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Melody Barnes: We knew policies would be unpopular

October 5, 2010, 9:55 PM UTC

The White House domestic policy director defends the administration’s actions, saying the economy was worse than they knew at the time of the first stimulus.

By Tory Newmyer, writer

The question of whether the White House oversold its $814 billion economic stimulus package — and, more generally, overestimated the public appetite for spending — has become a prickly one for the administration. Republicans have co-opted the tea party crowd’s focus on deficits as a potent election-season attack line.

Melody Barnes, director of the White House Domestic Policy Council, offered a familiar defense of the Obama team’s performance at Fortune’s Most Powerful Women Conference on Tuesday. The economy that the administration inherited, she explained, was in even worse shape than they thought when the White House was forging the recovery package and making forecasts about its impact.

“When we walked in certainly the economic scenario was far worse than even we imagined,” Barnes told Fortune‘s Nina Easton. “So we did things that we knew would be tough, that we knew might be unpopular but we had to go forward and do them.”

The non-partisan fact-checking site PolitiFact backs the claim. Republicans have crowed about the White House’s argument at the time of its enactment that the package would keep unemployment below 8%. But the site notes that the report that made that prediction also projected that without the stimulus, the jobless rate would crest at about 9% — a mark it passed in the spring of 2009.

The administration’s attempts to reset expectations, based on an acknowledgment they understated the severity of the crisis, haven’t met with much success. A recent CBS News/New York Times poll found that 66% of respondents think the stimulus has either made things worse or had no impact. And Obama’s approval rating has been on a steady slide ever since unemployment topped 9%.

But Barnes made an optimistic case that popular support for the administration’s agenda is primed to turn, pointing to consumer-friendly portions of the health care overhaul that recently took effect. “When that really gets into the bloodstream, people will really recognize the advantages of health care reform,” she said. As a result, she said the Republican push to repeal the law or defund it if the party scores a Congressional takeover “will be very, very difficult to do.”

Meanwhile, on the jobs front, Barnes said the administration is focused on reinvigorating the educational system to prepare the next generation of workers and retrain older workers laid off in the recession. Obama has set a goal of graduating the world’s highest proportion of college graduates by the year 2020, she said, including an additional 5 million from community colleges. Community colleges are a “greatly used resource, but one that we on the national level really haven’t supported adequately.”