If next year the American people pull the plug on the Obama presidency, mark down the past week as the beginning of the end . . . and what looks like the real beginning of Tim Pawlenty's candidacy.
Incumbency isn't merely a function of political inevitability but of the fact that a presidency commands potent tools of self-restoration. Barack Obama's decision to kill Osama bin Laden was one such weapon. But we now see that this welcome May Surprise was insufficient to thwart the one force bigger than the American presidency—the U.S. economy. As of this week, it's looking like a long mudslide through the economy to November 2012.
The Washington Post/ABC poll out Tuesday reported that the bin Laden uptick in approval for the president has washed away already; some 59% profess disdain for the president's mishandling of the economy.
The catalyst was last Friday's depressing numbers on new job creation. Instead of the 175,000 new May jobs some economists thought they saw in their liquid crystal algorithms, only 54,000 jobs materialized in the real world. As bad, the Case-Shiller index revealed a bad housing market getting worse. Also as bad, most leading economic indicators appeared to be leading from behind. The stock market, the last redoubt of the optimists, is going south.
Austan Goolsbee, the president's top economic adviser, used the Sunday morning platforms to argue that the "variable" jobs numbers were "bumps on the road to recovery." Pro-administration analysts, including Mr. Obama himself, argued that the economy was battling tough but temporary "headwinds" such as Asian tsunamis or Midwest tornadoes that disrupt supply chains. In defense of the integrity of the government's data gatherers, the Bureau of Labor Statistics put out a statement that "We found no clear impact of the disasters on the national employment and unemployment data for May."
Barack Obama's worst week was about more than bad data. The two great legislative monuments to the first Obama term, the remaking of the health-care industry and the Dodd-Frank financial reform, look like they've got serious structural cracks. A McKinsey report estimates that a third of employers will abandon their health-insurance plans come 2014. On Tuesday, The Wall Street Journal reported that the failure (or inability) of Dodd-Frank's regulatory arm to write new rules for the $583 trillion derivatives market has the financial sector in a panic over its legal exposure.
The worst was yet to come: Mr. Goolsbee announced he was departing the White House for the irresistible pull of academic tenure. What this signifies is that Mr. Goolsbee, a reputable economist, knows that in terms of economic policy, the Obama armory is empty. From within the exclusively demand-side context of the president's economic policy, there are no more bullets in the carbines. This president is now virtually defenseless against the inexorable forces of the U.S. economy. All that's left is whatever comes of Ben Bernanke's 30 months of close-to-zero interest rates atop two Quantitative Easings, the greatest untested economics experiment in the history of the world.
No wonder Tim Pawlenty is smiling. Amid a news cycle whose message is "nothing's working," Mr. Pawlenty delivered a major speech on economic policy whose title could have been: All the Things Barack Obama Has Not Tried to Do to Lift the Economy and Never Will.
Whether Gov. Pawlenty's prescriptions—dramatically lower individual and corporate taxes, zero taxes on capital gains and dividends, sunset provisions for federal regulations and a growth-rate target of 5%—are provable as solutions is politically beside the point at this moment. As substantive brand differentiation, the Pawlenty speech was a success.
There is, however, a serious policy implication inside the Pawlenty proposals. We are heading toward an election fought over the economy. That's good because ultimately this means the subject is growth. The one consensus that exists across the political spectrum is that strong economic growth eases many problems—from the entitlement burden to the tragedy of high youth unemployment.
The battle will be fought over economic growth and how we get it—Obama's way or something close to the opposite of Obama's way. On one hand is Barack Obama's government-led "investment" mix, embedded with spending raised to 24% of GDP. On the other is the alternative GOP vision, which is starting to gel.
The Washington Post this week ran a long article to prove (and lament) that the GOP's "anti-tax orthodoxy goes deep." But why stop there? Add to this the tea party's anti-spending orthodoxy. Now virtually all Republican candidates agree that the public sector's contribution to growth is to cut spending, while tax cuts should be used to rediscover the private sector.
This "orthodoxy" informs John Boehner's insistence that any increase in the debt ceiling be matched by real spending cuts. It informs black Republican presidential candidate Herman Cain's withering, and increasingly effective, rhetorical assault on Mr. Obama's obliviousness to the needs of the private sector. Like Gov. Pawlenty, Mr. Cain also would eliminate the capital gains tax and cut others to enhance business formation.
Barack Obama will have better weeks than this. On the available evidence, however, the trend lines for politics and the economy are becoming clearer every day.
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