Another presidential “pivot.” Having “pivoted” from Europe to Asia, Barack Obama’s White House has announced another pivot. This one, according to Politico, “to re-focus his oft-meandering message back on the economy.” It seems that voters are less interested in Obama’s drive for gun control (he couldn’t rally many in his own party to that cause), or his continued effort to toss billions at renewable energy just when the country is set to become a net exporter of fossil fuels than in seeing the unemployment rate come down. “It’s the economy, stupid,” the campaign rule that kept Bill Clinton focused on what matters to voters, is Obama’s new mantra as he schedules a campaign-style tour to deliver perhaps half-dozen speeches to add to the one he delivered last week in which he said not very much – that’s the view of both supporters and opponents – in a talk that took over an hour, longer than his State of the Union message.
“Repackaged economic proposals that the President has offered for years” is how the Obama-friendly New York Times characterizes the description provided by Obama aides. An effort to get “Washington” to concentrate on things that matter to real people is how the president puts it, ignoring the fact that if he is pivoting to economics he must be pivoting from something else.
Why bother to take to the hustings to sell new wine (whine?) in old bottles? For three reasons. The first is that the president’s approval rating has slipped from 53 percent to 45 percent since the beginning of the year, the lowest level since late 2011. At this time in his second term, Bill Clinton was scoring 58 percent. Second, he is beset with scandals—“phony scandals,” as he characterizes them in his latest campaign swing. Just how “phony” is not clear; indeed, in at least two instances the president denounced the scandals before denying they were any such:
· The Internal Revenue Service has denied conservative groups the tax exempt status that it grants liberal organizations, a discrimination Obama initially called “outrageous.”
· The Justice Department tapped into reporters’ e-mails and labeled a Fox reporter a criminal and a flight risk, prompting the president and the most political attorney general in recent years to backtrack and propose legislation to prevent a recurrence of that attack on press freedom.
· It is now clear that the terrorist assault on our diplomatic mission in Benghazi and the slaughter of our ambassador and staff had nothing to do with an inflammatory video, as the president and his team, eager to claim that the war on terror was over, claimed.
Phony or not, these scandals are not what the administration wants to see dominating the news—well, not “dominating” but at least piercing the wall of silence the media erects between any bad news for the president and the public. Better to see stories about the president focusing on such plans as he might have to improve the lot of the middle class, a repeat of a theme that featured in his last two campaigns.
The third reason for Obama’s renewed interest in matters economic is that a new showdown with the Republican-controlled House of Representatives is looming. Sometime in the next few months America will hit the ceiling on its ability to borrow. Republicans are saying they will only raise the ceiling if Democrats agree to an equal cut in spending. For good measure many Republicans add that any spending they authorize for the fiscal year beginning October 1 will not include funds for the implementation of Obamacare, the president’s signature reform of the American economy, his legacy as he sees it.
The president says none of this negotiable, leaving Republicans to balance two conflicting pressures. One is from voters who will punish them if they refuse to raise the debt ceiling and appropriate funds that are needed to prevent a government shut-down. Another is from voters who heartily disapprove of the massive government intervention that Obamacare mandates. Some 54 percent of Americans disapprove of the law, with 40 percent favoring outright repeal. When the law was passed in 2010, 74 percent of moderate and conservative members of the president’s party thought it a good thing; that number has shrunk to 46 percent in the latest polls. Many Republican congressmen believe that these voters, 65 percent of whom say America is on the “wrong track,” will support then in the 2014 elections if they hold to their plan to defund Obamacare.
The unfortunate fact is that this new outbreak of partisan jockeying over raising the debt ceiling comes at a time when the economic recovery seems to be taking hold, but is sufficiently fragile to be derailed by another display of partisan brinkmanship. The president alternates between demonizing Republicans and offering to negotiate with them (but not over cutting spending), and Republicans say they don’t want to shut down the government (unless they must in order to cut spending). Why Republicans think it is a good idea to cut spending further I leave to other economists to explain, and why the new improvement in voters’ view of the economy is not buoying the president’s popularity or shifting some of is best explained by Karlyn Bowman, the AEI’s poll-interpreter and in my view, in which I am not alone, the best in Washington. She points out that although there is some good news about the economy, “In most people’s minds the recovery is tentative and weak. So no kudos for Obama.”
Meanwhile, in the real economy:
· Last month auto sales were at their highest level since November 2007.
· New home sales in June increased 8.3 percent, and the inventory of new homes relative to sales is at its post-recession low. The composite index of present and future sales, and of prospective buyer traffic now stands at its highest level since 2006, which Goldman Sachs’ economists see as “a favorable indicator for future housing activity… despite the [recent] substantial increase in mortgage rates.”
· The New York and Philadelphia Fed indexes of economic activity both jumped in June “pointing to a better manufacturing outlook,” according to Peter Boockvar, chief market analyst at the Lindsey Group. The Richmond index fell, but it is regarded as less consequential than either the New York or Philadelphia measures.
· The increase in average hourly earnings has exceeded the inflation rate for eight consecutive months, giving a bit of a lift to consumer buying power.
· Household debt is down to 2003 levels and corporate debt is below pre-bubble levels, giving companies plenty of spending power when business confidence returns.
· America is in the midst of an oil and gas boom that is creating jobs now, and lower energy costs in the future.
· The nation’s fiscal house is in better order than in a long time, a consequence of tax increases that Republicans opposed and spending cuts that have Democrats up in arms.
This is not to say that all is for the best in what is probably the best of the world’s major economies. Retail sales are weak, as are corporate revenues, and analysts fear that a bruising battle over the debt ceiling will keep businesses on the side-lines.
Most forecasters expect forthcoming figures to support the popular perception of a recovering but still very weak economy, one that grew at the pallid rate of less than 2 percent this past quarter. We will know more when new jobs data are released on Friday.