Obama Can Buck The Trend

Journalists can be as slavish to precedent as judges. Most media round-ups of the U.S. presidential election stakes begin or devote much space to the fact that unemployment is running high and that no incumbent since FDR has secured re-election with it higher than 7.2 percent.

Binyamin Applebaum provides the perfect example of conventional wisdom with his piece for the New York Times on June 1, in which he asserts: “Seventeen months before the next election, it is increasingly clear that President Obama must defy that trend to keep his job.”

Precedents are there to be broken, though, and elections are littered with examples of campaigns that have bucked trends. Obviously, persistently high unemployment is something that’s likely to hurt Obama – I’m sure he’d prefer it below the magic 7.2 percent number – but it may well be that it isn’t the defining factor this time.

With incumbency and no primary challenger, Obama is already enjoying a couple of distinct advantages.

And he has another major advantage going into the election season that will, I suspect, assist him to buck the trend – namely, the weakness of the opposition. The GOP’s current candidates are about as inspiring as Bob Dole was in 1996, an election that saw Bill Clinton coast to victory on much lower approval ratings than Obama now enjoys.

Clearly, Obama is vulnerable because of the agonizingly sluggish recovery and high unemployment. Twice as many Americans think the country is on the wrong track as the right one and anger is high in key battleground states such as Michigan, Ohio and Florida. Obama will focus no doubt on continuing to try to persuade voters that without the stimulus and the takeover of GM and Chrysler, the economy and unemployment rate would be much worse.

I happen to think he’s right but that, though, is a tough sell and comes down to defending a record rather than pitching forward and presenting new ideas. President Herbert Walker Bush was caught in that trap when he sought reelection in 1992 – in fact the economy was pulling out of recession then but people were not feeling the benefits of recovery and he got blamed for the economic pain.

Obama has another major weakness: he has failed to present a credible plan to cope with the budget deficit, currently running at almost 10 percent of GDP. His suggestion is that higher taxes on the wealthy will sort that out. It won’t.

But where is the Republican that can take Obama’s weaknesses and turn them into GOP strengths? Do they have credible plans for reducing the budget deficit while at the same time coaxing quicker growth and providing the circumstances for more Americans to get jobs?

The governors in the race – Jon Huntsman, Tim Pawlenty and Mitt Romney – have to be considered the serious candidates. (Sarah Palin, if she runs, and Michele Bachmann are the circus acts.)  But all they do is trot out the line that pleases the Tea Party consisting of slashing public spending and cutting taxes.

Pawlenty has gone off into never-never land in terms of the scale of public spending and tax cuts he wants to see – his plan has prompted groans of disbelief from the Economist magazine, hardly a publication that is in favor of Big Government or high taxes. Aside from ideologues, few respected economists see much to recommend in the bleak solutions being thrown up by the GOP candidates.

They sound like Bush the Younger when it comes to the magic of tax cuts. He claimed that “tax relief will create new jobs. Tax relief will generate new wealth. And tax relief will open new opportunities.” And how did job growth fare? Well, between pre-recessionary 2001 and 2007 America enjoyed the slowest job growth since World War II. Very impressive. And now we have the Republican candidates coming out with the same old, same old unsophisticated supply-side solutions.

Of course, taxes can be too high and in certain economic circumstances and at some points in business cycles tax cuts can be essential. The IMF is recommending them for the UK currently – and that on top of the spending reductions being planned by the coalition government in London. But for America now tax cuts would be unhelpful for economic or job growth.

Bruce Bartlett, a senior policy analyst in the Reagan White House; and deputy assistant secretary for economic policy at the Treasury Department during the George H.W. Bush administration, has been trying to explain to his erstwhile colleagues on the right about why that is the case. His latest column in The Fiscal Times scorns Republicans for tending to talk as if there is only one factor that affects growth – namely, tax rates.

As Bartlett points out corporate investment is key when it comes to economic growth. It is worth quoting him in full:  “There’s no evidence that the 2003 tax cut did anything to stimulate corporate investment. Indeed, according to the Federal Reserve, nonfinancial corporations have increased their holdings of liquid assets to $1.8 trillion from $1.2 trillion since 2003. Thus it’s implausible that a further reduction in the corporate rate, as Pawlenty and other Republicans favor, would do much to raise investment.

“The bottom line is that neither taxes nor spending by themselves are the most important government contribution to the investment climate; it’s the budget deficit. Consequently, a reduction in tax revenue which raises the deficit is unlikely to stimulate domestic investment because more money will have to be borrowed from abroad. Conversely, a tax increase dedicated to deficit reduction could well be stimulative, as was the case with the 1982 and 1993 tax increases. Contrary to Republican dogma, rapid growth followed on both occasions.”

Ordinary voters may not think in such terms. Polls suggest that the budget deficit scares the blazes out of them — as it should. But are they going to be convinced that drastically cutting public spending pell-mell is the answer or that making America’s wealthiest people even wealthier is the way forward?

