Commentary Magazine


Topic: economy

The GDP Report

The Commerce Department this morning gave a reading on the third-quarter 2012 Gross Domestic Product—the sum of goods and services produced in the United States. GDP climbed 2 percent (on an annualized basis) in July, August, and September, slightly above the predictions of economists. This was an improvement on the dismal 1.3 percent growth the economy saw in the second quarter, but still a long way from the sort of robust recovery that is needed to significantly bring down the unemployment rate and restore a sense of prosperity to the country.

Much of the growth was in consumer spending, especially for durable goods (such as automobiles, refrigerators, etc.), which saw growth at 8.5 percent. But business investment remained weak, with fixed investments (buildings and equipment, for instance) actually declining 1.3 percent after climbing 3.6 percent in the second quarter.  This might reflect caution ahead of the election and fear that the “fiscal cliff” of tax hikes and government spending cuts due January 1 might actually come to pass. Most economists think that that would send the economy right back into full-blown recession.

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The Commerce Department this morning gave a reading on the third-quarter 2012 Gross Domestic Product—the sum of goods and services produced in the United States. GDP climbed 2 percent (on an annualized basis) in July, August, and September, slightly above the predictions of economists. This was an improvement on the dismal 1.3 percent growth the economy saw in the second quarter, but still a long way from the sort of robust recovery that is needed to significantly bring down the unemployment rate and restore a sense of prosperity to the country.

Much of the growth was in consumer spending, especially for durable goods (such as automobiles, refrigerators, etc.), which saw growth at 8.5 percent. But business investment remained weak, with fixed investments (buildings and equipment, for instance) actually declining 1.3 percent after climbing 3.6 percent in the second quarter.  This might reflect caution ahead of the election and fear that the “fiscal cliff” of tax hikes and government spending cuts due January 1 might actually come to pass. Most economists think that that would send the economy right back into full-blown recession.

Exports shrank, reflecting the deepening economic problems in Europe. Imports also fell, but at a lower rate. Federal government spending also accelerated in the quarter.

This isn’t a game-changer in the election by any manner of means. Everyone knows the economic recovery, which began in June 2009, four months into Obama’s term, has been anemic at best, so this report is just a continuation of the status quo. The jobs report due out next Friday might be more significant as it could show a rise in unemployment, correcting the anomalous October jobs report that showed an unexpected .3 percent drop in unemployment. If unemployment were to rise above 8 percent again, just four days before the election, that would be very bad news for President Obama.

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On Economic Issues, Romney Wins Big

The post-debate polls taken last night seemed to more or less line up with the conventional wisdom forming on social media: President Obama won a narrow victory over Mitt Romney, helped late by escaping the Libya question—thought to be his Achilles’ heel—when Romney dropped the ball.

But that Libya exchange—in which moderator Candy Crowley intervened on Obama’s behalf and only afterwards seemed to realize that she had been wrong on the facts—also revealed the flip side of Romney’s lack of focus on Benghazi: his fluency and preparation for questions on the economy, and Romney’s continuing bet that the economy will overshadow the other issues in voters’ minds. Polls back this up, and the post-debate polls seemed to as well. While both the CNN and CBS polls gave Obama a hard-fought win on points, respondents to both polls gave Romney the win on the economy by wide margins. CBS reports:

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The post-debate polls taken last night seemed to more or less line up with the conventional wisdom forming on social media: President Obama won a narrow victory over Mitt Romney, helped late by escaping the Libya question—thought to be his Achilles’ heel—when Romney dropped the ball.

But that Libya exchange—in which moderator Candy Crowley intervened on Obama’s behalf and only afterwards seemed to realize that she had been wrong on the facts—also revealed the flip side of Romney’s lack of focus on Benghazi: his fluency and preparation for questions on the economy, and Romney’s continuing bet that the economy will overshadow the other issues in voters’ minds. Polls back this up, and the post-debate polls seemed to as well. While both the CNN and CBS polls gave Obama a hard-fought win on points, respondents to both polls gave Romney the win on the economy by wide margins. CBS reports:

Moments following the debate at Hofstra University in Hempstead, N.Y., 37 percent of voters polled said the president won, 30 percent awarded the victory to Romney, and 33 percent called it a tie. After some particularly animated exchanges between the two candidates, 55 percent of voters said Mr. Obama gave direct answers, but 49 percent also said that about Romney.

As for who would do a better job of handling the economy, the president made some headway on closing that gap. Before the debate, 71 percent said they believed Romney would, while only 27 percent said they thought Obama would; after the debate, 34 percent said the president would better handle the economy, with 65 percent saying Romney would.

And here’s CNN’s write-up of its in-house poll:

According to the survey, Obama had a 47%-41% edge on which candidate was more likeable. But on some key issues, Romney came out on top, including an 18-point lead on the economy.

“Mitt Romney was seen as better able to handle the economy, taxes, and the budget deficit among the debate audience, but it seems that issues were trumped, or at least blunted, by intangibles, including the expectations game,” says CNN Polling Director Keating Holland.

Obama’s victory on the “intangibles,” such as expectations and demeanor, should not be dismissed. Those are often what people remember most about debates. Additionally, a major goal for Obama was to fire up the base. They were despondent after the first presidential debate because of the old adage about parties: when the host no longer appears to be having fun, it’s time to go. But if Obama was able to inject some enthusiasm into his party faithful last night, he’ll take it.

Yet it must be acknowledged that in the voting booth, it’s probably a safer bet that intangibles won’t drown out issues. Romney has raised his favorability ratings and made himself seem judicious and presidential, so voters will probably consider this election as one between two plausible presidents. In such a case, it really does come down to issues.

Should Obama be concerned that he got flattened on the economy even in a debate in which he eked out a narrow victory? If the electorate thinks Obama is marginally more likable than Romney, but wildly inferior to Romney on the issue that determines most presidential elections and is expected to determine this one as well, how would such voters cast their ballots?

Additionally, the CNN pollster says Obama won last night in part by beating expectations. That amounts to: The president wasn’t nearly as terrible as he has been or as awful as voters expected him to be. That’s not a ringing vote of confidence; it’s a condescending pat on the shoulder.

CNN’s pollster also says Romney was better on taxes—there goes one of the pillars of Obama’s yearlong attack on Romney. Obama ran on cutting the deficit—he called George W. Bush “unpatriotic” for running up deficits that Obama is only rapidly adding to—and voters give Romney the edge there too. Obama hopes to gain some momentum after last night, but a campaign betting on a minor lead on “intangibles” suggests a campaign still spinning its wheels.

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Obama’s Teflon Coating Will Be Tested

It is telling that our expectations are so low these days that the latest dismal jobs report issued by the U.S. Labor Department is being viewed with some relief. It noted that the economy had added 114,000 jobs in September. That is, we are told, not so bad because that is around the figure most economists projected, even though it is below the total that is generally considered the number needed to account for normal population growth. The drop in the unemployment rate to the lowest point in the Obama presidency should not deceive us, because it is clear that many people have simply given up looking for work during what is the worst economic recovery since the Great Depression. Though President Obama may choose to highlight the 24th straight month with job growth since the end of the recession he inherited from his predecessor, with 12.1 million Americans still unemployed, a drop in the number of manufacturing jobs and temporary employment, we may be closer to the next Great Recession than to genuine recovery.

