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Good Week for the President, the Prime Minister, and the Economy

12:00 AM, Mar 17, 2012 • By IRWIN M. STELZER
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It’s better to be lucky than good. So goes the old saw. It’s better still to be both lucky and good, which is what Britain’s new ambassador here in Washington seems to be. Sir Peter Westmacott surely demonstrated just how good he is at what he does by setting up a dream visit for Prime Minister David Cameron. Photo-ops with President Barack Obama are surely more valuable to the prime minister than to the president, so getting the White House to go along could not have been easy. Sources in London tell me that the generous remarks by President Obama, praising Cameron’s personal courage, reliability, and other virtues, already has European leaders looking at and treating the prime minister with renewed respect. And Britain’s America-haters, who in the past cheered what they saw as the death of the special relationship, have taken to their columns to denounce the renewed friendship with an America that starts wars, kills innocent civilians, imprisons terrorists, and commits other terrible acts, including most notably remaining an ally of Israel.

Obama and Cameron

Perhaps equally important, Ambassador Westmacott is lucky: Obama has to be in as good a mood as he has been in months, and not only because his potential Republican opponents continue their efforts to destroy one another. Every new economic report and development signals continued recovery:

·     Share prices are breaking records, improving household balance sheets, and soothing the Wall Streeters whose feathers the president has ruffled with attacks on fat cat bankers.

·     The jobs market is improving.

·     Exports are booming, especially from farmers in states important to the president’s reelection prospects.

·     The auto companies that Obama claims to have saved by bailing them out are selling more vehicles than they ever hoped to sell at this stage of the recovery.

·     Retail sales increased in February at the fastest rate in five months.

·     American households and corporations have deleveraged—cut their debt burden—substantially.

·     Almost alone among the countries surveyed by Markit, new orders are rising in both America’s manufacturing and service sectors.

·     Almost all of the major banks passed new Federal Reserve stress tests that assumed a downturn that would take the unemployment rate to 13 percent, are now free to pay dividends or buy back their shares, and can continue the recent increase in lending to small businesses. Score one for bank bailouts, new regulations and any other thing the president chooses to cite as one of his achievements.

Even the cautious monetary policy gurus at the Federal Reserve Board are becoming a bit more optimistic. Like the church fathers who deemed it important to count the number of angels that dance on the head of a pin, the wise men of the Fed are given to fine distinctions. After a daylong meeting, they raised their forecast of U.S. growth from “modest” to “moderate,” whatever that means. 

Even more important for Obama is that despite becoming a bit more bullish at last week’s meeting the monetary policy committee did not announce any change in the Fed’s policy of keeping interest rates low until at least late 2014. So the president need not fear the fate of George H. W. Bush, whose reelection bid was damaged by a recession, triggered in part by a Fed decision to raise interest rates. Once the election is over, and if the politicians cannot tighten fiscal policy by attacking the deficit, the markets will take over, and the Fed might prove unable to prevent a rise in interest rates demanded by purchasers of the continued flood of treasury paper. Indeed, one more good jobs report might set just a rate increase in train.

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