Ryan Avent Says: In a Sense, Obama Deserves to Lose in 2012
RA:
BARACK OBAMA has had, by many measures, a fairly successful presidency.... [But] it surely won't help if Mr Obama is perceived as being complacent on the economy. Given the lame proposals emerging from the White House these days, it's hard to imagine how he won't be. According to some polling, perceptions of the president's handling of the economy are at their worst ever.
I don't know why Mr Obama has been complacent. Christina Romer talks here about the battle between forces within the administration wanting to focus on growth and those most worried about the deficit. That Mr Obama moved so decisively, and so early, toward a deficit-cutting orientation suggests that over-optimism has been part of the problem. But by now, that optimism should have dimmed in the face of the facts on the ground.
Mr Obama isn't doomed, and it's not hard to imagine an economic scenario that works for the president.... But there are enormous downside risks.... Government spending cuts are now a drag on growth, and new cuts in any debt-ceiling agreement will add to these headwinds. If a deal isn't immediately reached, the situation could be worse still.... And there's also the risk that America's economy will lapse back into falling growth expectations, as it did last year, and that the Fed will prove reluctant to act again.
Given all of this, what is Mr Obama's plan? When Americans look at him now, what does he want them to see? Having bought so completely into the story that immediate deficit-cutting is necessary, Mr Obama can't easily demand new stimulus. At best, he can argue that his painful cuts are better in some way than those proposed by Republicans. "I'm not as bad as the other guy", is not a winning incumbent message when voters are upset.... Right now, the Obama administration seems short of economic ideas and (perhaps worse still) uninterested in labour market troubles. His Republican challengers aren't offering anything better. But Mr Obama has made himself extraordinarily vulnerable on the economy, and if he loses his job as a result he has only himself to blame.
The five things to do are: 1) recess-appoint qualified Federal Reserve Governors who understand the macroeconomics; 2) take as much risk as possible onto the Treasury's balance sheet so that the skittish private sector does not need to hold it; 3) use FANNIE and FREDDIE to goose the housing market; 4) have Tim Geithner say that at the moment a weaker dollar is in America's interest; 5) pray that the bond market does not panic.
Announcing that the administration is pivoting back to jobs but is--as it has been since day 1--hobbled by congressional procedural delays would not hurt either, nor would sending an infrastructure bank proposal up to congress...
Note that all of these do not require congress to do anything...
