April 5, 2010
Spoiling the SpoilsportBy Randall Hoven
I hate to do it, but I must be a spoilsport to the spoilsports. I'm afraid we are now in an economic recovery. What's worse, it will become apparent to the general public as we approach the 2010 elections. The message to Republicans: Don't gloat. Rather, gird your loins.
You can look at economic indicator after indicator, and the conclusion is apparent: The worst is behind us (at least for now). Real GDP, industrial production, and exports and imports all bottomed out several months ago, in June 2009.
Even jobs have bottomed out. The "establishment survey" showed that December and February were the low months of the Great Recession. March saw 162,000 jobs added. That cannot all be attributed to government jobs, either. Private industry added jobs in each month of 2010 and now employs 147,000 more than it did in December. The "household survey" shows even bigger job growth since bottoming out in December: 1,113,000.
Unemployment is considered a lagging indicator, but it reached its peak of 10.1% last October. It has been below 10% every month this year.
Pretty much no matter how you measure it, the Great Recession ended some time between June and December 2009 -- last year. I'm betting that the National Bureau of Economic Research says exactly that very soon. And my best guess of the NBER's best guess is June 2009.
As I write, the S&P 500 is up 46% from the day President Obama was inaugurated. It is up 74% from its low point in March 2009. And it is up over 5% in 2010 so far. The stock market is at a level not seen since September 2008, when George Bush was president and bailouts were king. Gloat over the polls on ObamaCare all you want, but the market does not seem spooked by them.
Happy days are not yet here again, but this business cycle hit bottom and is on the rebound. The real questions now are how good will it get and how long will it last?
Politically speaking, all the Democrats need is for the second dip of the double-dip to hold off until after November. Their story should be simple:
I could write their speeches for them. In fact, it's so easy that even a Democrat could do it.
Just to be clear, I don't actually believe any of that. The recession was just a recession. It would have been less bad if Bush had not passed the bailout and Obama had not passed the stimulus. I wrote the following in January 2009.
I would now, fifteen months later and in all humility, evaluate that statement as being just about exactly correct.
My theory is this: the government has to really screw up bad to choke off the market to near-death. Think Hoover and FDR combined. The market, like a living creature, hates to die. Bush and Obama together were only about 10% to 20% of Hoover and FDR together. So we got only a Great Recession (4% GDP decline), not a Great Depression (25% GDP decline). The market is gasping for breath, and Obama's shoe is still on its neck, but it's alive.
Besides, the real threat to the market is unsustainable government debt driven by entitlement programs, also known as the economic booby traps left by FDR and LBJ. Compared to the debt blob, even Bailout 1.0, Stimulus 1.0, and ObamaCare 1.0 together are mere bagatelles -- maybe a combined $3 trillion compared to a $30-$50-trillion debt problem.
That puts us in an "OK so far" economic condition: just recovering from an ugly business cycle, but waiting for the real storm to hit. It's the perfect time for an election...if you are a Democrat.
It's possible that things could take a turn for the worse in the next few months: perhaps a stock market collapse or the second dip of a double-dip. But do not count on such "luck" to bail you out, Republicans.
My head is still reeling from a financial system collapse and an unprecedented government bailout barely one month before the 2008 presidential election. If you recall, the news from Iraq had just turned good then, and the McCain-Palin ticket was a smidgeon ahead in the polls at that point. (Bush and Paulson couldn't wait one more month? But I digress.)
Now look for the opposite. Expect unemployment to go below 9% before November. Imagine how good 8.x% unemployment will feel, and how good a year straight of economic growth will feel. The easily swayed -- exactly that 20% of morons who decide elections -- will tend to believe that Obama really did do it, especially when dawn-to-dawn TV coverage reinforces that paradigm.
Remember, this is April. The good news needs to last only another seven months. And if this is an average recovery, or even a less-than-average recovery, then things will trend up for at least that long. And the pain was so bad that simply stopping the pain will look like progress.
Does that mean that Democrats have it made in the shade? Nope. The Tea Parties and the polls indicate that the opposition is both sizeable and zealous. But Republicans have a long way to go. Democrats have near-60% majorities in both houses of Congress now.
I stated the obvious Democrat talking points before: Blame Bush, etc. What should be the Republican talking points?
For my money, Paul Ryan gave the speech of the decade on March 31. Republican politicians and PR men should stop thinking on their own (as if they were!) and follow Ryan's script to the letter.
I believe that even the middle 20% of voters sense that something has gone wrong, that government budgets are out of control, that no one quite seems responsible anymore. That sense is what Republicans need to build on. And Ryan is superb at it.
Two more pieces of advice:
(1) For this 2010 congressional election, Republicans need to emphasize how well things ran when Republicans had Congress: 1995-2000 and 2003-2006. When Democrats bring their Blame-Bush knives, bring your Blame-the-Democrat-Congress guns.
(2) Republicans need to have an answer ready for "Why didn't you do, or even try to do, all these great ideas when you had the power?" I don't have the answer to that one. In fact, I'd really love to hear that answer.
Seven months. Game face. Showtime.