James Pethokoukis

Politics and policy from inside Washington

What the March jobs report means for Obama 2012

Apr 1, 2011 19:59 UTC

OK, the unemployment is now down to 8.8 percent, and the economy added 216,000 jobs last month. Here is the political economy of the situation, which is not as good for Team Obama as you might think:

1) Let’s not overstate the strength of the report: a) based on last two nasty downturns, 1974-75 and 1981-82, jobs should be growing roughly 400K a month; b)  nominal wage growth over both the last quarter and year have both been 1.7% vs. 2.1% inflation; c) the number of people who have been unemployed less than five weeks rose by 59K, first increase since November; d) the share of the unemployed who have been unemployed for more than 26 weeks also hit a record high of 45.5 percent. (Numbers compilation courtesy of the Economic Policy Institute.)

2) Political scientists have found only so-so correlation between unemployment and presidential election results. It’s really income growth that counts. And over the past year — and past two months — that has been negative. Shorter: jobs are being created, but they are not so high paying as before. Note that WH economic adviser Austan Goolsbee said today that he does not expect strong income growth unless the unemployment rate moves lower.

3) So let’s say it is Election Day 2012 and the unemployment rate is 8 percent — but housing is still frozen, wages are flat and broader unemployment rate is 15 percent. Then I think it is a 51-49 situation, with the winner depending on what kind of political athlete the GOP nominates.

4) I also note that O’s recent approval in the Quinnipiac poll was 42% and Reuters had the right track/wrong track number at 31-64 — the worst level of O’s presidency. This shows that a falling unemployment rate is necessary but not sufficient to boost voter optimism.

5) As I have written before:

It takes a while for people to really perceive that an economy has turned around, especially if unemployment is high. Bill Clinton won the 1992 election on the economy (“it’s the economy, stupid”) even though GDP had been growing for six full quarters (and at a pretty good clip). According to Gallup, 88 percent of Americans thought the economy was “fair” or “poor” in October 1992 with some 60 percent saying the economy was “getting worse.”

Two years later, it was the Democrats turn to feel the brunt of widespread economic anxiety as the Republicans captured both the House and the Senate. Even though the economy had then been growing for 14 straight quarters and the unemployment rate was down to 5.8 percent, 72 percent of Americans still thought the economy was “fair” or “poor” and 66 percent though the nation was headed in the wrong direction.

That’s right 3 1/2 years after the 1990-91 recession ended, the economy was still weighing negatively on voters and hurting the incumbent political party. Is it so hard to imagine, then, that three or four years from now voters will also be unhappy about the state of the economy and blame the party in power, the Obamacrats?

COMMENT

Blah! Blah! Blah! We should be thankful for any positive news, unless you get a biased reporter like James. Blah Blah Blah

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Would Tim Pawlenty be America’s Six Sigma president?

Mar 28, 2011 19:04 UTC

Much more of this, please:

Six Sigma dates back to 1986, when a Motorola engineer created the methodology to boost productivity and quality with as few errors in production as possible — fewer than 3.4 defects for every 1 million attempts, to be exact. The result was data-driven program that systematically measures, defines and analyzes all aspects of a business. Its name derives from a statistical term that calculates how far a process deviates from perfection.

Pawlenty was first introduced to Six Sigma during his tenure as governor. In 2003, the new commissioner of the Minnesota Pollution Control Agency brought in Six Sigma to train her staff. At the time, agency was only issuing about 9 percent of its permits every six months. But with Black Belts and Green Belts from Six Sigma on board, the agency greatly accelerated its work and began issuing 70 percent of the permits within that time frame — all without layoffs or relaxing environmental standards.

Pawlenty admitted he hasn’t taken the Six Sigma Six Sigma dates back to 1986, when a Motorola engineer created the methodology to boost productivity and quality with as few errors in production as possible — fewer than 3.4 defects for every 1 million attempts, to be exact. The result was data-driven program that systematically measures, defines and analyzes all aspects of a business. Its name derives from a statistical term that calculates how far a process deviates from perfection.

I repeat, voters would be more willing to accept cuts to favored programs if they felt government operated a bit more like FedEx or Wal-Mart.

