The slow pace of the nation's economic recovery has picked up a bit lately. In the third quarter, the economy grew at an annual rate of 2 percent, beating expectations and the dismal 1.3 percent growth in the second quarter. Over the past year, the growth rate has been 2.3 percent. At that pace, there's enough momentum to keep unemployment, currently 7.8 percent, from getting much worse, but not enough to spur big job gains.
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The growth figures, released on Friday by the Commerce Department, played right into the candidates' competing themes on the campaign trail, where President Obama has pointed to slow but steady economic recovery relative to the severe recession he inherited, while Mitt Romney has criticized growth of the past few years as unacceptably slow because of Mr. Obama's policies.
Mr. Obama has the stronger argument. The economy would have been much worse off without Obama administration policies like the stimulus and the auto industry rescue. And it would be much better off today if congressional Republicans had not obstructed subsequent stimulus proposals, most notably the administration's jobs bill introduced last year, which could have added an estimated 1.9 million jobs — and at least a percentage point to growth, according to many private-sector economic analyses.
And yet, even without that boost, there is some cause for optimism. Much of the improvement in the latest economic data is attributable to more consumer spending and a healthier housing market, two mainstays of a sustainable recovery. More domestic production of oil and gas helped, too, by reducing the need to spend on imports.
Growth was also bolstered by larger-than-expected outlays for defense spending, much of which simply represents a rebound from weaker-than-expected spending in previous quarters. More defense spending by itself is not a sign of a healthier economy, but its effect on growth is an important reminder that federal spending is vital to the economy, especially in times of slow growth.
As for drags on growth, there was a slowdown in exports last quarter, reflecting recession in Europe and slowing growth in China. That is a worry, but there is not much that American policy makers can do about that. Another drag on growth — a decrease in business investment — is more baffling. One popular interpretation is that businesses are beset by uncertainty over the year-end fiscal cliff, when huge federal spending cuts and tax increases are due to kick in unless Congress takes action to prevent them.
A more fundamental cause is that businesses are not sure that the economy's current growth can be sustained or accelerated. That goes beyond the fiscal cliff, to the role that government will play, if any, in the recovery next year and beyond. And that depends on who wins the election.
Mr. Obama has supported federal spending for more jobs. And he has done so while presenting a reasonable compromise for making progress on deficit reduction. That compromise would allow the Bush tax cuts to expire for the top 2 percent of households, while it would extend them for everyone else. This would raise needed revenues without imperiling the recovery, and could even provide resources for spending to create jobs. Mr. Romney, by contrast, wants more tax cuts that would worsen the deficit coupled with severe spending reductions.
With growth hanging in there around 2 percent, the economy clearly needs a push. Whether it gets one awaits the election.
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