A.J. DiCintio
Sour outlook for Obama
By A.J. DiCintio
The great number of presidential elections are decided by the state of the economy, a reality of American political life illustrated by these winners, Johnson '64, Nixon'72, Reagan '84, Clinton '96, and these losers, Nixon '60, Carter '80, Bush '92, McCain '08.
That's why incumbent presidents try to do everything they can — the long term harm of their behavior be damned — to insure a strong Election Year economy.
However, presidents know all too well an economy isn't moved in a day. Therefore, they begin urging Congress to increase spending and Fed chairmen to decrease interest rates well before Election Day.
To understand the success of these machinations, consider the following statistics:
Since WWII, the median rise in the stock market in the third year of presidential terms has been 18 percent (NYT).
Over the same period, growth in GDP in the fourth presidential year has been above average 75% of the time, with 62% of all economic growth occurring in years three and four of presidential terms (Centier Bank).
In ordinary times, then, Barack Obama would stand a good chance of manipulating the economy to win reelection. But these are far from ordinary times.
In fact, any rational analysis of the U.S. economy currently and going forward toward November, 2012, reveals a very high probability the nation will experience not the historical economic sweetness induced by the strong arm of the White House but the sourness associated with Bill Gross' "New Normal," whose fundamental cause and effects were succinctly stated by forbes.com:
The decades of fueling spending and growth with debt are over. [Therefore] people, companies and countries shedding their debts [will lead] to years of slow economic growth and meager returns on investments.
So, let's examine precisely why economic reality portends trouble for the president.
How better to begin than to say the historical pump priming that sent many an incumbent gushing toward reelection just ain't gonna happen this time around, not with the country properly uneasy about the very real, very dangerous consequences of a $1.5 trillion annual deficit apparently destined to go on until a once proud nation becomes a humiliated beggar-borrower soon to be thoroughly devastated.
Making matters worse, Obama's ideologically driven incompetence has turned an angry, exasperated public against even the best public spending.
Yes, Obama could have exhibited courageous, smart leadership by vigorously supporting tax reform that requires corporations and individuals to pay their fair, equitable share of taxes.
He could have led the charge to eliminate $200 billion annually in government duplication and to save hundreds of billions more by cutting budgets for federal departments back, for example, to '07 levels.
He could have supported policies that put an end to what Donald Trump rightly calls our de facto "nation building" in China as well as the literal kind of nation building we are asking our soldiers to carry out in Iraq and Afghanistan.
He could have begun a sensible plan for reducing the military welfare we are providing to rich nations all over the world.
And he could have proposed that some of the many trillions in savings over the next decade be used to rehabilitate and modernize the nation's infrastructure in ways that promote growth and the creation of American jobs in the private sector economy.
Instead, the man the NYT's Bill Keller fawns over as "cerebral" exclusively threw his weight behind an ocean of new profligate spending, highlighted by the nearly trillion dollar rotten-pork-stuffed "stimulus" bill he promised would keep the unemployment rate from rising above 8% and "Obamacare," the real-reform-bereft scam about whose true cost and government bloating nature he has been shamelessly duplicitous.
Obama has further destroyed the public trust by bailing out banks, unions, and favored companies, behavior that has nurtured the very good times associated with corporate balance sheets and VIP salary packages while citizens sit around Main Street's kitchen tables, suffering the ravages of a misery index that bangs their brains with cries of "hard times."
The probability, then, that Obama can spend his way to reelection? Virtually zero.
The president's liberal-elite cheerleaders may argue, however, that liberal Ben Bernanke represents liberal Barack Obama's ace in the hole.
How silly, for two reasons:
First, there's no room for the Fed to take interest rates any lower.
Second, under the euphemisms of "QE1" and "QE2," Ben printed a couple of trillion dollars in an attempt to stimulate the economy by sucking up government debt and placing it on the Fed's apparently infinite and certainly secret balance sheet.
However, the only thing he stimulated was stock indexes, commodity prices, and inflation, the first two recently having deflated in response to the inevitable realization that Barack and Ben's Livin' on Hope economy is so flaccid it can't stand on its own — much less run with the power it exhibited in the past.
Forced to flush the Fed option, Obama's goo-goo eyed acolytes might claim an economic savior exists in the form of a resurgence in home construction.
Well, they can waste their breath chanting "Yes, you can!" to the housing industry until the cows come home; but it won't change the reality that the continuing decline in housing prices, the huge number of bad mortgages weighing down the books of banks and government agencies, and the hundreds of thousands of foreclosures yet to be settled rule out a strong housing recovery for years.
. . . Perhaps spending and hiring by state and local governments can fill the void.
. . . Maybe Greece will avoid going belly up after all, thereby saving Europe from a horrifying socio-economic fissure and the U.S. a whole lot of upheaval, especially tremors affecting the foundation of banks that have sold a couple of hundred billion in credit default swaps to their European counterparts.
. . . Possibly by next summer the rate of income inequality will not just have reversed itself but moved so far in the right direction that a buoyant American middle class will regard itself not just financially and emotionally healthy but downright ripped.
Smart, independent thinkers once again agree the probability such White Knights will appear to save Obama approaches zippo. Yet, from Boston to Berkeley liberals are exclaiming an airheaded "Yes!" to them and more.
But what else can you do when your ideology compels you to make a religion of politics and gods of politicians?
As for me, I'll keep my feet on the ground with this comment:
The economic outlook over the next sixteen months is agonizingly sour for an incumbent president seeking reelection. And if that projection becomes reality, it will be a Republican's turn to show whether he or she works on behalf of government of, by, and for special interests or "We the People" who have made this great nation everything it is.
