After looking at today’s anemic unemployment report, Goldman Sachs drops this H-bomb on the Obama campaign:
We have lowered our forecast for US real GDP growth further and now expect real GDP to grow just 2%-2½% through the end of 2012. Our forecast for annual average GDP growth has fallen to 1.7% in 2011 (from 1.8%) and to 2.1% in 2012 (from 3.0%). Since this pace is slightly below the US economy’s potential, we now expect the unemployment rate to be at 9¼% by the end of 2012, slightly above the current level.
2. Even our new forecast is subject to meaningful downside risk. We now see a one-in-three risk of renewed recession, mostly concentrated in the next 6-9 months. There are three specific issues that concern us. First, a worsening of the European financial crisis, and a failure of European policymakers to respond adequately, could lead to a further tightening of financial conditions and credit availability, which would worsen the economic outlook globally. Second, our forecast assumes that the payroll tax cut—currently scheduled to expire at the end of 2011—is extended for another year, but if that failed to happen the fiscal drag in early 2012 would increase significantly. Third, increases in the US unemployment rate have historically had a tendency to feed on themselves, and this could happen again.
The consensus used to be that President Obama might be OK if the jobless rate fell below 8 percent by Election Day. That seems increasingly unlikely. The economy is, at best, in slow-growth mode, just churning and churning, creating few jobs. Comparisons to President Reagan’s 1984 “Morning in America” campaign are looking ever-more ridiculous. Under Reagan’s tax-cut driven recovery, unemployment fell from 10.8 percent in December 1982 to 7.2 percent by Election Day as the economy grew 4.5 percent in 1983 and 7.2 percent in 1984. In fact, Jimmy Carter’s 1980 campaign might be the better comparison. The unemployment rate jumped from 6.0 percent in December 1979 to 7.5 percent on Election Day 1980 as the economy shrank 0.3 percent.
We are, by all measures, in the midst of a failing economic recovery. Under these circumstances, Americans expect that policymakers in Washington are committed to improving economic conditions further.
It’s against this backdrop that conservatives are committed to taking capital out of the economy, creating more public-sector unemployment, eliminating effective jobs programs, urging the Federal Reserve to stop focusing on lowering unemployment, and fighting tooth and nail to protect a tax policy that’s been tried for 30 years without success.
By their own admission, GOP officials have said economic growth is not their priority; Hoover-like deficit reduction is. While advocating this agenda, Senate Minority Leader Mitch McConnell has said, more than once, that his “top priority” isn’t job creation, but rather, “denying President Obama a second term in office.”
It’s time to face the fact that there are people who are prioritizing the destruction of a presidency over the needs of the nation. They are willing to crash the American economy, even the global economy, to accomplish this.
Oh, and senatorseven? Standard and Poor’s says it’s Republican obstructionism and intransigence on economic policies that caused them to downgrade America’s credit. But conservatives are rejoicing over this downgrade and attempting to blame Obama for fiscal irresponsibility. Every time I think conservative logic couldn’t possibly get more blisteringly ridiculous, you lower the bar yet again.