SCENARIOS-Obama sees stimulus vindication in GDP data

WASHINGTON, July 31 Sat Aug 1, 2009 1:10am IST

WASHINGTON, July 31 (Reuters) - President Barack Obama jumped on better-than-expected U.S. economic figures on Friday as a sign that his stimulus package had paid off -- but he is far from free of the financial crisis.

* Gross domestic product numbers showing that the economy shrank modestly in the second quarter -- and contracted more than originally reported in the first quarter -- gave Obama a respite, at least temporarily, from criticism that expensive programs to rescue auto companies, safeguard the financial system and jump-start job growth were not having the promised effect. GDP measures total goods and services output within U.S. borders.

* Respite or not, Obama is still on the defensive. His proposed $1 trillion overhaul of the U.S. healthcare system faces battles in both the Senate and the House of Representatives. Opinion polls show Americans losing confidence in his ability to improve the system. Obama's emphasis on the economy in remarks on Friday gave him a chance to switch the focus from the struggling healthcare legislation to a topic that had at least a glimmer of good news. But the healthcare issue will not go away.

* Critics say that despite the second quarter GDP figures worsening jobless figures proved that the stimulus package had not lived up to its promises. "The president said rush and spend it; pass it, we'll hold unemployment to 8 percent, but now it's pretty clear we're going to 10 (percent)," said Senate Republican leader Mitch McConnell through a spokesman. "By any measurable index, the stimulus package has been a failure."

* The Democratic president acknowledged that jobless figures would continue to rise. "As far as I'm concerned, we won't have a recovery as long as we keep losing jobs," Obama said. "And I will not rest until every American who wants a job can find one."

* Economists expect third quarter GDP to show modest growth. (Additional reporting by Ross Colvin and Steve Holland; Editing by Will Dunham)

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