© A.J. DiCintio
June 26, 2011
The great number of presidential elections are decided by the state of the economy, a reality of American political life illustrated by these winners, Johnson '64, Nixon'72, Reagan '84, Clinton '96, and these losers, Nixon '60, Carter '80, Bush '92, McCain '08.
That's why incumbent presidents try to do everything they can — the long term harm of their behavior be damned — to insure a strong Election Year economy.
However, presidents know all too well an economy isn't moved in a day. Therefore, they begin urging Congress to increase spending and Fed chairmen to decrease interest rates well before Election Day.
To understand the success of these machinations, consider the following statistics:
Since WWII, the median rise in the stock market in the third year of presidential terms has been 18 percent (NYT).
Over the same period, growth in GDP in the fourth presidential year has been above average 75% of the time, with 62% of all economic growth occurring in years three and four of presidential terms (Centier Bank).
In ordinary times, then, Barack Obama would stand a good chance of manipulating the economy to win reelection. But these are far from ordinary times.
In fact, any rational analysis of the U.S. economy currently and going forward toward November, 2012, reveals a very high probability the nation will experience not the historical economic sweetness induced by the strong arm of the White House but the sourness associated with Bill Gross' "New Normal," whose fundamental cause and effects were succinctly stated by forbes.com:
The decades of fueling spending and growth with debt are over. [Therefore] people, companies and countries shedding their debts [will lead] to years of slow economic growth and meager returns on investments.
So, let's examine precisely why economic reality portends trouble for the president.
How better to begin than to say the historical pump priming that sent many an incumbent gushing toward reelection just ain't gonna happen this time around, not with the country properly uneasy about the very real, very dangerous consequences of a $1.5 trillion annual deficit apparently destined to go on until a once proud nation becomes a humiliated beggar-borrower soon to be thoroughly devastated.
Making matters worse, Obama's ideologically driven incompetence has turned an angry, exasperated public against even the best public spending.
Yes, Obama could have exhibited courageous, smart leadership by vigorously supporting tax reform that requires corporations and individuals to pay their fair, equitable share of taxes.
He could have led the charge to eliminate $200 billion annually in government duplication and to save hundreds of billions more by cutting budgets for federal departments back, for example, to '07 levels.
He could have supported policies that put an end to what Donald Trump rightly calls our de facto "nation building" in China as well as the literal kind of nation building we are asking our soldiers to carry out in Iraq and Afghanistan.
He could have begun a sensible plan for reducing the military welfare we are providing to rich nations all over the world.
And he could have proposed that some of the many trillions in savings over the next decade be used to rehabilitate and modernize the nation's infrastructure in ways that promote growth and the creation of American jobs in the private sector economy.
Instead, the man the NYT's Bill Keller fawns over as "cerebral" exclusively threw his weight behind an ocean of new profligate spending, highlighted by the nearly trillion dollar rotten-pork-stuffed "stimulus" bill he promised would keep the unemployment rate from rising above 8% and "Obamacare," the real-reform-bereft scam about whose true cost and government bloating nature he has been shamelessly duplicitous.
Obama has further destroyed the public trust by bailing out banks, unions, and favored companies, behavior that has nurtured the very good times associated with corporate balance sheets and VIP salary packages while citizens sit around Main Street's kitchen tables, suffering the ravages of a misery index that bangs their brains with cries of "hard times."
The probability, then, that Obama can spend his way to reelection? Virtually zero.
The president's liberal-elite cheerleaders may argue, however, that liberal Ben Bernanke represents liberal Barack Obama's ace in the hole.
How silly, for two reasons:
First, there's no room for the Fed to take interest rates any lower.
Second, under the euphemisms of "QE1" and "QE2," Ben printed a couple of trillion dollars in an attempt to stimulate the economy by sucking up government debt and placing it on the Fed's apparently infinite and certainly secret balance sheet.
However, the only thing he stimulated was stock indexes, commodity prices, and inflation, the first two recently having deflated in response to the inevitable realization that Barack and Ben's Livin' on Hope economy is so flaccid it can't stand on its own — much less run with the power it exhibited in the past.
Forced to flush the Fed option, Obama's goo-goo eyed acolytes might claim an economic savior exists in the form of a resurgence in home construction.
Well, they can waste their breath chanting "Yes, you can!" to the housing industry until the cows come home; but it won't change the reality that the continuing decline in housing prices, the huge number of bad mortgages weighing down the books of banks and government agencies, and the hundreds of thousands of foreclosures yet to be settled rule out a strong housing recovery for years.
. . . Perhaps spending and hiring by state and local governments can fill the void.
. . . Maybe Greece will avoid going belly up after all, thereby saving Europe from a horrifying socio-economic fissure and the U.S. a whole lot of upheaval, especially tremors affecting the foundation of banks that have sold a couple of hundred billion in credit default swaps to their European counterparts.
. . . Possibly by next summer the rate of income inequality will not just have reversed itself but moved so far in the right direction that a buoyant American middle class will regard itself not just financially and emotionally healthy but downright ripped.
Smart, independent thinkers once again agree the probability such White Knights will appear to save Obama approaches zippo. Yet, from Boston to Berkeley liberals are exclaiming an airheaded "Yes!" to them and more.
But what else can you do when your ideology compels you to make a religion of politics and gods of politicians?
As for me, I'll keep my feet on the ground with this comment:
The economic outlook over the next sixteen months is agonizingly sour for an incumbent president seeking reelection. And if that projection becomes reality, it will be a Republican's turn to show whether he or she works on behalf of government of, by, and for special interests or "We the People" who have made this great nation everything it is.
© A.J. DiCintio
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