This is hardly the sort of situation that would normally bode well for the re-election of any incumbent president. Yet since President Obama’s poll numbers went up rather than down after an even worse report last month, it would be foolish to assume these discoursing numbers will hurt him. Earlier this week, I referred to Obama as the real Teflon president, since neither the recent revelation about his past use of racial incitement nor the security screw up in Libya (and the subsequent lies about it from the White House) or even a bad economy seemed to be enough to dent his standing in the polls. Yet all it takes to burst a balloon is one sharp jab. After the president’s awful performance in the debate with Mitt Romney on Wednesday, it could be that Americans will start to view the president’s litany of disasters with less equanimity than before.

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It is telling that our expectations are so low these days that the latest dismal jobs report issued by the U.S. Labor Department is being viewed with some relief. It noted that the economy had added 114,000 jobs in September. That is, we are told, not so bad because that is around the figure most economists projected, even though it is below the total that is generally considered the number needed to account for normal population growth. The drop in the unemployment rate to the lowest point in the Obama presidency should not deceive us, because it is clear that many people have simply given up looking for work during what is the worst economic recovery since the Great Depression. Though President Obama may choose to highlight the 24th straight month with job growth since the end of the recession he inherited from his predecessor, with 12.1 million Americans still unemployed, a drop in the number of manufacturing jobs and temporary employment, we may be closer to the next Great Recession than to genuine recovery.

This is hardly the sort of situation that would normally bode well for the re-election of any incumbent president. Yet since President Obama’s poll numbers went up rather than down after an even worse report last month, it would be foolish to assume these discoursing numbers will hurt him. Earlier this week, I referred to Obama as the real Teflon president, since neither the recent revelation about his past use of racial incitement nor the security screw up in Libya (and the subsequent lies about it from the White House) or even a bad economy seemed to be enough to dent his standing in the polls. Yet all it takes to burst a balloon is one sharp jab. After the president’s awful performance in the debate with Mitt Romney on Wednesday, it could be that Americans will start to view the president’s litany of disasters with less equanimity than before.

One bad debate will not alter the fact that the president still appears to be able to defy the laws of political gravity. It has long been apparent that his historic status as the first African-American president and the adulation that he has received from much of the public as well as an adoring press means that the rules that constrain other politicians do not apply to him.

But the debate told us a great deal about the president. It wasn’t just that he was off his game that night, but that the contemptuous manner with which he approached the ritual of asking the people to re-elect him revealed a side of his character that some Americans had not previously noticed. He behaved as if the whole exercise was beneath his dignity and that he didn’t need to bother presenting a reasonable defense of his policies and actions. The fact that his challenger showed himself to be far more able than he had been given credit for also altered the nature of the contest.

What we will discover in the coming days and weeks is if the debate turns out to be the sharp jab that will finally start to let some of the air out of the president’s hot air balloon. If Americans begin to think a bit differently about the man they elevated to the White House in the expectation that his hope and change mantra would transform the nation, then it is possible that many of the flaws that have been either forgiven or ignored will start to impact his standing in the polls. It may be that nothing will ever really scrape the Teflon coating off of the president, in which case he will be re-elected no matter what happens to the economy–including the growing prospect of a new recession in his second term that will be difficult to blame on George W Bush. But it could also be that what happened this week is the start of a process during which the rules of political gravity will start to bring the messiah of 2008 back to earth.

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The Jobs Report

The number of jobs increased an anemic 114,000 (with the numbers for both July and August revised upwards). The labor force participation rate barely ticked up, from 63.5 percent to 63.6. That’s still a dismal number. Long-term unemployment (over 27 weeks) edged up to 40.1 percent of the unemployed.

This year has seen an average job growth of 143,000 per month. In 2011 it was 153,000. But the number that will be in the headlines is 7.8 percent.

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The number of jobs increased an anemic 114,000 (with the numbers for both July and August revised upwards). The labor force participation rate barely ticked up, from 63.5 percent to 63.6. That’s still a dismal number. Long-term unemployment (over 27 weeks) edged up to 40.1 percent of the unemployed.

This year has seen an average job growth of 143,000 per month. In 2011 it was 153,000. But the number that will be in the headlines is 7.8 percent.

That’s the unemployment rate for September, down fully three-tenths of a percent from August and the first time it has been under 8 percent since Obama took office in January 2009, when it was 7.6 percent; 7.8 percent is also, presumably coincidentally, the unemployment rate when Ronald Reagan was re-elected in 1984 (although the rate was falling fast that year), the highest unemployment rate at which a president was re-elected since FDR. It’s also the biggest monthly decline since January 2011, although economists (who had been predicting job growth of 118,000, pretty close to the actual number) had been predicting no change at all.

The White House is happy this morning.

 

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Get Ready for Obama’s Great Recession

As John Steele Gordon rightly points out, Ben Bernanke’s latest attempt to bail out a failing economy by manipulating interest rates isn’t likely to be met with any more success than his first two tries. Some Democrats may think the Federal Reserve’s decision to print more money will inflate the economy enough to get President Obama re-elected. The assumption is that it will cause a rise in the stock market that will be interpreted as a sign that the recovery has finally succeeded. However, the result of another dose of inflationary economics, compounded by growing debt, unemployment and less than 2 percent growth may be another recession that will come on the heels of the current anemic recovery.

The constant refrain coming from the administration and its defenders has been that a change of course away from the president’s reliance on trying to spend our way out of the economic ditch would be a return to the failed Republican policies of the past that created the problem in the first place. But as James Pethokoukis writes at the American Enterprise Institute blog, it is cheap money and too much debt that caused the so-called Great Recession that the president inherits. That recession ended in the summer of 2009. It was followed by a recovery for which the president once took credit. But the feeble nature of that revival is something he still blames on his predecessor. Thanks to the continuation of the spending and debt binge that took place over the last four years, the country may soon be faced with another Great Recession no matter who wins in November. But it is not likely that most Americans will be willing to blame that one on George W. Bush.

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As John Steele Gordon rightly points out, Ben Bernanke’s latest attempt to bail out a failing economy by manipulating interest rates isn’t likely to be met with any more success than his first two tries. Some Democrats may think the Federal Reserve’s decision to print more money will inflate the economy enough to get President Obama re-elected. The assumption is that it will cause a rise in the stock market that will be interpreted as a sign that the recovery has finally succeeded. However, the result of another dose of inflationary economics, compounded by growing debt, unemployment and less than 2 percent growth may be another recession that will come on the heels of the current anemic recovery.

The constant refrain coming from the administration and its defenders has been that a change of course away from the president’s reliance on trying to spend our way out of the economic ditch would be a return to the failed Republican policies of the past that created the problem in the first place. But as James Pethokoukis writes at the American Enterprise Institute blog, it is cheap money and too much debt that caused the so-called Great Recession that the president inherits. That recession ended in the summer of 2009. It was followed by a recovery for which the president once took credit. But the feeble nature of that revival is something he still blames on his predecessor. Thanks to the continuation of the spending and debt binge that took place over the last four years, the country may soon be faced with another Great Recession no matter who wins in November. But it is not likely that most Americans will be willing to blame that one on George W. Bush.

Bernanke’s third chorus of interest rate cuts is a last-ditch attempt to save Obama’s recovery. But we may look back on it next year as the moment when the next Great Recession became inevitable. In the long run, only a program that aims to reform our out-of-control spending, tax cuts to fuel real economic growth and to create wealth, and sound money policies from the Fed will create a genuine recovery.

But a steady diet of more spending, debt and cheap money has set the stage for a transition from a weak recovery to another collapse. Indeed, the bad employment numbers show that the recovery never reached some sectors of the economy or the army of unemployed Americans. That means that for many Americans the downturn we may have to face next year will feel more like the tail end of a double dip recession than a fresh downturn.

