No other president in my lifetime entered office worrying about his legacy as much as Barack Obama. As his second term ends, I'll look back at his tenure and rate his legacy.
The financial crisis of 2008, also known as the Great Recession, was a terrible thing for most people but it helped President Obama in many ways.
The crisis itself was not very well understood. During the 2016 campaign, Hillary Clinton insisted that it was caused by the Bush tax cuts. Even the left-leaning fact checkers rated this one false. The reason for Hillary's prevarication is that the crisis had its roots in Bill Clinton's presidency. During that period, it was decided that increasing home ownership, especially among minorities, would be a good thing. As part of this, many of the qualifications to get a mortgage were eliminated. Previously you needed a large down-payment and the mortgage could be no more than 15%-20% of your income. That made it unlikely that you would default.
At the same time, a weak-dollar policy designed to reduce the trade deficit and historic-low inflation pushed mortgage rates to the lowest in generations. Variable-rate mortgages pushed the rates even lower. All of this created a housing boom. Rising home values allowed people to constantly refinance their house for more than they paid for it while keeping payments low. The Bush administration continued these policies.
All of these mortgages were used to create something new. They would be bundled together and sold as a package along with some insurance against default. With stocks and bonds paying so little because of the low interest rates, these financial instruments were the best way to get an easy return on investments.
The problem was that the whole thing was a house of cards that depended on rising housing values and those couldn't rise forever. That should have been obvious but people were making so much money on all levels that no one seriously questioned the bubble that they were creating.
The crash was inevitable but not the timing. This is where Obama had an amazing stroke of luck. The crisis hit after the conventions, just in time to derail Senator McCain's campaign as the voters blamed the Republicans. But the worst of it hit before Obama was sworn in. The parts where the world economy were in danger were handled by President Bush, who usually gets the blame for causing it but little credit for saving the world's economy. Many of the steps taken were unpopular, such as bailing out banks. Obama was there as Senator and president-elect and supported Bush's actions but was able to distance himself from it.
By the time Obama was sworn in, his main job was to not mess up the recovery. But that's not how he was received. People expected him to work miracles. Some (including New Your Times Columnists) called on him to suspend Congress for a year so he could just fix things from the way Bush messed them up.
Congress acted on a stimulus bill that was supposed to save the economy by financing "shovel-ready" jobs that were already planned but needed funding. These didn't really exist and most of the $700 billion went for a grab-bag of programs as well as for propping up cash-strapped states.
Obama also had a free hand to save GM and Chrysler. He did that by having them go through bankruptcy but, in what would become an Obama trademark, by ignoring bankruptcy laws and dividing GM up by executive fiat.
Obama moved to shore up the banks, forcing them to take funds so no one could tell which banks actually needed the money then telling them that "he owned them" and that he was all that stood between them and the crowd with pitchforks.
Obama also announced a program to help people who defaulted on their mortgages. This provoked a backlash by people who felt that Obama was rewarding those who broke the rules and ignoring the ones who followed by the rules. The backlash gave rise to the Tea Party.
After the 2010 election, the Republicans took back the House. There would be no second stimulus. Without that, Obama relied on the Federal Reserve which cut interest rates to as close to zero as is possible to get.
How did all of that work out? Not so well. The recovery was the slowest since the Great Depression. Years later the interest rates are still near-zero. Unemployment has dropped below 5% but the participation rate is the lowest ever and a large percentage of the workforce is under-employed. Given that the Fed is still keeping the economy on life-support, it can be argued that we never actually recovered at all.
It's quite possible that the underlying problem is increased regulation. This is the only recovery ever where increases in employment came from large businesses instead of small ones. The Obama administration has issued a record number of new regulations and those might be dragging down small business. Or it may be other factors. Regardless, Obama's claim that he saved the economy rings hollow to large sections of the economy.
As a final exercise, let's imagine what would have happened if the crash had come a year earlier or later to see why Obama was so lucky.
McCain seemed totally out of his depth when the crisis hit. Had it hit earlier, then either he'd have managed to come to terms with it or a different candidate would have won the nomination - possibly Mitt Romney. The shock of the hundreds of billions in bail-outs would have passed, too.
Obama may not have even managed to capture the nomination if the crisis had hit in 2007. Hillary Clinton was the presumed candidate and her message of returning to the prosperity of the Clinton years would have resonated. Obama was a dark horse until after Super Tuesday when he dominated the news by winning caucus after caucus, giving him a sense of inevitability. An earlier crisis may have crowded that out of the news.
Had Obama managed to overcome all of that, he still would have taken office well after the crisis was passed and the recovery had begun. He'd still have been able to take credit for it but he wouldn't have had the same urgency.
Think how much worse it would have been for Obama if the crisis had struck after he was in office. Just as many Democrats blame Bush for not stopping 9/11 (Michael Moore is still going on about it), many would have blamed Obama for not stopping the economic melt-down. Far from having people clamoring for him to save the economy, he'd be trying to cobble together the same bi-partisan group that Bush needed to save the economy. But, Bush was much better at bi-partisanship that Obama. Obama barely gets along with the Democrats in his party. He might not have been able to salvage things. Or he might not have been willing to rescue banks given his antipathy to the wealthy.
It's very likely that the country would have been willing to elect a turn-around artist in the 2012 election and elect Romney.
So, like I said, Obama was very lucky that the crisis hit exactly when it did.
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