James Pethokoukis

Politics and policy from inside Washington

Obama’s 2012 hopes may rest on jobs plans

Sep 6, 2011 16:35 UTC

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

By James Pethokoukis

WASHINGTON (Reuters Breakingviews) – The guy sitting in the Oval Office wins re-election some 70 percent of the time. But a weak economy can even the odds. U.S. President Barack Obama is preparing a big speech on job creation for Thursday in the hope of regaining the initiative. As things stand now, though, by some economic forecasts he may be a slight underdog for a second term. Still, Republicans need an acceptable candidate and a positive message to take advantage in next year’s election.

Slowing GDP growth, still-high unemployment and a see-saw stock market have taken their toll on America’s mood and Obama’s popularity. Consumers are nearly as gloomy as they were in 1980, according to a Thomson Reuters/University of Michigan survey. Back then, President Jimmy Carter said the nation was plagued by a “crisis of confidence” — an event later mocked as his “malaise” speech. And Gallup polls show Obama’s approval ratings at the lowest levels of his term, and the president neck-and-neck with four leading Republican candidates.

But polls more than a year before an election aren’t reliably predictive. Incumbents Bill Clinton and Carter were essentially tied with their leading opponents 15 months before elections in 1996 and 1980, respectively. Come the actual November elections in those years, Clinton won by a landslide and Carter lost by one.

The economy’s trajectory is a big factor. In 1996, GDP grew at a 4.5 percent annual pace during the first nine months of the year. In 1980, it shrank at a 2.4 percent rate. Wall Street doesn’t expect either extreme in 2012 — the consensus is closer to muddling along. JPMorgan, for instance, forecasts unemployment around 9.5 percent and GDP growth of 1.3 percent. Plug that scenario into a well-known election model from Yale University, and the result is Obama losing to his Republican opponent by four percentage points. Plug in a recession and Obama loses in a rout like Carter.

That suggests a double-dip downturn might mean the identity of the Republican nominee wouldn’t matter much. But anything less gloomy, especially if Obama can generate a more positive tone for his own campaign, and a GOP candidate hoping to win the White House and then govern successfully will need a persuasive message. For some hopefuls, that may require moderating their words and policies. But for any candidate, if higher taxes and spending cuts are in America’s future — as they probably must be — the next 15 months will require education as well as electioneering.

CONTEXT NEWS

— Pollster Gallup finds President Barack Obama with approval ratings hovering near 40 percent in its most recent weekly survey. The firm also said on Aug. 22 that the president is “closely matched” with the four leading Republican candidates for 2012 — Mitt Romney, Rick Perry, Ron Paul and Michele Bachmann. Romney edged out Obama among registered voters in the findings, while Obama was ahead of Bachmann.

— U.S. consumer sentiment sank in August as consumers lost confidence in lawmakers’ ability to stave off the threat of another recession, a survey released on Friday showed. The Thomson Reuters/University of Michigan’s consumer sentiment index edged up from its mid-August level but was still consistent with recession-era lows. The index has only been lower in three other surveys, which were taken in April and May 1980 and November 2008. The final August reading on the overall index of consumer sentiment was at 55.7, down from 63.7 the month before. It was slightly better than August’s preliminary reading of 54.9, which had been the lowest level since May 1980.

— Yale University election forecasting model: link.reuters.com/byd43s

(Editing by Richard Beales and Martin Langfield)

Romney’s “green” economic advisers

Sep 6, 2011 16:10 UTC

Later today Mitt Romney will unveil his 59-point economic plan. From what I read in Romney’s preview op-ed in USA Today, it looks a lot like his 2008 plan. For instance, it has an investment tax cut for the middle class just like the one offered three years ago. And Romney wants to cut corporate taxes. Last time he wanted to lower the rate to 20 percent. We’ll see this time around. One area where he could really separate himself is housing. Economic adviser Glenn Hubbard has a housing plan that would allow underwater homeowners to refinance at today’s superlow interest rates.  (In a recent chat, I talked to Hubbard about his views on economic policy: TARP, taxes, trade.)

And earlier today, Romney announced both Hubbard and Greg Mankiw of Harvard as his economic advisers. Interesting to see if his GOP opponents point out that Hubbard has supported cap-and-trade in the past, while Mankiw favors a carbon tax to limit greenhouse gases. As for their boss, here is what I recently wrote about his climate change position:

Romney is clearly in favor of limiting carbon emissions — at least in theory — but does not want to cripple the U.S. economy or spend trillions of dollars for “extreme and expensive measures” like cap-and-trade to do it. He mentions the work of Danish economist Bjorn Lomborg who believes “addressing the remediation of the effects of global warming [is] far more economic and far more humane than massive spending to reduce emissions.”

Romney also spends considerable time in his book explaining the pros and cons of a carbon tax-payroll tax swap, a plan favored by economist and Romney adviser Greg Mankiw and many other Republican-leaning economists. Among the positives, he says:  1) revenue neutrality; 2) higher energy prices would encourage energy efficiency; 3) industry would have a predictable outlook for energy costs; 4) profit incentives rather than government  subsidies would encourage the development of “oil substitutes and carbon-reducing technologies.”

 

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