President Obama is hoping Bernanke’s latest stunt will give him the boost he needs to stay ahead of Mitt Romney in the final weeks of the campaign. But the long-term impact of the Fed chairman’s QE3 may merely pave the path for a poor economy that will make a second term a misery for both Obama and the American people.

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Re: The Jobs Numbers

The White House spins today’s grim August jobs report (which John Steele Gordon details below), calling it “further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression”:

While there is more work that remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression. It is critical that we continue the policies that are building an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007. To create more jobs in particularly hard-hit sectors, President Obama continues to support the elements of the American Jobs Act that have not yet passed, including further investment in infrastructure to rebuild our Nation’s ports, roads and highways, and assistance to State and local governments to prevent layoffs and to enable them to rehire hundreds of thousands of teachers and first responders. To build on the progress of the last few years, President Obama has also proposed an extension of middle class tax cuts that would prevent the typical middle class family from facing a $2,200 tax increase next year.

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The White House spins today’s grim August jobs report (which John Steele Gordon details below), calling it “further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression”:

While there is more work that remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression. It is critical that we continue the policies that are building an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007. To create more jobs in particularly hard-hit sectors, President Obama continues to support the elements of the American Jobs Act that have not yet passed, including further investment in infrastructure to rebuild our Nation’s ports, roads and highways, and assistance to State and local governments to prevent layoffs and to enable them to rehire hundreds of thousands of teachers and first responders. To build on the progress of the last few years, President Obama has also proposed an extension of middle class tax cuts that would prevent the typical middle class family from facing a $2,200 tax increase next year.

At the AEI blog, James Pethokoukis cites a far less optimistic take from Citigroup:

The unemployment rate dropped to 8.1% from 8.3%, but in this case with declines in both the labor force (-368,000) and the household-survey measure of employment (-119,000). With labor force participation falling back to a new cycle low of 63.5%, the drop in the unemployment rate should not be reported as good news.

Pethokoukis adds:

This was not the employment report either American workers or the Obama campaign were hoping for. A huge miss. It shows the U.S. labor market remains in a deep depression, generating few jobs and little if no income growth.

No amount of spin from the White House or Obama campaign can put a happy face on these numbers. While the unemployment rate dipped from 8.3 percent in July to 8.1 percent, Pethokoukis notes that the unemployment rate would actually be 8.4 percent if workforce participation had remained steady from July. The fact that many unemployed Americans have given up looking for jobs over the past month is obviously a distressing sign, even though it may have made the unemployment rate look modestly better on the surface.

Meanwhile, the Romney campaign jumped on the numbers this morning to contrast them with the positive recovery rhetoric from the Democratic National Convention: “If last night was the party, this morning is the hangover.”

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The Jobs Numbers

The official unemployment rate fell two-tenths of a percentage point in August to 8.1 percent. That’s the good news. The rest isn’t so great.

Only a net of 96,000 jobs were created in August, way below what is needed to bring down the unemployment rate long term. And the numbers for both June and July were revised downwards. (June was down from 64,000 jobs created to 45,000, July from 163,000 to 141,000). The percentage of the population in the labor force continued to decline (to a dismal 58.3 percent), 5 million people have been unemployed for more than 27 weeks, 40 percent of the total unemployed. Involuntary part-time workers remains at 8 million.

All in all, the sluggish recovery continues sluggishly at best. These numbers cannot make the Obama campaign very happy the morning after the candidate’s big night in Charlotte. They powerfully reinforce the idea that Obama just hasn’t gotten the job done in the last three and a half years and that perhaps Clint Eastwood is right: if a public servant isn’t performing you have to let him go.

 

The official unemployment rate fell two-tenths of a percentage point in August to 8.1 percent. That’s the good news. The rest isn’t so great.

Only a net of 96,000 jobs were created in August, way below what is needed to bring down the unemployment rate long term. And the numbers for both June and July were revised downwards. (June was down from 64,000 jobs created to 45,000, July from 163,000 to 141,000). The percentage of the population in the labor force continued to decline (to a dismal 58.3 percent), 5 million people have been unemployed for more than 27 weeks, 40 percent of the total unemployed. Involuntary part-time workers remains at 8 million.

All in all, the sluggish recovery continues sluggishly at best. These numbers cannot make the Obama campaign very happy the morning after the candidate’s big night in Charlotte. They powerfully reinforce the idea that Obama just hasn’t gotten the job done in the last three and a half years and that perhaps Clint Eastwood is right: if a public servant isn’t performing you have to let him go.

 

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Tapper: Why is WH Ignoring the Economy?

ABC’s Jake Tapper has been trying his best to get the White House to comment on the issues the public cares about — namely, the economy — but it’s been an uphill battle so far. At the WH press briefing today, Tapper pressed Jay Carney on why Obama hasn’t mentioned yesterday’s troubling CBO report:

ABC’s Jake Tapper: “The Congressional Budget Office report is a pretty dire warning about what this nation faces, yet I didn’t hear the president mention it yesterday, is there a reason why?”

White House Spokesman Jay Carney: “Well I think I put out a statement which is the White House’s view and the president’s view. The president talks every day that he’s out there, as he was yesterday, about what we need to do to help build our economy, help it to continue to grow, help it to continue to create jobs and yesterday, and the day before, he was focusing on the need to continue investments in education because he firmly believes that education is a matter of our economy, it’s an economic issue.”

Tapper: That’s not what the Congressional Budget Office was addressing, they were talking about … The president talked about education, he talked about Todd Akin, he talked about Michael Jordan, he talked about a lot of—

Carney dodged it, responding with a few boilerplate sentences on Obama’s “balanced approach” to the “fiscal challenges.” But it’s a question that should be put to the White House over and over again. Why won’t the Obama campaign talk about the economy? More importantly, why does the White House press corps — Tapper and some others excluded — allow Obama to get away with it?

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ABC’s Jake Tapper has been trying his best to get the White House to comment on the issues the public cares about — namely, the economy — but it’s been an uphill battle so far. At the WH press briefing today, Tapper pressed Jay Carney on why Obama hasn’t mentioned yesterday’s troubling CBO report:

ABC’s Jake Tapper: “The Congressional Budget Office report is a pretty dire warning about what this nation faces, yet I didn’t hear the president mention it yesterday, is there a reason why?”

White House Spokesman Jay Carney: “Well I think I put out a statement which is the White House’s view and the president’s view. The president talks every day that he’s out there, as he was yesterday, about what we need to do to help build our economy, help it to continue to grow, help it to continue to create jobs and yesterday, and the day before, he was focusing on the need to continue investments in education because he firmly believes that education is a matter of our economy, it’s an economic issue.”

Tapper: That’s not what the Congressional Budget Office was addressing, they were talking about … The president talked about education, he talked about Todd Akin, he talked about Michael Jordan, he talked about a lot of—

Carney dodged it, responding with a few boilerplate sentences on Obama’s “balanced approach” to the “fiscal challenges.” But it’s a question that should be put to the White House over and over again. Why won’t the Obama campaign talk about the economy? More importantly, why does the White House press corps — Tapper and some others excluded — allow Obama to get away with it?

The advent of online media was supposed to increase competition and improve reporting. Instead, some reporters seem so hooked on getting their six or seven scoops a day from their campaign sources that they end up acting as stenographers for newsmakers instead of challenging them. Maybe it’s because journalists are time-crunched, or maybe it’s because they don’t want their access to dry up, or maybe it’s because economic stories don’t bring in the web hits. But the speed at which the media jumps from distraction to distraction is disappointing.

