In his State of the Union response the other night, Indiana Gov. Mitch Daniels neatly summed up Mitt Romney’s (who has a roughly 90 per cent chance of being the GOP nominee according to Intrade) economic case against President Barack Obama: “The president did not cause the economic and fiscal crises that continue in America tonight, but he was elected on a promise to fix them, and he cannot claim that the last three years have made things anything but worse.”
In other words, the Obama Recovery stinks. Even if today’s GDP report — for the fourth quarter of 2011 — shows 3 per cent growth or better, it would be just the fourth time that has happened since the economy began turning up in June 2009: 3.8 per cent in the fourth quarter of 2009, 3.9 per cent in the first quarter of 2010, and 3.8 per cent in the second quarter of 2010. But no 3 per cent-plus quarters since then.
The first nine quarters of the Reagan Recovery, by contrast, looked like this: 5.1 per cent, 9.3 per cent, 8.1 per cent, 8.5 per cent, 8.0 per cent, 7.1 per cent, 3.9 per cent, 3.3 per cent, 3.8, per cent, 3.4 per cent. In fact, the Reagan Boom went from the first quarter of 1983 until the second quarter of 1986 without notching a sub-3 per cent GDP quarter.
So while the Reagan Recovery quickly made up for lost years of growth, not so much for the Obama Recovery, as this chart in today’s Wall Street Journal makes clear:
And few economists are expecting the Obama Recovery to take off anytime soon. The IMF predicts just 1.8 per cent growth for 2012 (and that’s assuming no EU sovereign debt meltdown). And the Federal Reserve sees growth in the 2.2 per cent to 2.7 per cent range with unemployment around 8.2 per cent to 8.5 per cent. Ugh!
The WSJ offers two explanations for the anemic rebound:
Economists say the nature of the recession helps explain the slow recovery. Aftershocks from the financial crisis have left banks reluctant to lend, making it hard for companies, and especially start-ups, to get access to capital. The housing market, which has historically helped lead the economy out of recession, remains deeply depressed.
Many business leaders say they are also being held back by policy-related uncertainty, everything from the threat of new regulations and higher taxes to the fear that political gridlock could hamper the government’s ability to respond to a new crisis. Recent economic research has given some weight to those complaints. A study by a trio of academic economists found that policy uncertainty has risen in recent years, and that periods of uncertainty have in the past corresponded with rising unemployment and slowing growth.
Whichever explanation holds more weight with voters may go a long way toward deciding who’ll be America’s next president.