The tax deal and Obama’s reelection chances
It looks like Robert Gibbs will be leaving the White House to run his own consultancy and work on Obama’s 2012 campaign. Ruy Teixeira, a politics guys not an econ guy, thinks the Obama-Republican tax deal makes it far more likely that campaign will be a successful one:
A significantly better economy is certainly the key to reaching voters in the white working class, which supported House Republicans by an unprecedented 30 points in 2010. To be reelected, Obama needs to bring that gap down to around its size in 2008 (18 points), and he simply won’t get there if these voters, unsympathetic to Obama to begin with, continue to see a lack of economic progress.
That much may seem obvious. But, in addition, it’s also true that Obama’s performance among sympathetic constituencies will depend to a very great degree on the economy. … The fact is that tens of millions of ordinary rank-and-file Obama supporters will end up basing their decisions on the state of their pocketbooks and the job market: Want 18-to-29-year-olds to turn out as 18 percent of the electorate and support Obama by anything like the 66-32 margin of 2008? Want minorities to turn out as 28 percent of the electorate and vote for Obama by a margin of 80-18? Want moderates to turn out as 44 percent of the electorate and support Obama by a margin of 60-39? Numbers near these will be impossible to achieve if the economy continues to stumble. Conversely, if a recovery seems to be kicking in, confidence will rise in Obama and his agenda, making it more likely that these voters will turn out and back the president.
It’s as simple as that. And Obama’s $858 billion package of tax cuts, tax credits, and unemployment benefits will in effect deliver a second economic stimulus, albeit not one any progressive—or sane—economist would have dreamed up on their own. In a world where unemployment barely budged and GDP growth couldn’t get above 3 percent, Obama’s re-election would be in considerable doubt. But with the tax-cut deal, there should be a significant decline in unemployment (though the absolute level will remain high) and a more robust growth rate, including during quarters two and three of election year, which political scientists tell us is particularly important to electoral outcomes.
If 3 percent growth and 9.5 percent unemployment is inadequate, will 4 percent growth with 8.5 percent unemployment be good enough? That, along with a lousy housing market and high national debt which makes the future especially worrisome? I have written repeatedly that there is a lag between when an economy improves on paper and when voters recognize improvements in their own standards of living. Just as the Bush (I) campaign team in 1992.