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Morning Jay: Obama's Achilles' Heel?

6:00 AM, Mar 25, 2011 • By JAY COST
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There are three significant issues or factors that will keep President Obama from forging a coalition of almost-everybody, à la Reagan in 1984 or Johnson in 1964, in the 2012 election. The first is the continuing weakness of the economy. Obviously, jobs remain a problem – and this weakness is also manifested in the rising cost of gasoline and food. The second is the president's health care bill. And the third is the budget deficit.

Barack Obama,

For a while, I had thought that the economy would be the president’s biggest problem, followed by health care and the deficit. But while the economy will still to be a drag on Obama (Wells Fargo predicts 8.2 percent unemployment by the end of 2012 while the consensus of Wall Street Journal economists puts it at 7.7 percent on Election Day – both estimates are higher than anything we've seen in a postwar election), I am increasingly of the opinion that the budget deficit might be the number one problem for this president in his reelection bid.

This runs contrary to many statistical models of presidential elections, which will tell you that the structural forces that shape outcomes are the number of terms of his party in office, casualties in foreign wars, and the performance of the economy. However, I generally have a low opinion of these models, and I think they are quite poorly suited for dealing with the politics of deficits. Here are two reasons why:

First, they usually try to predict the president’s share of the two-party vote, which means that third party candidacies are ignored. That includes the peculiar phenomenon of Ross Perot in 1992, wherein an eccentric Texas billionaire managed to get the votes of nearly one out of five citizens based largely on an anti-deficit campaign.

Second, these statistical models have an extremely difficult time accounting for unprecedented events. Constants cannot explain change, and the general outlines of the American budgetary situation had been constant, more or less, for 40 years. But we have broken new ground in the last few years, as the following chart suggests:

If we think of the deficit as a normally dormant issue that only intrudes upon the political discourse when it grows well beyond the long-term historic average, then the Perot candidacy suddenly begins to make sense. It was a reaction to unusually large budget deficits in 1991 and 1992. The deficits in these years were still smaller than in the mid-1980s, which suggests that there is no automatic trigger for the deficit to emerge as an issue -- but the fact that Perot was able to exploit it is very telling for 2012, when the deficit will be much larger than anything we have seen (excluding 2009 and 2010, of course). Indeed, this chart indicates substantially larger deficits than normal for the next couple years with a "new normal" deficit over the long term that is nearly twice the historical average (and growing by the end of the CBO projection window). 

If these projections are still valid by 2012, it will be bad news for President Obama. There are four major reasons why.

First, the budget deficit is a visceral issue in many respects. Everybody understands this on a gut level because we all have to balance our own books. We also appreciate the consequences of what happens when we consistently take in less than we put out. The government can't go bankrupt like private citizens, but it is still bad news.

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