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It’s Paul Krugman on Line Two, Calling With More Free Advice

At the London Review of Books, of all places, Christian Lorentzen has a less-than-admiring portrait of Paul Krugman, who was in London in May plugging his latest book. Krugman went on the BBC’s “Hardtalk” to take questions from journalist Sarah Montague:

A strange theatre ensues whenever Krugman is engaged by a journalist rather than a peer with similar expertise or a politician with actual if undeserved authority. The journalist reminds him of the people who’ve dismissed his ideas and he just shakes his head and says these Very Serious People are wrong. When the journalist goes the other way and flatters him, his ego creeps out:

Montague: If you were advising the Greek government now, what would you say to them?

Krugman: Ah well, you know, I’ve actually had conversations, not with them, but you know, with European politicians.

Montague: With whom?

Krugman: Um, I can’t tell you that.

Montague: But has there been a European government that’s asked for your advice?

Krugman: No, no, I’ve just had conversations.

His face takes on a pained expression, he stammers, puts his finger to his cheek, and for a moment shuts his eyes. You get the sense he’s thinking, why am I not in charge? There’s something sad about the spectacle.

It is, as James Taranto might say, the sad spectacle of a former Enron adviser.

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At the London Review of Books, of all places, Christian Lorentzen has a less-than-admiring portrait of Paul Krugman, who was in London in May plugging his latest book. Krugman went on the BBC’s “Hardtalk” to take questions from journalist Sarah Montague:

A strange theatre ensues whenever Krugman is engaged by a journalist rather than a peer with similar expertise or a politician with actual if undeserved authority. The journalist reminds him of the people who’ve dismissed his ideas and he just shakes his head and says these Very Serious People are wrong. When the journalist goes the other way and flatters him, his ego creeps out:

Montague: If you were advising the Greek government now, what would you say to them?

Krugman: Ah well, you know, I’ve actually had conversations, not with them, but you know, with European politicians.

Montague: With whom?

Krugman: Um, I can’t tell you that.

Montague: But has there been a European government that’s asked for your advice?

Krugman: No, no, I’ve just had conversations.

His face takes on a pained expression, he stammers, puts his finger to his cheek, and for a moment shuts his eyes. You get the sense he’s thinking, why am I not in charge? There’s something sad about the spectacle.

It is, as James Taranto might say, the sad spectacle of a former Enron adviser.

Krugman went on another show to argue against Jon Moulton, chairman of Better Capital, and Andrea Leadsom, a Tory MP and former banker. Lorentzen recounts the following exchange:

“I find his view reckless, frankly,” Leadsom said, “I can’t believe that somebody as incredibly highly regarded as you could honestly think that the answer is to go and borrow more money.” Krugman told her she was confusing an economy with a household.

Late yesterday afternoon, Krugman posted a mini-classic of Krugmanesque analysis on his New York Times blog. It seems “totally obvious to me,” he wrote, that economists and Fed officials are making erroneous assumptions “without realizing it.” They’re making “exactly the same mistake” he demonstrated in 1998 with a chart. We should “pursue unconventional policies on a sufficient scale,” by which I think he means going out and borrowing a lot more money: totally obvious to him.

Back in Europe, a lot of countries are learning that the comparison of a country’s budget to that of a household is not quite as irrelevant as Krugman suggested. In fact, for some of them, the analogy may now be totally obvious.

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Poll: ObamaCare Hurts Economy

It’s still a bit early to say how much of an impact the Supreme Court decision will have on the public opinion on ObamaCare in general. So far, it hasn’t seemed to have had much effect, though it wouldn’t be a surprise if it ended up swaying some people — softening some opponents, energizing others.

But Americans are adamant about the negative impact ObamaCare will have on the economy, the top issue for voters. Gallup has the latest today:

Americans are more likely to say the 2010 healthcare law upheld by the Supreme Court last week will hurt the national economy (46 percent) rather than help it (37 percent), while 18 percent say they don’t know or that it will have no effect. …

Average Americans are certainly in no better position than economists to know exactly how the legislation will affect the economy, but their assumptions and perceptions have political repercussions nevertheless. And at this point, Americans’ views on the economic impact of the ACA are more negative than positive.

Views of the economic impact of the ACA are, as is true with everything else about the legislation, bound up with politics. Republicans, who generally oppose the ACA, overwhelmingly think it will hurt the economy, while Democrats, who generally favor it, think it will help. Independents tilt toward the “hurt” rather than the “help” position.

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It’s still a bit early to say how much of an impact the Supreme Court decision will have on the public opinion on ObamaCare in general. So far, it hasn’t seemed to have had much effect, though it wouldn’t be a surprise if it ended up swaying some people — softening some opponents, energizing others.

But Americans are adamant about the negative impact ObamaCare will have on the economy, the top issue for voters. Gallup has the latest today:

Americans are more likely to say the 2010 healthcare law upheld by the Supreme Court last week will hurt the national economy (46 percent) rather than help it (37 percent), while 18 percent say they don’t know or that it will have no effect. …

Average Americans are certainly in no better position than economists to know exactly how the legislation will affect the economy, but their assumptions and perceptions have political repercussions nevertheless. And at this point, Americans’ views on the economic impact of the ACA are more negative than positive.

Views of the economic impact of the ACA are, as is true with everything else about the legislation, bound up with politics. Republicans, who generally oppose the ACA, overwhelmingly think it will hurt the economy, while Democrats, who generally favor it, think it will help. Independents tilt toward the “hurt” rather than the “help” position.

The fact that the mandate is now a “tax” isn’t going to help in this area, which makes you wonder again how the Romney campaign managed to step on that message so badly. Independents are clearly receptive to the economic impact argument, which makes Obama’s comments yesterday about “moving on” from the health care debate seem even more tone deaf. This isn’t partisan criticism. These are legitimate concerns from independent voters, and the president comes off as out of touch by dismissing them outright.

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Economic Forecast Bleak for Obama’s Recovery Bus Tour

The Hill reports President Obama will kick off his jobs-focused “Betting on America” bus tour this week, an odd choice of timing considering the dreary economic news out today and the likelihood of another bad jobs report on Friday. The real question is whether Obama will at least use an American-built bus this time around?

President Obama’s campaign is tagging his two-day bus trip in the Midwest later this week the “Betting on America” tour, an opportunity for the campaign to push its economic message against Mitt Romney in two key swing states.

In a statement released Tuesday, the campaign said the president intended to “talk about his efforts over the last three years to get our economy back on track, doubling down on American workers by saving the auto industry, investing in manufacturing and bringing jobs back to America,” as he travels through northern Ohio and western Pennsylvania.

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The Hill reports President Obama will kick off his jobs-focused “Betting on America” bus tour this week, an odd choice of timing considering the dreary economic news out today and the likelihood of another bad jobs report on Friday. The real question is whether Obama will at least use an American-built bus this time around?

President Obama’s campaign is tagging his two-day bus trip in the Midwest later this week the “Betting on America” tour, an opportunity for the campaign to push its economic message against Mitt Romney in two key swing states.

In a statement released Tuesday, the campaign said the president intended to “talk about his efforts over the last three years to get our economy back on track, doubling down on American workers by saving the auto industry, investing in manufacturing and bringing jobs back to America,” as he travels through northern Ohio and western Pennsylvania.

Manufacturing activity dropped in June for the first time in three years, an indication of economic downturn, according to Reuters. Obama is planning a protectionist message for his tour, emphasizing the outsourcing of jobs at Romney’s Bain Capital. Many of Obama’s claims are unsubstantiated; FactCheck.org found no evidence that Romney shipped American jobs overseas during his tenure at Bain. But even the false attacks won’t change the fact that the economic outlook dropped to a new low this month, or change the jobs numbers later this week, via Gallup:

Both components of the index — Americans’ ratings of current economic conditions and their perceptions of whether the economy is getting better or getting worse — declined slightly in June. The -18 economic outlook rating reflects 38 percent of Americans saying the economy is improving and 56 percent saying it is getting worse. At the same time, 15 percent of Americans say the economy is in excellent or good shape, while 41 percent consider it poor, resulting in a -26 current conditions rating.

