Obama struggles with task of fixing economy

There is increased focus on what Obama might do after Federal Reserve Chairman Ben Bernanke's speech last week in Jackson Hole, Wyoming. Bernanke said the Fed was ready to take further steps to help the economy but also acknowledged the options are limited with interest rates already ultra-low.

Galston said the “post-November” period could provide a chance for Democrats and Republicans to discuss steps that might get bipartisan support such as a payroll tax holiday and some tax breaks for business hiring.

But for now, the two political parties are miles apart on what should be done to help the economy, with Republicans labeling the US$814 billion stimulus package of 2009 a failure and lambasting his regulatory policies while some liberal economists are urging a new round of stimulus spending.

Departing White House economist Christina Romer provided fresh fodder for the debate with a speech on Wednesday in which she launched a vigorous defense of the stimulus.

Romer, who is stepping down on Friday as chairwoman of the White House Council of Economic Advisers, stopped short of calling for a second round of stimulus.

But many analysts said the remarks suggested she was sympathetic to calls for aggressive fiscal measures to bring down the jobless rate.

Romer said in her speech that concern about the U.S. budget deficit — which is projected to hit US$1.5 trillion this year — should not be an “excuse for leaving unemployed workers to suffer.”

But worries over the deficit are a constraint Obama will need to manage even after the elections.

“Among moderate and independent voters, deficit consciousness has surged over the past year and a half,” Galston said. “There is no chance a second large stimulus is going to be enacted — none.”

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