Rand Paul and the 2012 Republican presidential nomination

Mar 23, 2011 19:01 UTC

Steve Kornacki of Slate makes the case:

Rand Paul was in South Carolina on Monday and will soon make appearances in Iowa and New Hampshire. On Monday he told reporters that “the only decision I’ve made is I won’t run against my dad. I want the Tea Party to have an influence over who the nominee is in 2012.” An unnamed “Paul family advisor” also told CBS News that “there’s better than a 50/50 chance that there will be a Paul in this race.”

While it’s hard to envision Paul actually winning the GOP nod, improving on his father’s performance in the 2008 primaries seems entirely possible. Ron Paul finished fifth in Iowa with 9 percent and fifth in New Hampshire with 8 percent, then became a media afterthought. Given that he began the campaign with no money, no name recognition and no expectations, this represented a remarkable showing; he ended up beating Rudy Giuliani — the early GOP front-runner — in nearly every state in which they both competed. But it was also something of a disappointment, given the tens of millions of dollars Paul was able to raise and the free media he attracted. The New Hampshire GOP electorate, with its fierce libertarian bent, seemed a particularly promising audience for his message, and his campaign had hoped to break through with a much stronger performance there.

The best-case scenario for Paul would probably be replicating what Pat Buchanan achieved in 1996: a surprisingly strong showing in Iowa (he nabbed 23 percent, good for second place), followed by a startling win (with just 29 percent of the vote) in New Hampshire — at which point a panicked GOP establishment rallied around the strongest non-Buchanan candidate (Bob Dole) and denied him the nomination.

And James Antle of the American Spectator gives his two cents:

The case against Paul running is obvious. The voters in Kentucky just elected him in November. Like Chris Christie, Bobby Jindal, and a host of other recently elected promising Republicans, he should wait until he has accomplished more. For those of us who think a successful Senator Paul could do better than the Buchanan ’96 campaign, a concern might also be that becoming a perennial candidate by running too early could undermine that. It could also hurt his support at home in Kentucky if voters there think he’s only using their Senate seat as a stepping stone to his own ambitions.

The case for Paul running is that he’s simply a better politician than his father and would move the ball farther than either Ron Paul or Gary Johnson could. As a senator, he’d have the luxury of four years to mend fences with Kentucky voters. Paul could bring the constitutionalist message to the forefront of the Republican primary debates without getting sidetracked into theoretical discussions of libertarianism. And a premature presidential campaign in 1968 ultimately didn’t hurt Ronald Reagan.

To me, the biggest thing Paul has going for him is that he is perfectly attuned to the Tea Party GOP. He is actually saying something with a degree of specificity that puts to shame the current crop of GOP presidential contenders. He has, for instance, put forward a 5-year balanced budget. Among its high points:

SPENDING:

Brings spending near historical average in very first year

Reduces spending by nearly $4 trillion relative to the President’s budget

Achieves a $19 billion surplus in FY2016

Brings all non-military discretionary spending back to FY2008 levels

Requires the process of entitlement reform, including Social Security and Medicare, with final implementation by FY2016

Does not change Social Security or Medicare benefits

Block-grants Medicaid, SCHIP, foods stamps, and child nutrition

Provides the President’s request for war funding

Reduces military spending 6 percent in FY2012

Eliminates four departments:

Department of Commerce (transfers certain programs)

Department of Education (preserves Pell grants)

Department of Housing and Urban Development

Department of Energy (transfers nuclear research and weapons to Department of Defense)

Repeals Obamacare

DEFICITS/DEBT:

Never exceeds $12 trillion in debt held by public

Creates $2.6 trillion less in deficit spending relative to the President’s Budget

REVENUE:

Extends all the 2001 and 2003 tax relief

Permanently patches the Alternative minimum tax

Repeals Obamacare taxes

COMMENT

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Obama’s big shift?

Feb 7, 2011 15:53 UTC

The president told Fox’s Bill O’Reilly that he hasn’t shifted to the center. “I’m the same guy,” Obama says.  Right, he’s the same guy — a guy who will try and push through as much of his left-of-center agenda as he can.  If he had the votes,  for instance,  Obama would certainly be pushing a cap-and-trade energy plan or higher income taxes. But he doesn’t, so it’s time for Plan B.