Americans’ economic outlook in June averaged lower than in any month since January, while their rating of current conditions remained in the narrow range between -28 and -23 seen since March.

The protectionist message could be effective in states like Ohio and Pennsylvania, but voters are already pessimistic about the direction of the economy and understand the problem is about much more than job outsourcing. If Obama’s message comes off as out-of-touch or an attempt to shift blame, it could actually end up backfiring.

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Romney’s Hispanic Outreach Ad

Specifically, Romney’s new ad focuses on the disproportionate impact the economic downturn has had on the Hispanic community. Eleven percent are unemployed, compared with around eight percent for the public at large (h/t Dan Halper):

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Specifically, Romney’s new ad focuses on the disproportionate impact the economic downturn has had on the Hispanic community. Eleven percent are unemployed, compared with around eight percent for the public at large (h/t Dan Halper):

The Romney camp clearly hopes it can win over Hispanic voters with its economic message, and for good reason. Hispanic voters consistently cite jobs and the economy as their top election concerns, despite the political emphasis on immigration. But that doesn’t mean the Romney campaign can solely rely on economic issues to woo Hispanic voters and avoid coming up with a clear and consistent message on immigration.

Read Ruben Navarette on Romney’s stilted immigration outreach today. Navarette, as usual, makes good points. It’s a contradiction for the Romney camp to blast Obama about his new deportation guidelines, and then act as if immigration is not a key issue for Hispanics when faced with questions about Romney’s own proposed policies.

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Obama Needs an Elevator Pitch

As tech savvy and streamlined as the Obama campaign wants to depict itself, its reelection message is remarkably clunky. Take the candidates’ dueling economic speeches today. Romney kept his to a concise 20 minutes. Obama’s dragged on for nearly an entire excruciating hour.

At the beginning of his speech, Obama told us the election would be about the fundamental differences between his economic vision and Romney’s. Then he rephrased this same idea about a dozen different times, just to make sure we all got it. Then he droned on about the origins of the economic crisis, veered off into Bush-blaming, threw in a class warfare interlude and rambled for awhile about how the recovery is moving in the right direction.

Finally — 40 minutes after the cable news stations cut him off and the committed political junkies were forced to switch to C-SPAN — Obama circled back to the original point about his economic vision. I think. In the daze of boredom, it was hard to tell.

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As tech savvy and streamlined as the Obama campaign wants to depict itself, its reelection message is remarkably clunky. Take the candidates’ dueling economic speeches today. Romney kept his to a concise 20 minutes. Obama’s dragged on for nearly an entire excruciating hour.

At the beginning of his speech, Obama told us the election would be about the fundamental differences between his economic vision and Romney’s. Then he rephrased this same idea about a dozen different times, just to make sure we all got it. Then he droned on about the origins of the economic crisis, veered off into Bush-blaming, threw in a class warfare interlude and rambled for awhile about how the recovery is moving in the right direction.

Finally — 40 minutes after the cable news stations cut him off and the committed political junkies were forced to switch to C-SPAN — Obama circled back to the original point about his economic vision. I think. In the daze of boredom, it was hard to tell.

We already knew Obama was long-winded. But his overly-complicated reelection message actually necessitates these sort of brutally long, technical, lawyerly speeches — and that’s a big problem when his opponent has what amounts to a straightforward elevator pitch.

Obama’s message requires him to juggle several arguments. First, that his predecessor is solely to blame for the economic problems, and that experts did not realize how extensive the crisis was when Obama first took office. Second, that Obama’s policies put the economy back on the path to recovery, but were not extensive enough. Third, that the recovery is lagging because of Republican obstructionism and global events out of his control. Fourth is that, if reelected, Obama will be able to overcome the gridlock and put policies in place that will speed the recovery.

And he needs to persuade the public to believe all of that.

The fourth argument is the one Obama would be smart to focus on, but as we saw from his speech today, it’s the one he’s giving the least attention to. If Obama is persistent, he may be able to convince the American people that the stalled recovery isn’t due to his own incompetence. But they want to hear what he is going to do about it, and why his second term policies would be more effective than his first term policies.

Romney’s message, in contrast, is straightforward: Obama had his chance and failed. If you give me a chance, I will succeed.

The first part of that is self-evident. The economy has not recovered, and the recovery is lagging. Even top Democrats will admit that. All Romney needs to worry about is convincing voters on the second point. Instead of mocking the GOP for having a message that can “fit in a Tweet,” Obama would be better off taking a lesson from it: Keep it simple.

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Clinton Advises Americans to Vote Against Obama (sort of)

As Alana noted earlier, back in September 2010, former President Bill Clinton – in making what at the time seemed like an effective case for Democrats – said this:

And [Republicans] say [Democrats] had 21 months, put us back in. The Democrats are saying something like this: Look, we found a big hole that we did not dig, and we didn’t get out of it in 21 months, but at least we quit digging. So, so, so, don’t go back in reverse. Give us two more years. If it doesn’t work you have another election in just two years, you can vote us all out then. But for goodness sakes, we quit digging don’t bring back the shovel brigade.

Here’s the thing, though: that “other election” isn’t just two years away any more. It’s now less than five months away. And I for one believe the standard set out by Bill Clinton is an entirely reasonable one. We’ve given the president 21 additional months to turn things around. And guess what? It’s still not working.

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As Alana noted earlier, back in September 2010, former President Bill Clinton – in making what at the time seemed like an effective case for Democrats – said this:

And [Republicans] say [Democrats] had 21 months, put us back in. The Democrats are saying something like this: Look, we found a big hole that we did not dig, and we didn’t get out of it in 21 months, but at least we quit digging. So, so, so, don’t go back in reverse. Give us two more years. If it doesn’t work you have another election in just two years, you can vote us all out then. But for goodness sakes, we quit digging don’t bring back the shovel brigade.

Here’s the thing, though: that “other election” isn’t just two years away any more. It’s now less than five months away. And I for one believe the standard set out by Bill Clinton is an entirely reasonable one. We’ve given the president 21 additional months to turn things around. And guess what? It’s still not working.

This year’s first quarter growth rate was downgraded to 1.9 percent. The most recent jobs report was dismal (in May we gained less than 70,000 new jobs, while the jobs reports in March and April were revised downward). Long-term unemployment increased from 5.1 million to 5.4 million. The average work week fell to 34.4 hours. And new orders for factory goods fell in April for the third time in four months as demand slipped for everything from cars and machinery to computers, indicating alarming weakness in a sector that has carried the economic recovery, such as it is.

If we pull back the lens a bit, we find that Americans have experienced 40 consecutive months of unemployment above 8 percent, the longest such stretch since the Great Depression. (If the work force participation rate today was what it was when Obama was sworn in, the unemployment rate would be right around 11 percent.) That Obama is overseeing the weakest recovery on record. That he’s on track to have the worst jobs record of any president in the modern era. That the standard of living for Americans has fallen more dramatically during his presidency than during any since the government began recording it five decades ago. That home values are nearly 35 percent lower than they were five years ago. That we’re seeing a record number of home foreclosures. That a record number of Americans are now living in poverty. That a record 46.4 million Americans are receiving food stamps. And that under Obama’s watch, health care premiums have gone up significantly.