One thing, I suspect, Republicans still don’t get is that they scare the majority of voters far more with their talk of radically changing Medicare, Medicaid and Social Security. And their lack of a plan to overcome the clear and present danger of structural unemployment save a shrug of the shoulders and claiming tax cuts will solve everything by magically promoting economic growth just isn’t going to cut it on the stump either.

An approach that talks about public investment in infrastructure, science, technology and education, structural reforms to boost jobs and growth, the importance of savings, cutting public spending over time and not so rapidly that it will derail recovery, retraining, government in partnership with the private sector is much more likely to resonate with voters.

As the Economist has pointed out recently, the Republican “failure on the deficit” is serious. “The deficit is simply too large to close through spending cuts alone. The overall tax take – at its lowest, as a share of GDP, in decades – must eventually rise.”

Realism is something that Americans are likely to appreciate this time round more than ever. They understand that a crossroads has been reached. So far there isn’t a candidate on the GOP side who is offering honesty to counter Obama’s half-honesty.




A Good Night for the White House

There hasn’t been much to cheer up the White House in recent weeks but last night’s Tea Party upset in the GOP Senate primary in Delaware must have prompted some pretty big smiles in the West Wing. “Tea Party Scores Big,” was the Washington Post headline this morning. But the scoring is at the cost of the GOP and the headline could easily have been instead – “Big Night for the White House.”

Tea Party activists won’t feel that way. From their perspective they are shaking up politics and disproving Speaker Nancy Pelosi’s dismissive interpretation of the Tea Party as just “Asrto-turf “ and “not really a grass-roots movement.” As Tea Party victor Christine O’Donnell said last night after her defeat of veteran GOP congressman Mike Castle, this is “no more politics as usual.”

Add O’Donnell’s stunning victory to the string of embarrassments the Tea Party has been handing out to the Republican establishment this year, from Alaska with Joe Miller’s trouncing of Sen. Lisa Murkowski in a primary to last spring’s Tea Party overturning of Sen. Robert Bennett at the Utah Republican state convention, and it hard for the activists to think anything but that history is with them.

Certainly there are pollsters and commentators eager to confirm that view. Writing in the Washington Examiner, pollster Scott Rasmussen and political consultant Douglas Schoen launch on a breathless paean to the Tea Party’s importance, arguing that the movement is “demonstrating a level of activism and enthusiasm that is both unprecedented and arguably unique in recent American political history.”

While they are right to castigate the press for dismissing the movement earlier this year, and while they are surely correct in arguing that the Tea Party has been “one of the most derided and minimized and, frankly, most disrespected movements in American history,” I am not so convinced that the Tea Party movement is that different from the third-party challenge of Ross Perot back in 1992.

Many of the things claimed for the Tea Party were claimed also for the Perot movement – one as inchoate  as the Tea Party. It was going to shake up politics and repaint the political landscape permanently. The activists were highly active and incredibly enthusiastic and glowing with the self-righteous  belief that their time had come. And what did it in practice do? Act as a major factor in the defeat of George Bush and the election of Bill Clinton.

And that is exactly what the Tea Party is likely to achieve. Their victories are not over the Democrats, supposedly their real foes. Their triumphs are over party allies and each time they win they are underscoring the civil war that continues to rage within the GOP, thereby weakening Republican prospects come November.

O’Donnell inadvertently revealed that when she said last night in her victory speech that, “This is more of a cause than a campaign.” Causes tend not to do too well when it comes to general and congressional elections and they can inflict incredible harm on the party they are trying to capture. The anti-war movement did no favors to the Democrats and succeeded in assisting Richard Nixon to victory in 1968. The ugly anger of the Buchanan Brigades and their challenge to Bush in the 1992 primaries only added to the hurdles the incumbent president had to try to jump.

Compare the poll numbers Rasmussen and Schoen outline in their article. One of their surveys finds nearly one quarter (24 percent) of the electorate self-identified as being members in the Tea Party movement. That’s about what the Perot movement was polling in the summer of 1992.

Admittedly, the Perot movement was taking votes and support away from the GOP; Tea Party activists claim they will bring votes to the Republicans come November. But is this really true? Most Tea Party activists vote GOP when push comes to shove and for every new vote they may attract to a Republican candidate, they will turn off an independent voter or centrist who could have been enticed to vote GOP.

Take a look at what happened to John McCain’s presidential prospects after Sarah Palin joined the ticket. Yes, he got an opinion poll jump for a few days after his pick but once the broader electorate got to know Palin more, his numbers plummeted.  She was meant to reflect McCain’s “change credentials” and help him appeal to urban women. In fact, her selection was a turning point in the campaign for the Democrats and along with the Republican crack-up was a determining factor in his win.

Senior Republicans know this. Last night, the silence from GOP Sen. John Cornyn, the NRSC chairman, who issued no statement congratulating O’Donnell, was telling. O’Donnell’s win in Democrat-tilted Delaware has jeopardized the chance of the GOP in winning the Senate seat there in the fall. She is too conservative for the state and the Tea Party is too conservative for a lot of the electorate.

Earlier this week I suggested that President Obama would be hard pushed to reverse the GOP tide. Last night he might have found a new ally in the Tea Party. Yup, it was a good night for the White House.