The economy remains Obama’s biggest obstacle

Many observers feel that Barack Obama has a very good shot at re-election this fall as Mitt Romney — who often performs the best out of the GOP field in head-to-head matchups against the president — has given Democrats plent of firepower in recent days. But even with today’s good jobs report, the economy should be a concern for Obama’s campaign, reports Ian Swanson at The Hill:

Recent economic reports could have the Obama White House worried.

All of the reports suggest the pace of economic growth is still slow, and that unemployment could rise, and not fall, by the end of the year.
[…]
2012 has been a good year for markets so far, despite unease over Europe. Every major index reported strong gains in January, and the rally on Wednesday continued a good year. Improving 401(k) plans might put voters in more of a mood to give Obama four more years in November.

Still, there are plenty of reasons to think the markets and jobless rate will go in a different direction later this year.

Here’s why the White House should be nervous:

• The Federal Reserve has announced it will keep interest rates low through 2014, a sign of its pessimism about the pace of the economic recovery.

• The Commerce Department found the nation’s economy grew at a 2.8 percent rate in the fourth quarter of 2011, a faster pace than the rest of the year but worse than expected. If the economic growth slows in the next quarter, it will be tough to keep unemployment down.

• The Congressional Budget Office projected a wider budget deficit and rising unemployment for the rest of the year, with the jobless rate expanding to 8.9 percent by the end of the year, when Obama goes to the polls. Rising deficits and unemployment would give Romney and Republicans potent weapons to use against the White House.

• Housing remains a problem. The Case-Shiller index again found that home prices across the country fell 1.3 percent in November from October in its most recent survey. Until home prices rebound, voters will lack confidence in the economy’s future, and Obama needs them to feel better about the direction of the country.

The concerns are reverberated by recent numbers from Gallup out of key battleground states — including Colorado, Ohio, Pennsylvania, and Virginia — showing Obama’s approval rating upside down. Overall, President Obama can’t get his approval rating out of the mid-40s, which brings a bad omen of things to come.

Over at Real Clear Politics, Sean Trende argues that for all the pundits saying that Romney and Newt Gingrich are unelectable, Obama has just as much of a mountain to climb, if not more given the how the economy has performed in the last four years:

[T]here has been some good economic news lately. But the flip side of this is that we’ve heard it before: Late 2010 and early 2011 were filled with bullish reports on the economy, as was early 2010 (remember “Recovery Summer”?).

The bigger problem for the president is that things are improving too slowly for him to really reap the benefits. Take a look at the following chart, supplied by Jay Cost, which shows per capita real disposable income (a metric commonly used by political scientists in their models) from the start of each president’s term up to his re-election effort (LBJ/Kennedy are combined, as is Ford with Nixon’s second term).

Obama looks quite a bit more like Presidents Ford, Carter and Bush 41 than he does the presidents who have been re-elected.

And Obama will have to answer for running up massive budget deficits and making promises that he simply could not keep. His economic advisors may have convinced him that their economic models showed that the stimulus bill and increased domestic spending world help the economy, but Obama failed to grasp that he deal with real people and spending real money in the real world.

Will it be his “fatal conceit,” to borrow a phrase from F.A. Hayek? It’s tough to say right now. Republicans should have a huge window right now, but they aren’t giving Americans much of a reason to pull the trigger for them in the fall.


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