The End of the Obama Presidency?

The current Obama presidency came to an end last week. What it means for 2012 and his re-election bid is that for the first time I think there is a serious chance that he might not get reelected. The reasons for that are the economy, alienating his base, and potential white voter backlash.

In general it is hard to defeat sitting presidents. Yes, Carter and Bush I both lost, but it took bad economic conditions and a third party vote for Ross Perot to do that. Previous to that, Ford did lose but he was barely an incumbent and he pardoned Nixon, and LBJ opted not to run. However, before that, it was Hoover (1932), Harrison (1892), Cleveland (1888), Van Buren (1840) and John Adams (1800) who lost when running for election. The economy and major crisis seem to be the usual reasons for incumbents losing.

Kerry in 2004 is a testament to how difficult it is to defeat a sitting president. They have to make major mistakes or blunders to lose, or be so dragged down with the economy that their candidacy is destroyed by it. Obama faces both.

The economy remains a mess. In a couple of blogs ago I wrote about the persistent unemployment, the failure to address the mortgage market, and the perception that he favored the banks over the people. These problems persist. Yes, Obama will get some bump from the economy in the next year or so but short of a miracle too many people will be jobless.

Beyond the economy, two fatal blows were delivered. First the failure to repeal “don’t ask, don’t tell” means he has dramatically lost or alienated the young under-30 vote and the GLBT community. They supported him enthusiastically in '08 and stayed home in '10. The latter will be true in '12.

In addition, his compromise on the Bush tax cuts infuriated his liberal base. The cuts may still pass, but he threw Democrats and liberals under the bus in order to appease swing voters. The House refusal to bring the original proposal to a vote demonstrated the anger. Had this been a parliamentary system, the refusal to vote on it would have triggered a vote of no-confidence and a collapse of the government. That is what happened last week effectively.

The fatal error here is Obama alienated his base. They will not vote against him in '12, but certainly they will not come out strong for him. He is counting on them having no alternative and voting for him. Don’t count on it. Ignoring your base and raising expectations–only to disappoint–is the surest way to lose them.

Thus, Obama’s strategy? Hope your base holds their nose and votes for you in '12 out of fear of the GOP, and try to regain the swings voters. Preliminary polls suggest the swings like the Obama tax deal, but is it enough to swing them to his side? Maybe not.

Many who voted for Obama in '08 were whites so disappointed with Bush and the economy they were willing to take a chance. Fear and disgust melted some white opposition but they may not happen again. Obama may have a harder time getting their support.

So, how is the end of the Obama presidency? Obama is swapping one type of presidency for a another. If the narrative of the first presidency was change now it is survival. It is a defensive presidency, one aimed at governing with the support of the GOP and swings and not the Democrats. Why after two years he thinks he can win over the GOP is a mystery to me. Finally, I remain perplexed regarding the narrative that Obama has for the next two years. What is it?

A Note on Michael Bloomberg
Bloomberg has said no to running for president in '12. He has a great opening. A combination with Obama disenchantment, a GOP field that is ultra conservative, and the independent streak the NYC mayor has (plus his money), give him a great opening in '12 if he wants it.

Welcome to Hooverville

Whatever the fate the of financial reform bill in Congress, it does little to fix the short term problems with the US economy. Last Friday the news of weak job production followed up stories of declining consumer confidence and weakening new homes sales. Couple these together with signs of increased mortgage foreclosure and all the signs of a double-dipped recession are becoming more clear and real.

So what are Obama and Congress doing about all this? Not much. Obama proposes an anemic jobs bill that Congress cannot pass, new action to extend unemployment insurance is stalled, and there is pressure among deficit hawks to cut government spending now, well in advance of the economy sustaining itself. It seems as if the lessons of John Maynard Keynes have been lost as many rush to join Hoovernomics. Soon I bet we will pass a new version of Smoot-Hartley and we will be completely back to Depression era economics.

It is bad enough that the individual states are hurting recession recovery by cutting spending in order to maintain balanced budgets. These moves, while they sound fiscally smart, actually counteracted the federal stimulus law adopted last year. Instead of creating new spending they merely forestalled state budget cuts which are now coming in force this year.

These cuts will undo or undercut whatever good the federal stimulus did. Now with pressure mounting on the federal government to tackle deficits first, any effort to stimulate the economy at the time it most needs a second bounce will also be damaged. The assumption seems to be worries about inflation and belief that cutting spending and taxes now will free up capital for the private sector to grow. This is still the same old pie in the sky supply-side economics hope and belief that has not worked in the past.

There have been too many roads not taken since 2008 to help the economy. First there was the $150 or so billions stimulus in the spring, 2008. That measure failed as it was too small and too diffuse. I argued then the $150 was a waste and measures should have been taken to directly help the residential mortgage market.

TARP helped banks but did little to address the underlying problems with the mortgage market that caused all the problems. We have yet to address mortgage speculation, subprimes, defaults, and falling or negative equity. Both the short term and long term health of the economy needs to stabilize this market. Several times I have argued that this is a core issue and there still seems to be no clue or effort to address this problem.

The weak housing market is paralleled by a weak jobs market. There is no question that a real job bill (not just milk toast tax breaks for businesses) are needed. My laundry list of legislation for both the mortgage and labor market includes:

• Immediate moratorium on residential foreclosures for one year
• Require banks to renegotiate loans
• Federal support to reduce principal on many residential mortgages
• Federal jobs bill that consists of direct hiring for public works projects (A WPA for 2010 that is not just roads and highways).

My overriding goal? Keep people in their homes and get them to work. These are both good individual goals and socially smart in that they benefit us all. They address personal problems and market failures. Both require serious government investments in the short run before we worry about the longer term problem of deficits and inflation which are still distant issues.

Alas, if we do not do this, as I suspect we will not, we will remain trapped in Hooverville and in the economics that exacerbated the first Depression and which is in danger of doing the same here.