PrintScott Rasmussen and Doug Schoen had a completely mystifying op-ed about Obama's political standing in yesterday's Wall Street Journal. On the one hand, they argue that his biggest political problem is unemployment (correctly in my mind):
The announcement a week ago of 10.2% unemployment is a significant political event for President Barack Obama. It could well usher in a particularly serious crisis for his political standing, influence and ability to advance his agenda.
Double-digit unemployment drove Ronald Reagan's disapproval ratings in October 1982 up to a record high 54%. It was only when unemployment dropped to 7.3%, roughly two years later, that he was able to win a landslide victory over Democratic challenger Walter Mondale in the 1984 presidential election.
Similarly, Franklin Roosevelt's success in the 1930s in reducing the 25% unemployment rate he inherited down to the mid-teens was almost certainly responsible for his success in the 1934 midterm elections and in the 1936 presidential elections.
Mr. Obama faces a similar challenge. A detailed look at the available survey data suggests that the difficulties may be more substantial than those suggested by the recent off-year elections.
Mr. Obama's approval among likely voters has dropped to the low-50s in most polls, and the most recent Rasmussen Reports poll of likely voters shows him slightly below the 50% mark. This is a relatively low rating for new presidents. Mr. Obama's approval rating began to slide in a serious way in early July, triggered by a bad unemployment report.
This analysis so closely resembled John Judis's piece on the same subject I was about to e-mail him to let him know about it. (Both pieces even make the reasonable argument that health care is far less capable of boosting Obama's political standing than the amount of time he's spending on it would suggest.) Which makes it bizarre that one of the key solutions Rasmussen and Schoen propose isn't a focus on job creation but ... reducing the deficit:
Deficit reduction and reining in spending are critically important priorities for the vast majority of the electorate. Indeed, according to a Rasmussen Reports Poll conducted at the end of last month, voters say deficit reduction is most important and health care is a distant second. ...
Unless Mr. Obama changes his approach and starts governing in a more fiscally conservative, bipartisan manner, the independents that provided his margin of victory in 2008 and gave the Democrats control of Congress will likely swing back to the Republicans, putting Democratic control of Congress in real jeopardy.
In practice, you can of course roll out both job-creation initiatives and deficit-reduction initiatives. I'm guessing the administration will do a bit of both in the coming months. But you've also got to make a judgment about which is the bigger concern, since the two projects work at obvious cross-purposes: reducing the deficit tends to hurt job growth during a recession or weak recovery; job-boosting policies tend to cost money. So, depending on where you cast your lot, you will either take job-creation seriously and make your deficit-reduction efforts fairly superficial, or vice versa.
Now it's one thing to opt for deficit-reduction if you're someone like David Brooks, who sees the deficit as the bigger political problem. But if, like Rasmussen and Schoen, you think jobs are where it's at, it makes little sense to pitch deficit-cutting as the solution.
COMMENTS (5)
Well, since healthcare costs and their continued meteoric rise ARE the deficit problem I'm not sure I see much of a contradiction here. Perhaps in the minds of the electorate, but there's plenty of data to show that people basically do not understand the components of the deficit.
And of course it is possible that we have elected someone who is more concerned with solving the problems facing America today than getting re-elected. I know that's a difficult concept for many people, but if that's actually not what his plan is, it's hard to understand why he is acting in the way that he is. The political need for job creation surely isn't escaping a very large number of people in the adminis ... view full comment
Well, since healthcare costs and their continued meteoric rise ARE the deficit problem I'm not sure I see much of a contradiction here. Perhaps in the minds of the electorate, but there's plenty of data to show that people basically do not understand the components of the deficit.
And of course it is possible that we have elected someone who is more concerned with solving the problems facing America today than getting re-elected. I know that's a difficult concept for many people, but if that's actually not what his plan is, it's hard to understand why he is acting in the way that he is. The political need for job creation surely isn't escaping a very large number of people in the administration, including the president.
It seems to me that the question of which issue poses the greatest political problem for Obama--unemployment or the deficit--misses the larger point. When Roosevelt took office in March, 1933, it had been three and one half years since the crash, and the forces of deflation (the political brunt born completely by Hoover) had brought the economy to its nadir. Roosevelt's "stimulus" then received credit for the drop in unemployment from 1933 to 1936.
Obama, by contrast, took office only about four months after the "crash" in the midst of sustained efforts to reflate the economy through Keynsian stimulus measures. But aside from fending off the implosion of the banks, all the financial hocu ... view full comment
It seems to me that the question of which issue poses the greatest political problem for Obama--unemployment or the deficit--misses the larger point. When Roosevelt took office in March, 1933, it had been three and one half years since the crash, and the forces of deflation (the political brunt born completely by Hoover) had brought the economy to its nadir. Roosevelt's "stimulus" then received credit for the drop in unemployment from 1933 to 1936.
