in the current recovery.

The country is now generating around 500,000 new households per year, well below the 1 million rate that would indicate a strong housing market. Home prices are well off their recession lows but far below their pre-crisis highs in many markets. Housing starts actually fell in November of last year. Economists keep calling for the housing market to improve and boost economic growth but it has not really happened yet.

“This recovery has been weaker because housing has been on the sidelines,” said Holtz-Eakin. “And that’s unique to this downturn.”

The Obama counter to this is that the administration made a conscious decision early on not to try and re-inflate a housing bubble as a way to jump start the economy. Instead, they hoped to transition the economy away from such major boom and bust cycles. “Housing is not playing that great a role in this recovery and that’s actually want we want,” said Goolsbee.

Looking ahead

Obama’s final event of his economic road trip this week will be to promote a new plan to work with states to make the first two years of community college free for qualifying students. Obama plans to outline the program at Pellissippi State Community College in Knoxville, Tenn. It is clearly aimed at one of the big remaining hurdles for the White House to boost its economic legacy: get workers trained for higher paying technical jobs that will drive faster growth, new home formation and a less hollowed-out economy in the coming years.

The program does not yet have a price tag and the GOP Congress could quickly dismiss it. But the fact that the White House is even proposing the plan suggests Obama is ready to jettison caution about proposing significant new spending programs.

And part of that confidence comes from the improved economic and deficit numbers of the last several years and the political benefit that is already coming the White House’s way in terms of rising poll numbers. Those poll numbers should continue to rise if the economic numbers keep coming in strong. Because presidents tend to get most of the credit for a rising economy, whether they deserve it or not.

“We tend to personify economies based on who is in the White House even though there is so much else going on,” said Pethokoukis. “And that’s why Republicans are going to have to have an agenda that’s less about Obama and more about the everyday lives of middle class and working class Americans.”