Obama's Inauguration Present: The Economic Recovery Is Finally Here

President Obama will enjoy a much stronger economy during his second term.

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Call it the passive-aggressive economy.

When Congress pumped billions of dollars of stimulus spending into the economy, it sputtered and wheezed like a patient having a heart attack. Now that Congress is raising taxes and cutting back on stimulus measures, the economy seems more resilient than expected. For President Barack Obama, it could mean a much more durable economy over the next four years than he enjoyed in his first term.

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Toward the end of 2012, economists warned repeatedly that the fiscal-cliff standoff would harm economic growth and perhaps even cause a recession. The last-second solution avoided the worse possible outcome, but it still included tax hikes that will take money out of consumers' pockets, without addressing the looming crisis over the national debt.

Yet instead of tanking, the economy held up much better than expected given the dangerous game of chickenCongress and the president engaged in. Employers created 155,000 new jobs in December, maintaining the same pace of job creation established throughout 2012. Instead of plunging, the stock market drifted upward toward a five-year high, preventing many investors from taking advantage of a panicky selloff to buy stocks cheap, while hoping for a snapback once Congress got the message and did its job.

Economic growth is still weak, perhaps just 1.5 percent or so. But that's not bad considering that measures to address the federal deficit are now cutting into growth. Bank of America Merrill Lynch estimates that the fiscal-cliff deal negotiated at the start of the year will cut GDP growth by about 1.5 percentage points this year, with further spending cuts likely to cut it by another half-point. "This implies that absent the fiscal drag, we would be forecasting 3.5% growth," BofA said in a recent report. "This is actually quite positive."

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There's more good news from the housing market, where prices have bottomed out and the recovery seems to have legs. Long ones, perhaps. Homes sales are rising back toward more normal levels, and foreclosures have fallen to the lowest level since early 2007, according to RealtyTrac. Housing permits, which indicate plans for future construction, are at the highest level since 2008. That suggests lost construction jobs, one of the biggest contributors to high unemployment, will start to return in larger numbers.

Housing is key to a recovery, since it's usually the force that powers the economy out of a recession. Since a huge housing bust, fueled by excess debt, helped cause the recession in the first place, it has taken a lot longer for housing to bounce back this time. Now that a housing recovery has finally arrived, other sectors will benefit as well. Harvard's Joint Center for Housing Studies reports that a remodeling boomlet is well underway, for instance, which will boost sales of appliances and hardware and bring more work to contractors.

Other factors will mask an improving economy for at least the next few months, as Washington policymakers continue to battle over taxes and spending. Consumer confidence has dipped lately, since people are noticing that the end of a temporary cut in the payroll tax means more money is coming out of their paychecks. But there are concrete signs that the overall confidence trendline is moving higher. Auto sales ended 2012 strong, for instance, and most forecasters expect sales to keep climbing in 2013.

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Businesses have pulled back on spending too, since they're especially sensitive to bad policies in Washington that could torpedo the economy. And business spending may remain restrained until it's clear that Washington has resolved the standoff over raising the nation's borrowing limit and come up with some kind of plan to start addressing the $16 trillion national debt. If the political theatrics yield any breakthroughs this year, businesses might finally loosen up the purse strings.

Meanwhile, Europe may have put the worst of its own debt crisis behind it, China's growth is rebounding, and Japan's new prime minister is promising aggressive new policies to jolt his nation out of a two-decade slump. Americans should still expect an up-and-down economy in 2013, but the lows and highs may both be higher. It's about time.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.