Obama, by contrast, took office only about four months after the "crash" in the midst of sustained efforts to reflate the economy through Keynsian stimulus measures. But aside from fending off the implosion of the banks, all the financial hocus pocus seems to have achieved little so far. Roosevelt could use the preceding deflation to "validate" his stimulus. Obama has the much more difficult job of actually trying to overpower deflationary forces that are far from exhausted and doing it quickly without undermining the dollar. Roosevelt devalued the dollar against gold, but since we didn't import much in those days, so what? Running an importing country with a significant welfare state component and two wars in progress--all while trying to keep the deflationary wolf from the door (as opposed to symbolically kicking him after he has collapsed from huffing and puffing)--is a different ballgame.
Obama's real political problem is that his election did not coincide with the exhaustion of deflationary forces, so now, we get to see whether Keynsian theory really works (in solving high unemployment) without causing a currency crisis (from the debt we are incurring). Oh-oh!
"...aside from fending off the implosion of the banks..."
An of course this trifling achievement does nothing to validate the theory of government intervention when the private sector cannot solve the problem.
It is an unfortunate fact that History is skewed toward studying and celebrating those who overcome adversity, especially where an individual's predecessor has failed . However we tend to give short shrift to those who avoided a problem altogether because its very difficult to prove that an individual or group's action had that precise effect.
However, given how close to the precipice we were, this achievement would appear to stand on its merits.
"...aside from fending off the implosion of the banks..."
An of course this trifling achievement does nothing to validate the theory of government intervention when the private sector cannot solve the problem.
It is an unfortunate fact that History is skewed toward studying and celebrating those who overcome adversity, especially where an individual's predecessor has failed . However we tend to give short shrift to those who avoided a problem altogether because its very difficult to prove that an individual or group's action had that precise effect.
However, given how close to the precipice we were, this achievement would appear to stand on its merits.
"An of course this trifling achievement does nothing to validate the theory of government intervention when the private sector cannot solve the problem."
It is a mistake to try to set up the government and private sector as opposite poles. The banks ARE--among other vested interests--the government, and Obama, who has no understanding of money or monetary policy, depends on the likes of Larry Summers, just as his predecessor depended on the likes of Hank Paulson, to instruct him on what must be done "to save the system". So what ARE Larry Summers and Hank Paulson--government or private sector? They pressed for fewer restraints on the insatiable acquisitiveness of the banks during the good ... view full comment
"An of course this trifling achievement does nothing to validate the theory of government intervention when the private sector cannot solve the problem."
It is a mistake to try to set up the government and private sector as opposite poles. The banks ARE--among other vested interests--the government, and Obama, who has no understanding of money or monetary policy, depends on the likes of Larry Summers, just as his predecessor depended on the likes of Hank Paulson, to instruct him on what must be done "to save the system". So what ARE Larry Summers and Hank Paulson--government or private sector? They pressed for fewer restraints on the insatiable acquisitiveness of the banks during the good times, and then, when it all collapsed, they were there to ensure that banks had a privileged (or perhaps the only significant) position at the bailout trough, but I doubt that it will be enough.
We'll see if the current administration has "overcome adversity" when we can look back with some perspective. We're still in early innings as far as I'm concerned. (And yes of course, GWB was a failure. Failure is too kind a word for that serial incompetent.) But just because Bush failed does not mean that "the theory of government intervention" will be successful.
At some point, probably before the end of 2010, the reflationary bubble will burst. The deflationary effect on the U.S. economy of $150 plus oil--again--will overwhelm the modest forces of genuine economic expansion. The Treasury bond market will probably collapse, overwhelmed by the weight of deficit financing. Once again, the banking system will be in deep trouble. It is notable that, in spite of the Fed's frenzy of activity, bank lending has fallen $600 billion in the last year. Unemployment, which will probably enter the next downturn at around current levels, will spike further upwards.
Three years from now, as we complete the 2012 elections, THEN one will be able to say whether this "achievement" can stand on its merits or not. Gold at $1130 today--that's no validation of this administration or the last.
Xenophon - I agree with a lot of your points, and understand where you are coming from viz the difference on the deflationary curve between Obama and FDR.
Also agree with your point about Geithner and Summers, both of who had more than a small hand in the current situation. We can only hope they answer the higher calling, as they're who we have, and they were highly preferable to the alternative in 2008 IMHO.
However I am possibly more hopeful re the government intervention, as it appears that most other western countries have pulled it off at some point in time (and failed in others yes), and we have previously (see WWII, basically one huge government spending program). Not that I am witho ... view full comment
Xenophon - I agree with a lot of your points, and understand where you are coming from viz the difference on the deflationary curve between Obama and FDR.
Also agree with your point about Geithner and Summers, both of who had more than a small hand in the current situation. We can only hope they answer the higher calling, as they're who we have, and they were highly preferable to the alternative in 2008 IMHO.
However I am possibly more hopeful re the government intervention, as it appears that most other western countries have pulled it off at some point in time (and failed in others yes), and we have previously (see WWII, basically one huge government spending program). Not that I am without reservation, mostly about the long term debt implications.
At the end of the day, I guess it comes down to whether you'd have a reflationary bubble or genuine deflation, which were pretty much our choices. I know which one I'd pick.