And at the heart of that plan is winning reelection, a goal Obama apparently believes will be much easier if America’s CEOs aren’t railing against him. Conflicts with Corporate America cuts against the post-partisan mantle is his trying to reclaim.Thus his speech today to some 200 executives at the US Chamber of Commerce.  But here is the thing:

1) Obama should try and make these folks, at least some of them, angry by taking away tax breaks and subsidies in exchange for a lower corporate tax rate.

2) Fundamentally, Obama is skeptical  of markets which is why his way of embracing the private sector is via a grand, corporatist partnership with Big Business who will rent seek with the best of them. Established giants don’t want new competitors. They don’t want a constantly churning, entrepreneurial economy. The status quo is just fine for them, especially regulations that help preserve their advantage. Innovation can be a threat.

3)  When Obama decides to rely on markets rather than government for allocating healthcare resources, then I will acknowledge a shift to the center.

COMMENT

This from the author who thinks Reagan was a conservative. Obama has cut taxes for billioniares, signed a stimulus bill that was over 30% tax cuts, increased defense spending, expanded the War on Terror, surged in Afghanistan, signed a Republican health care bill, made the Too Big to Fail banks whole, proposed off-shore oil drilling, proposed cutting entitlements, frozen government pay, and just hired the CEO of General Electric and a Chief of Staff from JP Morgan Chase. You think he’s “left of center”? Well, perhaps. You think Paul Ryan is moderate.

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Why Obama’s magic number for reelection isn’t 270, it’s 215 (thousand jobs)

Feb 3, 2011 23:34 UTC

Team Obama would surely love to run a Reaganesque, “Morning in America” reelection campaign, cruising to victory by taking credit for a dynamic economic recovery. But for that scenario to play out — or anything close to it — the unemployment rate would have to drop a whole lot. (The president’s political advisers will be closely watching the January jobs report.)  In a new research note, analyst Matt McDonald of Hamilton Place Strategies, a policy advisory and strategic communications consultancy in Washington, makes the following points:

1) Usually in presidential election years, the magic number to watch is 270. But for 2012, the magic number may actually be 215. That is how many thousands of jobs the economy has to create every month for the unemployment rate to drop below 8 percent by Election Day 2012.

2) Since 1960, the unemployment rate has been above 7 percent during four elections: 1976,1980, 1984 and 1992. In three of these 4 elections, the incumbent party lost. Only in 1984 did Reagan win with 7.2 percent unemployment, which was in the context of a 1.3 percentage point drop in unemployment during the year prior to the election.

3) For President Obama, with a current unemployment rate of 9.4 percent, an unemployment rate below 7 percent is hard to envision by November 2012. However over the coming 2 years, he would see an improved political position from a significant drop in the unemployment rate. Current economic forecasting projects a fourth quarter 2012 unemployment rate of approximately 8 percent (CEA: 7.7 percent; CBO: 8.2 percent; Blue Chip: 8.4 percent). If the unemployment rate can break this 8 percent level, President Obama can credibly argue that he is making progress on jobs, even though the unemployment rate will still be historically high.

4) If we assume a straight-line projection of job growth and further assume 120,000 new entrants to the job market every month, the economy would need to create 215,000 jobs per month every month between now and November 2012 to get the unemployment rate below 8 percent. Every month we are above 215,000 new jobs, it gets a little easier to reach that 8 percent goal and every month we are below 215,000, it gets a little harder. This is the benchmark that interested parties should be watching tomorrow as the January jobs numbers are released.

McDonald does note a big complicating factor. Discouraged workers could rejoin the workforce as prospects improve. “This would have the effect of increasing the number of jobs needed each month to reduce the unemployment rate,” he notes.

Indeed, if the workforce had not shrunk so much during the downturn, the unemployment rate right now would be higher than at any point since the Great Depression. On the other hand, some economic observers, including those on the Federal Reserve, think the workforce may stay small. The longer people stay out of work, the longer they tend to stay on the sidelines since employers become biased against them. In addition, it’s unlikely that unemployed home construction workers or mortgage lenders will find their industries bouncing back anytime soon.

But whether Obama joins the unemployed in January 2013 may depend on whether 215,000 Americans find a job every month between now and Election Day 2012.

Democrat control of Senate could fall victim to Obamacare

Feb 3, 2011 16:37 UTC

Ed Carson of IBD’s Capital Hill blog, highlight the 11 red state senators who voted against repealing Obamacare:

Eleven Democrats up for re-election next year represent states in which Republicans won a majority of the 2010 popular vote for House seats: Florida, Michigan, Missouri, Montana, Nebraska, New Jersey, Ohio, Pennsylvania, Virginia, West Virginia and Wisconsin.

