As we grind through another difficult economic year, it is fair to ask how much President Obama’s policies have helped, or not helped, in achieving a recovery.

No one can deny that President Obama faced a difficult economy when he was inaugurated in January 2009. The economy had been shaky all through 2008 and then a major financial collapse occurred in September of that year, leading to the TARP rescue package that was supported by both former President Bush and Democratic Congressional leaders. (TARP proved to be generally successful in shoring up financial institutions, although its extension to the automobile industry has been problematic.) When Mr. Obama took office, the country was in a clear recession, with growing unemployment and a weak stock market.

Mr. Obama’s initial effort to deal with the slowdown was to obtain the passage of a $787 billion stimulus bill, enacted on a mostly party line vote. Although the Administration claims that the stimulus saved or created millions of jobs, overall it cannot be viewed as a success. Unemployment actually exceeded the dire forecasts put out by stimulus supporters if the measure had not been enacted. Rather than providing work to the unemployed on new “shovel ready” jobs, stimulus funds went disproportionately to state and local governments to pay existing workers, frequently represented by powerful public sector unions. One can fairly ask whether another approach, like a payroll tax holiday, might have produced better results.

Although the Administration has made some efforts to ease the effects of rampant unemployment such as extending unemployment benefits and providing for subsidized COBRA medical coverage during unemployment, its major legislative thrusts have not been directly related to the jobs problem. Rather, the focus has been on big ticket expansion of government like health care reform, financial institution reform and a “cap and trade” energy bill. Budget deficits have soared under Mr. Obama and substantial increases in taxes on businesses and wealthy individuals are slated to take effect in 2011.

While private sector employment sagged, the public sector has done comparatively well, at all levels. Indeed, the center of federal authority, Washington, DC, has not been greatly affected by the recession. Unemployment in the DC metropolitan area is just above 6 percent, in comparison with the 9.5 percent national figure.

A major question is whether Obama Administration policies producing substantial increase in federal power and authority have scared away employers from job formation. In a recent speech, Verizon chief executive officer Ivan Seidenberg, chairman of the Business Roundtable, accused the Administration and Congressional Democrats of creating an “increasingly hostile environment for investment and job creation.” Mr. Seidenberg declared that, “we have reached a point where the negative effects of these policies are simply too significant to ignore. By reaching into virtually every sector of economic life, government is injecting uncertainty into the marketplace and making it harder to raise capital and create new businesses.”

There is a precedent for this problem. As Amity Shlaes shows in her excellent The Forgotten Man: A New History of the Great Depression (HarperCollins 2007), uncertainty about new regulation and a perception that the federal government was hostile to business and investment led to a “capital strike” in the late 1930s. Many businesses and investors preferred to sit on the sidelines than initiate new projects, greatly prolonging the Great Depression. Mr. Obama’s greatest challenge is to avoid a perception that his expansive view of the role of government is hostile to the job producing private sector investments that the country so desperately needs.