Is the Economy Starting to Rebound?

For President Obama last week was very good.  He buried the “birther” issue, humiliated Donald Trump and killed Osama Bin Laden.   His approval ratings shot up, and suddenly the GOP narrative of Obama as a weak vacillating President vanished.   However, the most important news for Obama’s political future came later in the week when the April jobs report showed over 240,000 new private sector jobs as the price of oil dropped from over $110 a barrel to under $100.

Ultimately killing Bin Laden and humiliating Trump won’t keep Obama in the White House in 2012.  Just ask President George H.W. Bush what his Desert Storm victory did for him.   It all depends on the economy, and right now there are signs that by 2012 the President may be able to tout a recovering economy.

For all the noise in political debate, talk radio, blogs, and the news, ultimately the best indicator of whether or not a President will be re-elected is the economy.   That’s even the case when an incumbent is not running.  In 2000 the very mini-recession caused by the bursting of the dot com bubble was enough to nudge Bush over Gore for his narrow victory.   In 2008 the economic crisis doomed McCain — besides his mishandling of it, it was perceived at that time as a GOP crisis since the President was George W. Bush.

Now the President is Barack Obama and though the recession itself is non-partisan (or perhaps bi-partisan — it’s a result of policies undertaken by both parties) it gets attached to the person in the White House, just as a football team’s success ends up being connected to the starting Quarterback.   Democrats can rail that this is unfair — that the worst point in the recession was the month Obama took office and that he can’t be blamed for the deep and long recession — but life is unfair.   Like it or not, that’s political reality.

President Obama will be harder to beat than other incumbents in jeopardy.  He’s still personally popular, has a first rate campaign team, and likely will raise a record amount of money.   Moreover the Republicans might end up shooting themselves in the foot and choosing a Palin, Bachmann or Gingrich rather than a serious Daniels or Huntsman.   But if the economy is still stagnate by the summer of 2012 the chances will be good that President Obama will end up with only one term, an astounding disappointment after he entered office with so much hope and fanfare.

On the other hand, if the economy starts to rebound it may be enough to keep him in office, even if the recovery is relatively tepid.  If job growth is real, the unemployment rate drops, and oil prices start to decline (which I suspect they will in the short term) the President’s PR team may be able to pull off a “morning in America” moment.    The recession was deep and difficult, Obama will say, but we’ve done what is necessary to come out of it, and the future looks good.  If that story is credible enough, he will be re-elected.

Ironically, that’s not something he can shape.   Economic performance in the short term is mostly outside the power of the Presidency.   In that sense Presidents are always political victims to conditions beyond their control.  Some, like Clinton and Reagan, benefit.  Others, like Carter and Bush the Elder, are harmed.   So right now President Obama’s electoral hopes rely in large part on things that are beyond his control.

  1. #1 by pino on May 11, 2011 - 17:40

    Ironically, that’s not something he can shape. Economic performance in the short term is mostly outside the power of the Presidency.

    Yes and no.

    There are events in the world that shape markets and futures. War in Libya, for example, increases the price of oil. How we treat our dollar can impact the strength of that dollar and again, the price of oil goes up or down.

    Not to mention that by election time, we’ll have had 3.5 years of Oabam; certainly enough time to change the path of such things.

    • #2 by Scott Erb on May 11, 2011 - 20:02

      A huge event like another war or unrest in the Mideast will have an impact. I doubt there will be any significant monetary policies that will affect the dollar. If jobs keep growing, then there will be less pressure on Bernake for another quantitative easing. Most people probably already know how they are going to vote. The ones that tip the scales one way or another are probably going to vote primarily on their perception of the economy — if its improving or not. Obama is helped by his personal popularity and given the economy his job approval ratings aren’t bad (Ronald Reagan at about this point was at 38% approval in 1983). But if the economy doesn’t improve, I don’t think that will help him. If the economy does improve in a way that seems significant, I think he’ll win pretty easily. The quality of the GOP candidate will make a difference, especially if the economy improves only a bit. A Daniels or a Huntsman would increase the chances for the Republicans to take the White House, I think.

  2. #3 by brucetheeconomist on May 12, 2011 - 01:39

    He may be suffering from the fact that recoveries, especially in employment, seem to becoming much more stretched out over time starting with at least the 1991-92 recession. The slow turnaround in employment made G. H. W. Bush’s talk of a recovery just work against him. The jobless recovery was also focused on a lot in the mid 2000’s when George W. Bush was seeking election. Obama may face the same risk.

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