Based on the counsel of America’s 42nd president, then, we should –  in the name of accountability and under the banner of meritocracy – vote Barack Obama and members of his party out of office. That, at least, is the indisputable logic of the Democratic party’s most politically successful president since FDR.

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Clinton in ’10: Vote Dems Out if Economy Doesn’t Rebound

Bill Clinton may be shaping up to be the worst surrogate of all time. Not only has he pummeled President Obama’s campaign’s economic message in present time, he also managed to plant this ticking time bomb back in 2010 (h/t Joe Schoffstall):

And [Republicans] say [Democrats] had 21 months, put us back in. The Democrats are saying something like this: Look, we found a big hole that we did not dig, and we didn’t get out of it in 21 months, but at least we quit digging. So, don’t go back in reverse, give us two more years and if it doesn’t work you have another election in just two years, you can vote us all out then. But for goodness sakes, we quit digging, don’t bring back the shovel brigade.”

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Bill Clinton may be shaping up to be the worst surrogate of all time. Not only has he pummeled President Obama’s campaign’s economic message in present time, he also managed to plant this ticking time bomb back in 2010 (h/t Joe Schoffstall):

And [Republicans] say [Democrats] had 21 months, put us back in. The Democrats are saying something like this: Look, we found a big hole that we did not dig, and we didn’t get out of it in 21 months, but at least we quit digging. So, don’t go back in reverse, give us two more years and if it doesn’t work you have another election in just two years, you can vote us all out then. But for goodness sakes, we quit digging, don’t bring back the shovel brigade.”

Clinton made this comment the September before the 2010 midterm elections, so the argument from Democrats will probably be that the economic recovery was set back after the obstructionist Republicans took back the House. Still, the GOP will more than likely hold onto the House even if Obama wins reelection, so what message does that send the public? If Obama is basically conceding that he can’t reboot the economy as long as there’s divided control of Congress, then he’s pretty much saying that the next two-to-four years of his second term would bring no progress either. Considering that Obama ran in 2008 as a bipartisan uniter, that’s an interesting case to make.

Clinton’s line is attack ad gold for the GOP. If they pair it with Obama’s “one-term proposition” comments, it will be doubly brutal.

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President’s Plea for Mulligan Won’t Work

There’s little doubt the main obstacle to President Obama’s re-election is the country’s sinking economy. But in his scheduled major address on the subject in Ohio tomorrow, he is, as Reuters reports, “not likely to unveil new ideas to boost the economy and create new jobs, according to Democrats familiar with the preparations for the address.” That means the president will be returning to a familiar theme: blame it all on George W. Bush and plea for more time to fix things. While that may have seemed a reasonable position to take early in his administration, to say that this is an uninspiring campaign theme after three and a half years in office is an understatement.

Re-election campaigns can hinge on one of two themes: a referendum on the president’s record or one on the challenger’s unsuitability for high office. While the White House would like to make this election all about Mitt Romney and the Republicans, so far their efforts to demonize his business career or the GOP via the bogus “war on women” theme hasn’t worked. And with the latest economic statistics showing little sign of a genuine recovery, that leaves the Democrats with very little to say, especially because the president’s signature legislative achievements in health care and the stimulus are deeply unpopular. That’s the conceit behind his expected appeal for a “reset” on the economy. With no record to run on and an opponent who is demonstrating greater strength than expected, all the president can do is ask the public to give him an “incomplete” on his transcript and grant him another four years to complete the course. But a third straight summer of economic bad news requires a better answer than a request for a presidential mulligan.

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There’s little doubt the main obstacle to President Obama’s re-election is the country’s sinking economy. But in his scheduled major address on the subject in Ohio tomorrow, he is, as Reuters reports, “not likely to unveil new ideas to boost the economy and create new jobs, according to Democrats familiar with the preparations for the address.” That means the president will be returning to a familiar theme: blame it all on George W. Bush and plea for more time to fix things. While that may have seemed a reasonable position to take early in his administration, to say that this is an uninspiring campaign theme after three and a half years in office is an understatement.

Re-election campaigns can hinge on one of two themes: a referendum on the president’s record or one on the challenger’s unsuitability for high office. While the White House would like to make this election all about Mitt Romney and the Republicans, so far their efforts to demonize his business career or the GOP via the bogus “war on women” theme hasn’t worked. And with the latest economic statistics showing little sign of a genuine recovery, that leaves the Democrats with very little to say, especially because the president’s signature legislative achievements in health care and the stimulus are deeply unpopular. That’s the conceit behind his expected appeal for a “reset” on the economy. With no record to run on and an opponent who is demonstrating greater strength than expected, all the president can do is ask the public to give him an “incomplete” on his transcript and grant him another four years to complete the course. But a third straight summer of economic bad news requires a better answer than a request for a presidential mulligan.

The president’s advisers may be only playing the cards they have left in their hands, but even they must find it hard to believe that the public is willing to accept this sort of alibi. Fairly or unfairly, George W. Bush is still deeply unpopular and Congress is widely despised by the public. But presidents are judged on their own records, not those of their opponents. Though Democrats are still trying to convince themselves that Romney can be branded as an extremist, they know better than that by now. Indeed, for all of his shortcomings, the GOP standard bearer’s one great strength is his economic expertise. That means the president must present the voters with a more convincing rationale for a second term than a request for more time to finish the test.

The president may have inherited a difficult economy, but after a full term in office, the electorate expects the man in the White House to do more than point fingers at his predecessor or Congress. But the problem here is that the president and his inner circle are still so caught up in his historic status and the messianic hopes he engendered in his supporters that they believe the normal rules of politics don’t apply to them. Any other politician might think he needed to do more than just ask for a do-over, especially because President Obama needs to avoid a discussion of whether the American people are better off today than they were four years ago.

It is no small irony that a man who was swept into the White House by a belief that he would transcend partisanship and usher in a new age of positive hope-based politics is now left with nothing to say but to speak ill of his opponents. Though the president still has many advantages including his historic status and a very friendly mainstream media, he appears to be stuck with a message that would, were it articulated by a lesser office-holder, be instantly labeled a loser. Unless the president comes up with something better, his re-election campaign may start to resemble the economy that he failed to fix.

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Obama’s Economic Plans Lag with Voters

At first glance, the ABC News/Washington Post poll appears to show equally bad news for both Romney’s and Obama’s economic plans:

More than half of independents, 54 percent, say they see the president’s economic plan negatively, while just 38 percent say they consider Obama’s proposals in a positive light. For Romney, 47 percent rate his plans unfavorably, versus 35 percent who rank his proposals positively.

While more independents are undecided about Romney’s plans, giving the Republican challenger more room to attract support, the former Massachusetts governor is also likely benefiting from the fact that more conservatives identify themselves as independents than do liberals. Among self-described moderates, the president’s economic plan is actually favored, 48-46 percent, while Romney’s plan shows a 37-47 percent deficit.

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At first glance, the ABC News/Washington Post poll appears to show equally bad news for both Romney’s and Obama’s economic plans:

More than half of independents, 54 percent, say they see the president’s economic plan negatively, while just 38 percent say they consider Obama’s proposals in a positive light. For Romney, 47 percent rate his plans unfavorably, versus 35 percent who rank his proposals positively.

While more independents are undecided about Romney’s plans, giving the Republican challenger more room to attract support, the former Massachusetts governor is also likely benefiting from the fact that more conservatives identify themselves as independents than do liberals. Among self-described moderates, the president’s economic plan is actually favored, 48-46 percent, while Romney’s plan shows a 37-47 percent deficit.

