Will the Economy Help or Hurt Obama?
Just when you thought you had survived another round of political slings and arrows, better known as an election season, another one beckons.
This writer won’t spend time handicapping who is going to win the GOP nomination, what GOP candidate has the best shot of beating President Obama or who Obama would have the easiest time against.
There are two reasons for shying away from the horse race aspect of the presidential contest: You don’t come to Credit Union Times for electoral handicapping, and speculation this far out is risky at best, foolhardy at worst. Remember all those geniuses who thought that Jimmy Carter would have a cakewalk against a washed-up right-wing former actor?
In keeping with the advice of a friend, who occasionally urges me to “stay in your lane,” this column will focus on the economic components of next year’s election.
Voters have a tendency to re-elect presidents. Since 1900, 15 presidents have sought re-election and of those 10 were successful.
During the past two and a half years, credit unions were, at the very least, on the administration’s radar screen. Administration officials came to the industry’s rescue during the corporate credit union mess and none of its proposals for overhauling financial regulations included killing the NCUA. In addition, the administration also endorsed a proposal for raising the cap on member business loans, although it didn’t push the issue very hard.
Conversely, the regulatory burden of credit unions, and other financial institutions, has increased during the Obama administration. The CARD Act and the financial overhaul bill (complete with a new regulatory agency to pump out even more rules) are some of the hallmarks of Obamanomics.
You can’t blame Obama for the debit interchange issue. Though his best friend in the Senate, Majority Whip Richard Durbin (D-Ill.) is the leader on the issue, the administration’s silence has been deafening. That’s because it isn’t keen on getting in the middle of a fight between retailers and financial institutions. It’s a no-win situation.
Alas, the world doesn’t revolve around credit union issues. If it did, you might see a commercial in which the narrator says, “Our servicemen and servicewomen risk their lives for our nation. And when they come home they deserve every opportunity to prosper. But some financial institutions aren’t making enough business loans to help our veterans. That’s why, if re-elected, President Obama will redouble his efforts to raise the cap on member business loans. Member business loans: Good for credit unions, good for our veterans, good for America."
Despite the absence of MBLs as an issue, myriad economic factors will contribute to the outcome of the 2012 presidential race.
While foreign issues may be a factor, as Bill Clinton’s advisers so succinctly said it in 1992, “It’s the economy, stupid.” That’s why the Obama team is no doubt sweating bullets about the possibility of facing the voters with an unemployment rate above 8%. It was 8.8% in March.
Though the government generates considerable economic data, the unemployment rate is often the figure that resonates most with voters.
Obama and his advisers can, however, take some solace in the fact that there isn’t always a correlation between mediocre employment numbers and a president’s political fate.
In October 1980, the unemployment rate was 7.5% and the aforementioned Carter lost to the one-time co-star of “Bedtime for Bonzo.”
During that campaign, Ronald Reagan gave this economics lesson: “A recession is when your neighbor loses his job. A depression is when you lose yours. And recovery is when Jimmy Carter loses his.”
The economy got even worse during the early part of Reagan’s presidency and unemployment peaked at 10.8% in December 1982. However, by the time Reagan faced the voters again, conditions had improved. His campaign ran ads proclaiming that it was “morning in America,” even though in October 1984, the unemployment rate was 7.4%. Reagan carried 49 states.
The first President Bush lost re-election in 1992 with an unemployment rate of 7.3%.
Of course, it’s much better to face voters with really low unemployment. President Clinton sailed to re-election in 1996 when unemployment was 5.2% and the second President Bush won in 2006 when the rate was 5.1%.
Since Obama won’t be blessed with those kinds of numbers, he will embrace economic initiatives that are popular. That’s why he has supported budget cuts.
The nation’s economic tumult and other factors guarantee considerable uncertainty between now and November 2012.