James Pethokoukis

Politics and policy from inside Washington

The economic hill Obama has to climb to re-election

April 21, 2011

This analysis by Sean Trende of RealClearPolitics should give the White House pause:

The six incumbents who have successfully stood for re-election since World War II have enjoyed, on average, growth in per capita real disposable income (RDI) of 11.7 percent over the course of their term. The unsuccessful presidents have fared worse — about 8 percent growth on average.

So far, RDI is up 1.2 percent over the course of the Obama presidency. To hit the 11.7 percent mark over the course of his term, income would have to grow by about 1.4 percent in each of the seven quarters between now and late 2012. Since the 1980s, we’ve had 24 total quarters where RDI growth was above 1.4 percent.

The short-term future prognosis for RDI is not good: It actually shrunk from January to February of 2011. Moreover, government transfer payments and taxes are an important portion of RDI; they actually account for almost all of the RDI growth over the course of the president’s term. But the expiration of the payroll tax cuts and unemployment benefits at the end of the year will apply further downward pressure to this measure.

The most recent Pew poll suggests that a majority of the country currently characterizes the state of the economy as “poor,” while only 8 percent classify it as “excellent” or “good.” Only 20 percent believe the economy is recovering.

And as Sean also notes, the economy seems to have hit a soft patch: GDP growth has slowed, wages are flat or falling, housing remains ugly. In addition, things like the S&P warning and high borrowing levels may also be undermining voter confidence.

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