‘He Kept Us Out Of Depression’ Vs. ‘He Kept Us From Prosperity’

Both The New York Times and The Wall Street Journal today have stories looking at the fragility of the U.S. economic recovery. The NYT:

Some of the same spoilers that interrupted the recovery in 2010 and 2011 have emerged again, raising fears that the winter’s economic strength might dissipate in the spring. In recent weeks, European bond yields have started climbing. In the United States and elsewhere, high oil prices have sapped spending power. American employers remain skittish about hiring new workers, and new claims for unemployment insurance have risen. And stocks have declined.

And the WSJ:

Rising layoffs, falling home sales and slowing manufacturing activity are sparking fears that the economic recovery is headed for a springtime stall for the third year in a row. New data Thursday provided fresh evidence that the job market is losing the momentum it built earlier this year, which could pressure fragile housing markets that have been showing signs of life. Separate reports this week suggested that the factory sector, a source of strength in the recovery, now is being hurt by weak growth overseas.

The above chart illustrates research from the Federal Reserve finds that that since 1947, when two-quarter annualized real GDP growth falls below 2%, recession follows within a year 48% of the time. (And when year-over-year real GDP growth falls below 2 per cent, recession follows within a year 70% of the time.)

Right now, the economy is probably growing at a pace of between 2% and 2.5%, just a notch above sputter speed, just outside the recessionary red zone. But to many Americans, this growth surely feels like stagnation rather than a strong recovery. Incomes are flat to falling. And the unemployment rate is stuck above 8%. In the recent CBS News/New York Times poll, 60% thought America on the wrong track, 30% on the right track.

So which argument will voters find more compelling in November: a) “Obama, He Kept Us Out Of Recession” with the parenthetical (“so please be patient”) or  b) “Obama, He Kept Us From Prosperity” (“and his time is up”). Both present the election as a referendum on Obamanomics, which is what I think the election will be about.

This post was originally published by The American Enterprise Institute’s Blog.

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