Commentary Magazine


America’s Version of Japan’s Lost Decade

Much of the political world is atwitter about Sarah Palin’s bus tour. They need not be. She won’t run for president; and if she does, she won’t win the GOP nomination. Republicans want to win the presidency in 2012, and Sarah Palin simply cannot do that.

The more politically significant news is the more politically prosaic news. The American economy continues to flat line. We’ve seen that in the most recent housing data, which confirms a double-dip in home prices across much of the nation. The ownership rate, which peaked at almost 70 percent during the Bush presidency, is now at 66.4 percent, the lowest since the late 1990s. Some housing experts are predicting the level could drop to that of the 1980s or even earlier.

Not surprisingly, Americans are losing faith in the economy. The Conference Board’s Consumer Confidence Index fell to 60.8 from a revised 66 in April. It was the lowest reading since November. As a reference point, a reading of 90 indicates a healthy economy.

And as the Wall Street Journal points out, a growing number of forecasters are downgrading their second-quarter growth predictions. JPMorgan Chase & Co. economists revised down their estimate to a 2.5 percent from 3 percent while Bank of America Merrill Lynch economists cut theirs to 2 percent from 2.8 percent. Deutsche Bank cut its forecast to 3.2 percent from 3.7 percent. The Journal interviews economists about the specter of what it calls a “chronic growth problem.”

“We keep expecting the economy to perform along norms that are very difficult to achieve when you have this much private debt and public debt,” Carmen Reinhart, an economist at the Peterson Institute for International Economics, tells the Journal. She believes the U.S. could be in for a protracted period of subpar growth and high unemployment.

Barack Obama remains caught in a potentially lethal political tractor beam. And if a year from now the economy is in essentially the same condition as it now—and as it has been for more or less the entirely of the Obama presidency—the president will be the easiest incumbent to beat since 1980.

Obama is presiding over America’s version of Japan’s Lost Decade. That makes him not only beatable, but extraordinarily vulnerable.