MORE good news for Mr. Obama….NOT!!! – The Enterprise Blog, American Enterprise Institute


With six months to go until Election Day, time just ran out for Team Obama to run any sort of plausible “Morning in America” reelection campaign. And it’s not just that the U.S. economy grew at a subpar 2.2% annual rate in the first quarter, according to the Commerce Department.

It’s that this may be about as good as it gets for the economy this year. Most analysts have been looking for the second quarter to be no better—if not worse—than the first. So we could end up having a first half of the election year with GDP growth near 2% or below. As Citigroup puts it: “… 1Q GDP data should limit remaining optimism that U.S. economic growth will accelerate significantly this year.” And IHS Global Insight says it’s “looking for second-quarter growth to be similar to the first—around 2%.”

How bad is that?

1. Research from the Federal Reserve finds that that since 1947, when two-quarter annualized real GDP growth falls below 2 percent, recession follows within a year 48% of the time. In other words, the U.S. economy may be entering a red zone where if anything at all goes wrong—like, say, a worsening EU economy and financial situation—it will lack the momentum to avoid another downturn. Indeed, Strategas Research thinks corporate profits may have declined on a quarterly basis for the first time since 2008.

2. And even if nothing else goes wrong, growth still looks to be exceptionally weak for the third year of a recovery. This is the 11th quarter of the Obama Recovery. Over that span, the economy has grown 7% total. During the first 11 quarters of the Reagan Recovery, the economy grew 18%, more than twice as much as the Obama Recovery.

3. The GDP report also shows the Obama administration needs to rejigger its economic forecasting models, which keep predicting a boom is right around the corner.

– In August of 2009, the White House—after having a half year to view the economy and its $800 billion stimulus response—predicted that GDP would rise 4.3% in 2011, followed by 4.3% growth in 2012 and 2013, too. And 2014? Another year of 4.0% growth.

– In its 2010 forecast, the White House said it was looking for 3.5% GDP growth in 2012, followed by 4.4% in 2013, 4.3% in 2014.

– In its 2011 forecast, the White House predicted 3.1% growth in 2011, 4.0% in 2012 and 4.5% in 2013, 4.2% in 2014.

– In its most recent forecast, the White House predicted 3.0% growth this year and next, and then back to 4.0% after that. Good luck with that.

In reality, the economy grew 1.7% in 2011 and even 3% is now looking way out of reach for this year.

4. Let’s say the 2012 economy heading into Election Day resembles that of the past three quarters. If you plug those numbers into the forecasting model created by Ray Fair of Yale University, Obama would get just 48.4% of the two-party vote, a decisive loss to Mitt Romney.

Even if growth perks up a bit from here, it seems unlikely that it will be enough to dent the unemployment rate or boost incomes.

President Obama could still win, of course. But given the current economic trajectory, he will be defying historical precedent if he does.

An expert, no holds barred analysis of the DISASTER we have in the White House!

More: The American Enterprise Institute

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s