Obama's One-Term Presidency

My friend Chris McClure, blogging at the home page of U.S. Senator John Cornyn, makes an interesting point on the conflict between sound fiscal policies and demands for large domestic spending increases:

When social engineering agendas drive the legislative process, we see an imbalance enter into fiscal policy. Such imbalances can overload the ability of monetary policy to make corrections and keep the economy functioning properly. Over time, continued pressure for sustained economic growth while creating an overburden of debt, creates a situation in which significant corrections must occur. When such corrections are further influenced by corrupt practices and insufficient oversight, significant economic turmoil will be the result ....

The social agenda espoused by the Democratic Party, coupled with the re-distributive schemes of their nominee for the Presidency [now President-Elect], would cause dire consequences to our economy if enacted. The solution to our current woes is to shift spending away from an inefficient government and into the hands of the people who earned it. Government should return to the role of oversight and policy rather than attempting to nationalize our financial institutions.

Taking this further, James Pethokoukis argues that the economic crisis is so severe that Americans may not see much improvement in their finances over the next four years. Thus, it's quite possible that voters will grow tired of the "Obama malaise," and return the GOP to power:

That's right, the "O" in "Obama" may stand for "One Term." For starters, there's a strong chance that when voters head to the polls on Nov. 2, 2010, they likely will still think the economy is awful. Not much debate about that. (Good chance the Democrats' two-election winning streak comes to an end.) And while voters may be somewhat patient for two years, patient for four years? Really unlikely. If history is any guide at all, voters may still be terribly cranky about the economy when they cast their ballots on Nov. 6, 2012 and thus likely choose the 45th president of the United States -- be it Mitt Romney, Sarah Palin, Bobby Jindal or some other Republican without "Bush" for a last name. Once again a "change" election for an impatient America. The same bad economy that doomed John McCain in 2008 will have sunk Obama, as well.

Here's the political and economic math: Let's assume the current downturn turns out to be as painful as the 1990-91 recession. It's an apt comparison. As Minneapolis Federal Reserve President Gary Stern said earlier this year," The situation we confront today is reminiscent, in several salient ways, of the headwinds environment that prevailed in the aftermath of the 1990-91 recession."

Among those "headwinds" Stern referred to: an imploding real estate bubble, a construction bust, a banking crisis, and a credit crunch. Sound familiar? The nation's gross domestic product fell 3.0 percent in the fourth quarter of 1990 and 2.0 percent in the first quarter of 1991. But even after the economy started expanding again, the unemployment rate kept rising until it hit 7.8 percent in June of 1992 vs. a low of 5.2 percent in June 1990. Recall that in January of 1992, President Bush, running for reelection, told New Hampshire voters that the economy was in "free fall" even though the economy was later shown to have grown at a robust 4.2 percent during the first quarter of that year.

See, 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. 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?

Paul Krugman proposed a range of New-New Deal economic and spending policies in yesterday's New York Times.

Name your Democratic Party big-government spending boondoggle, and it's there. Recall, of course, that by May 1939, Franklin Roosevelt's Treasury Secretary, Henry Morgenthau, was complaining, "We are spending more than we have ever spent before and it does not work." Likewise, this year's fiscal stimulus tax rebate checks did nothing to slow the economy's slide toward recession.

Government can reform current regulatory institutions to eliminate corruption, and put a floor under collapsing credit markets; and government can keep taxes low to allow families to keep more of their own earnings and stimulate small-business expansion. But what we're seeing from the radical leftosphere, progressive party activists, and liberal media pundits is a gargantuan push for massive spending entitlements that will put both the New Deal and the Great Society to shame.