Especially vulnerable:

* Montana’s Jon Tester and Missouri’s Claire McCaskill won in 2006 with less than 50% of the vote.

* Ben Nelson of Nebraska may have sealed his fate with his infamous “Cornhusker Kickback” in exchange for being the 60th ObamaCare vote.

* Virginia’s Jim Webb, who narrowly won in 2006, is at least semi-vulnerable. And he could retire after a single term, some have speculated.

Meanwhile, a 12th red-state Democrat, North Dakota’s Kent Conrad, recently announced he would not seek another term. That seems a likely GOP pickup.

Some other longtime Democratic senators could choose to retire, especially if they face the prospect of a grueling campaign. For example, Wisconsin’s Herb Kohl will be 77 in 2012.

I know it’s early, but it would be  very surprising, I think, for Rs not to retake the Senate next year. The Dems really needed to make a better showing in 2010 given how many seats they have to defend in 2012 and 2014.

The tax deal and Obama’s reelection chances

Jan 5, 2011 15:42 UTC

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.

Like the economy, Obama is kind of stuck

Dec 22, 2010 19:54 UTC

Jay Cost thinks Obama, like the economy, is kind of stuck:

The macro trend, I would say, has essentially been flat for the last few months — as Americans have developed fairly stable opinions of the 44th president by this point that probably are not easily dislodged. In the long term, the way the president gets his numbers up will be to convince the country that he is a good steward of the economy, a view most of his fellow citizens do not hold at the moment.  This is why the tax cut deal was such a sensible compromise for President Obama to make, despite the criticism he received from his left flank.

rcp1

COMMENT

Kyle Ate: Sorry, but its working. Huge financial crisis that barely dodged the bullet in 9/08 isn’t coming back instantly. However, swift, capable gov’t action (by both parties ) averted collapse and we’re on the road back. Fix you character and ditch your instant gratification stuff.

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A brief rundown of the 2012 White House wannabees

Dec 22, 2010 16:30 UTC

Jonah Goldberg sizes up the possible GOP presidential contenders (presented in outline form by me):

1. By my count, 24 people benefit from nontrivial presidential buzz: Sarah Palin, Mitt Romney, Newt Gingrich, John Thune, Tim Pawlenty, Mitch Daniels, Mike Pence, Rick Santorum, Haley Barbour, Mike Huckabee, Bobby Jindal, Paul Ryan, David Petraeus, Ron Paul, Jeb Bush, John Bolton, Bob McDonnell, Jim DeMint, Chris Christie, Herman Cain, Gary Johnson, Judd Gregg, Marco Rubio and Rick Perry.

2. Rubio, Ryan and Jindal … are all wisely sitting out the presidential contest … though the GOP’s three golden boys are ripe vice-presidential picks.

3. Former Florida Gov. Jeb Bush and the governors of New Jersey, Virginia and Texas — Christie, McDonnell and Perry — probably aren’t running. … Also, there’s growing buzz that Huckabee … may not run because he’s got a big new contract with Fox News in the works.

4. DeMint … has said he’s not running but acts like he might be. … Gregg … acts likes he’s not running but hasn’t ruled it out. Pence … definitely wants to run but now may switch to the Indiana governorship.

5. Barbour … could be a front-runner (and a hilarious, adept debate opponent for Obama), but his plans remain murky.

6. In many respects, Thune is the GOP version of John Kerry: a candidate with presidential hair who seems “electable” despite not having done much.

7. That leaves us with a top tier of five front-runners: Romney, Palin, Gingrich, Pawlenty and Daniels. Romney is the organizational front-runner; Daniels is the first pick of wonks and DC eggheads; Palin probably has the most devoted following among actual voters; Gingrich will dominate the debates, and Pawlenty (vying with Daniels) is the least disliked.

I am beginning to think the field of legit contenders might actually be quite small in the end. But my dark horse entry is still Jeb Bush.

COMMENT

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Palin and Republicans

Dec 8, 2010 20:50 UTC

Public Policy Polling finds Sarah Palin underperforming among GOP voters:

ppp1

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