But when you take a closer inspection, the news here is far worse for Obama than it is for Romney. For one, there are more respondents who are undecided on Romney’s plan, giving him more room to maneuver. Also note that Romney’s plan is less popular with conservatives than Obama’s is with liberals — but we can assume those conservatives would still be more inclined to support Romney over Obama at the polls.

Obama’s economic plan, meanwhile, receives poor marks from precisely the groups he needs to win over — middle-income Americans making $50,000 to $100,000 per year:

Romney lags among moderates, and does less well among conservatives than Obama does among liberals. But the president’s economic plans are underwater among middle- to upper-middle-income Americans, while Romney manages an even split in this group. And Obama’s economic program is especially unpopular – by 2 to 1 among whites, though he does far better than Romney among nonwhites.

Obama also lags with registered voters and independents:

Obama also crosses the 50 percent negative line among registered voters, who see his economic program unfavorably rather than favorably by 51-43 percent. Romney’s rating among registered voters is 46 to 40 percent unfavorable-favorable, again with more undecided.

Obama’s challenges vs. Romney show more starkly when two of the president’s weaker groups are combined – independents who are registered to vote. In this group, more see Obama’s economic plans unfavorably than favorably by 56-36 percent; on Romney’s it’s 45-39 percent.

No wonder the Obama campaign is aggressively trying to reframe the narrative on his economic plan. It may be too late to convince voters to support his proposals, but he still has a chance to turn the undecided ones against Romney’s plan.

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“Feel Your Pain” Strategy Won’t Work

Democratic strategists Stanley Greenberg, James Carville and Erica Seifert issued a new memo late yesterday, warning the Obama campaign that its current strategy is doomed to fail. And they seem right about one thing: the Obama campaign is going to have a hard time convincing the public that the economy is on the path to recovery, especially with greater economic pitfalls looming.

The strategists argue that the Obama campaign should forget trying to make the case that the president’s economic policies are working. Instead, it should focus on its support and empathy for the middle class, and highlight how Mitt Romney’s policies would leave struggling Americans vulnerable during tough economic times:

It is elites who are creating a conventional wisdom that an incumbent president must run on his economic performance – and therefore must convince voters that things are moving in the right direction. They are wrong, and that will fail. The voters are very sophisticated about the character of the economy; they know who is mainly responsible for what went wrong and they are hungry to hear the president talk about the future. They know we are in a new normal where life is a struggle – and convincing them that things are good enough for those who have found jobs is a fool’s errand. They want to know the plans for making things better in a serious way – not just focused on finishing up the work of the recovery. …

But we underscore the sentiment they expressed in the postcards to the president they wrote at the end of the exercise: overwhelmingly, these voters want to know that he understands the struggle of working families and has plans to make things better.

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Democratic strategists Stanley Greenberg, James Carville and Erica Seifert issued a new memo late yesterday, warning the Obama campaign that its current strategy is doomed to fail. And they seem right about one thing: the Obama campaign is going to have a hard time convincing the public that the economy is on the path to recovery, especially with greater economic pitfalls looming.

The strategists argue that the Obama campaign should forget trying to make the case that the president’s economic policies are working. Instead, it should focus on its support and empathy for the middle class, and highlight how Mitt Romney’s policies would leave struggling Americans vulnerable during tough economic times:

It is elites who are creating a conventional wisdom that an incumbent president must run on his economic performance – and therefore must convince voters that things are moving in the right direction. They are wrong, and that will fail. The voters are very sophisticated about the character of the economy; they know who is mainly responsible for what went wrong and they are hungry to hear the president talk about the future. They know we are in a new normal where life is a struggle – and convincing them that things are good enough for those who have found jobs is a fool’s errand. They want to know the plans for making things better in a serious way – not just focused on finishing up the work of the recovery. …

But we underscore the sentiment they expressed in the postcards to the president they wrote at the end of the exercise: overwhelmingly, these voters want to know that he understands the struggle of working families and has plans to make things better.

This is the opposite of “hope and change.” The message proposed in the memo is inherently pessimistic: Economic struggle is the new normal. You need to be protected from it. President Obama will provide a safety net, while Mitt Romney will not.

It’s also inherently reactionary: Mitt Romney wants to bring change. His reforms pose a risk to your social welfare programs during dangerous economic times.

Carville, Greenberg, and the gang seem to want Obama to channel Clinton’s “I feel your pain” message. But there are a few problems. First, Obama isn’t Clinton when it comes to personal connection with voters. The focus group members in this memo wanted to know that Obama empathizes with them. But Obama has played plenty of lip service to the concerns of the middle class during the past year. If the public is wondering whether he understands their pain, that seems to suggest a deeper connection problem. Why aren’t they already convinced?

Second, focusing on empathy seems like it would be less effective for an incumbent, particularly one whose policies have utterly failed to revive the economy. Romney has a clean rebuttal: Obama may feel your pain, but what has he done about it? Maybe the president sympathizes with you in a campaign speech, but at the end of the day, where is he? Jetting off to fundraisers, with rich people and celebrities.

And when Obama had a chance to help you, what did he do? He pushed through ObamaCare, which will rack up more debt and kill more jobs. And he jammed through a failed stimulus, stuffed with billions in funding for pet projects. He might feel your pain, but he clearly has no clue what to do about it.

Sure, the economy may tank and we may be teetering on a fiscal cliff — but at least Obama will be there to hold your hand when we finally step over the edge.

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For Obama, the Context is the Killer

According to David Axelrod and White House press secretary Jay Carney, the controversy about President Obama’s comment on Friday that “the private sector is doing fine” is a manufactured one. Obama’s comments were taken out of context, his top aides insist.

Nice try, but here’s what the president said in context:

The truth of the matter is that, as I said, we’ve created 4.3 million jobs over the last 27 months, over 800,000 just this year alone. The private sector is doing fine. Where we’re seeing weaknesses in our economy have to do with state and local government—oftentimes, cuts initiated by governors or mayors who are not getting the kind of help that they have in the past from the federal government and who don’t have the same kind of flexibility as the federal government in dealing with fewer revenues coming in. And so, if Republicans want to be helpful, if they really want to move forward and put people back to work, what they should be thinking about is, how do we help state and local governments and how do we help the construction industry.

What the president is arguing, then, isn’t simply that the private sector is doing fine; he’s also making the case that the federal government right now is not spending enough, that it’s too frugal, that our trillion-dollar-a-year-deficit is evidence of parsimony, and that creating post-World War II records in federal spending as a percentage of GDP, the federal debt as a percentage of GDP, and the budget deficit as a percentage of GDP hasn’t quite satisfied his spending ambitions. By his own logic, President Obama believes the path to prosperity is for the federal government to spend more, and more, and more – and that the GOP, if it was a responsible political party, would help him do just that.

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According to David Axelrod and White House press secretary Jay Carney, the controversy about President Obama’s comment on Friday that “the private sector is doing fine” is a manufactured one. Obama’s comments were taken out of context, his top aides insist.

Nice try, but here’s what the president said in context:

The truth of the matter is that, as I said, we’ve created 4.3 million jobs over the last 27 months, over 800,000 just this year alone. The private sector is doing fine. Where we’re seeing weaknesses in our economy have to do with state and local government—oftentimes, cuts initiated by governors or mayors who are not getting the kind of help that they have in the past from the federal government and who don’t have the same kind of flexibility as the federal government in dealing with fewer revenues coming in. And so, if Republicans want to be helpful, if they really want to move forward and put people back to work, what they should be thinking about is, how do we help state and local governments and how do we help the construction industry.

What the president is arguing, then, isn’t simply that the private sector is doing fine; he’s also making the case that the federal government right now is not spending enough, that it’s too frugal, that our trillion-dollar-a-year-deficit is evidence of parsimony, and that creating post-World War II records in federal spending as a percentage of GDP, the federal debt as a percentage of GDP, and the budget deficit as a percentage of GDP hasn’t quite satisfied his spending ambitions. By his own logic, President Obama believes the path to prosperity is for the federal government to spend more, and more, and more – and that the GOP, if it was a responsible political party, would help him do just that.

It looks like we’re going to get that clash of visions the president has been longing for.

What Obama did on Friday was to lay out, in 136 words, what his economic theory is and what he would like his second term to look like. What happened at the Obama press conference, as Jennifer Rubin of the Washington Post points out, wasn’t a gaffe; it was a window into the philosophy that animates the president. He’s committed to doubling down on a policy that has been an utter failure. That is what will eventually prove most damaging to the president – and it explains why his aides are peddling the ludicrous line that Obama’s comments were taken out of context. In fact, it’s the context that is the killer.

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Obama Makes it Too Easy on His Critics

In a recent interview with Rolling Stone magazine, the president was asked about the tone and tenor of the debate that’s going to take place during the campaign. Obama answered, in part, this way:

[The GOP’s] vision is that if there’s a sliver of folks doing well at the top who are unencumbered by any regulatory restraints whatsoever, that the nation will grow and prosperity will trickle down. The challenge that they’re going to have is: We tried it. From 2000 to 2008, that was the agenda. It wasn’t like we have to engage in some theoretical debate – we’ve got evidence of how it worked out. It did not work out well, and I think the American people understand that. Now, the burden on me is going to be to describe for the American people how the progress we’ve made over the past three years, if sustained, will actually lead to the kind of economic security that they’re looking for. There’s understandable skepticism, because things are still tough out there… The fact of the matter is that times are still tough for too many people, and the recovery is still not as robust as we’d like, and that’s what will make it a close election. It’s not because the other side has a particularly persuasive theory in terms of how they’re going to move this country forward.

So Obama wants a debate based not on theoretical claims but on empirical achievements.

Wonderful. Why don’t we accommodate the president?

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In a recent interview with Rolling Stone magazine, the president was asked about the tone and tenor of the debate that’s going to take place during the campaign. Obama answered, in part, this way:

[The GOP’s] vision is that if there’s a sliver of folks doing well at the top who are unencumbered by any regulatory restraints whatsoever, that the nation will grow and prosperity will trickle down. The challenge that they’re going to have is: We tried it. From 2000 to 2008, that was the agenda. It wasn’t like we have to engage in some theoretical debate – we’ve got evidence of how it worked out. It did not work out well, and I think the American people understand that. Now, the burden on me is going to be to describe for the American people how the progress we’ve made over the past three years, if sustained, will actually lead to the kind of economic security that they’re looking for. There’s understandable skepticism, because things are still tough out there… The fact of the matter is that times are still tough for too many people, and the recovery is still not as robust as we’d like, and that’s what will make it a close election. It’s not because the other side has a particularly persuasive theory in terms of how they’re going to move this country forward.

So Obama wants a debate based not on theoretical claims but on empirical achievements.

Wonderful. Why don’t we accommodate the president?

Annual economic growth was three times higher under President Bush than under President Obama. Under Bush, the unemployment rate averaged 5.3 percent; under Obama, it has never been under 8 percent. In the wake of a recession that began roughly seven weeks after President Bush took office, America experienced six years of uninterrupted economic growth and a record 52 straight months of job creation that produced more than 8 million new jobs. We saw labor-productivity gains that averaged 2.5 percent annually — a rate that exceeds the averages of the 1970s, 1980s, and 1990s. Real after-tax income per capita increased by more than 11 percent. And from 2000 to 2007, real GDP grew by more than 17 percent, a gain of nearly $2.1 trillion. As for the deficit, it fell to 1 percent of GDP ($162 billion) by 2007. Indeed, before the financial crisis of 2008 – which I’ll return to in a moment — Bush’s budget deficits were 0.6 percentage points below the historical average.

As for the Obama record, as I point out in this essay in the current issue of COMMENTARY, President Obama has overseen the weakest recovery on record. He is on track to have the worst jobs record of any president in the modern era. The standard of living for Americans has fallen more dramatically during his presidency than during any since the government began recording it five decades ago. Unemployment has been above 8 percent for 40 consecutive months, the longest such stretch since the Great Depression. Home values are nearly 35 percent lower than they were five years ago. The United States has amassed more than $5 trillion in debt since January 2009, with the president having submitted four budgets with trillion-dollar-plus deficits. Prior to Obama, no president had submitted even a single budget with deficits in excess of a trillion dollars. In addition, government dependency, defined as the percentage of persons receiving one or more federal benefit payments, is the highest in American history. And a record 46 million Americans are now living in poverty.

On Obama’s record, then, it’s not like we have to engage in some theoretical debate. We’ve got evidence of how it worked out. It did not work out well, and I think the American people understand that.

Now unlike Obama, some of us are willing to concede that things need to be placed within a proper context. Obama took the oath of office in the wake of a financial collapse that made every economic indicator much worse; it’s only fair to take that into account. But even here, in characterizing what happened, Obama insists on presenting a distorted picture of reality, pretending that it was wholly the fault of his predecessor and the GOP. In fact, it was a complex set of factors that involved everything from credit default swaps to the Federal Reserve to policies in which both parties were complicit. But this much we know: Democrats bear the majority of the blame for blocking reforms that could have mitigated the effects of the housing crisis, which in turn led to the broader financial crisis.

As Stuart Taylor put it in 2008:

The pretense of many Democrats that this crisis is altogether a Republican creation is simplistic and dangerous. It is simplistic because Democrats have been a big part of the problem, in part by supporting governmental distortions of the marketplace through mortgage giants Fannie Mae and Freddie Mac, whose reckless lending practices necessitated a $200 billion government rescue [in September 2008]. … Fannie and Freddie appear to have played a major role in causing the current crisis, in part because their quasi-governmental status violated basic principles of a healthy free enterprise system by allowing them to privatize profit while socializing risk.

The Bush administration warned as early as April 2001 that Fannie and Freddie were too large and overleveraged and that their failure “could cause strong repercussions in financial markets, affecting federally insured entities and economic activity” well beyond housing. Bush’s plan would have subjected Fannie and Freddie to the kinds of federal regulation that banks, credit unions, and savings and loans have to comply with. In addition, Republican Richard Shelby, then chairman of the Senate Banking Committee, pushed for comprehensive GSE (government-sponsored enterprises) reform in 2005. And who blocked these efforts at reforming Fannie and Freddie? Democrats such as Christopher Dodd and Representative Barney Frank, along with the then-junior senator from Illinois, Barack Obama, who backed Dodd’s threat of a filibuster (Obama was the third-largest recipient of campaign gifts from Fannie and Freddie employees in 2004).

So Obama and his party bear a substantial (though not exclusive) responsibility in creating the economic crisis that Obama himself inherited. And even if you set all this aside, Obama entered office knowing what he faced, including a deficit and debt that was exploding. And rather than promote policies that accelerated economic growth and began to address our fiscal entitlement crisis, Obama went in exactly the opposite direction.

One other observation: historically, the worse the recession, the stronger the recovery (it’s referred to as the “rubber band effect.”) What is noteworthy about Obama’s economic record is how, in an environment in which one would expect the recovery to be unusually strong, it has been historically anemic. It seems to me, then, that “the other side” has quite a persuasive theory when it comes to moving the nation forward, at least compared to the theory being advanced by the current occupant in the White House.

Sometimes it seems as if Barack Obama is making it too easy on his critics.

Read Less




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