The White House and Democrats are having another good laugh over Mitt Romney’s latest gaffe when he said, “I’m not concerned about the very poor [because they have a social safety net to catch them]. The former Massachusetts governor, who just scored a crucial win in the Florida GOP presidential primary can’t seem to avoid shooting himself in the foot, even when things are looking up.
But frankly, President Obama’s advisers aren’t much better at avoiding self-inflicted political wounds. While Democrats are rightfully heartened by a few positive signs in the economy after three dreadful years, presidential aides are once again raising unrealistic expectations about unemployment heading into the teeth of a tough reelection campaign – or so it would seem. Jim VandeHei, the savvy executive editor of POLITICO, wrote today that “Obama advisers have told us repeatedly on background that if unemployment is above 8.5 percent in the final months of the campaign, it will be extremely hard, if not impossible, to win.”
Say what? VandeHei’s was making the point that Obama and his political team are being dangerously Pollyannaish about the president’s reelection prospects, considering a series of upcoming economic indicators that may dampen voters’ enthusiasm for administration policies. Since anticipating what the unemployment rate will be ten months from now is about as easy as predicting where the stock market will be, why would Obama advisers arbitrarily set a make-or-break unemployment rate for the campaign?
The White House press office referred a question about the POLITICO report to the Obama campaign organization in Chicago, and a spokesman there denied the report outright. “This is not true, and POLITICO has been informed it is not true,” the spokesman said.
Hmm. It may take a while to sort out precisely what Obama campaign advisers have been saying on background about the effect of the unemployment rate on the November election. The jobless rate for January will be released on Friday. A poll of economists conducted by Dow Jones shows a consensus forecast that the rate will inch up to 8.6 percent from 8.5 percent. Whether or not this proves to be accurate, it is safe to say we won’t be seeing a significant dip in the unemployment rate before the November general election.
The Gallup organization is also signaling an upward drift in unemployment. The polling organization reported today that without seasonal adjustment, the jobless rate increased slightly to 8.6% in January from 8.5% in December. The percentage of U.S. employees who are working part time but want full-time work increased sharply to 10.1% in January, from 9.8% in December. The January reading is also substantially higher than the 9.1% of January 2011 and is the highest percentage for this segment of the workforce since Gallup began monitoring it in January 2010.
And the news gets worse. The new Congressional Budget Office report out this week that projected the federal deficit will top $1 trillion again this year also outlined some sobering news on the employment front. The CBO projected the economy will grow just 2 percent this year and unemployment will actually rise to 8.9 percent.
“The continued slow recovery that CBO projects for the next two years reflects the lingering effects of the financial crisis and the recession, as well as the fiscal restraint that will arise under current law,” the report explained. “Considerable slack remains in the labor market, mainly as a consequence of continued weakness in demand for goods and services. In CBO’s forecast, the unemployment rate remains above 8 percent both this year and next.”
Obama wisely has been circumspect in discussing the economic future, especially when it comes to jobs. During his address to a joint session of Congress late last month, Obama cautiously observed, “The state of our Union is getting stronger,” not that the economic recovery is going gangbusters. And he acknowledged that while “we lost another four million jobs” early in his administration “before our policies were in full effect,” in the last 22 months businesses have created the most jobs since 2005. So setting election year targets for unemployment or any other economic indicator would seem like a bad move – on or off the record.
That is how the Obama administration got into trouble early in 2009, when the President was pressing Congress to pass an $825 billion economic stimulus package. Christina D. Romer, then the chair of the Council of Economic Advisers, produced a report estimating future unemployment rates with and without a stimulus plan. Their estimates, which were widely circulated, projected that unemployment would approach 9 percent without a stimulus, but would never exceed 8 percent with the plan.
In fairness, the economy was falling at a nearly 9 percent rate when Obama took office, not the 4 to 5 percent estimated by the Commerce Department, which was the basis for Romer’s highly optimistic projections that unemployment wouldn’t go over 8 percent. It was only by mid-year, after the stimulus had already passed, that the true depths of the recession became known, and it wasn’t until last year that the depth of the downturn was quantified by the U.S. Bureau of Economic Analysis.
But when unemployment exceeded 9 percent in 2011, long after Congress had passed the stimulus plan, Republicans seized on Romer’s original forecast in making the case that Obama’s anti-unemployment policies were an unmitigated failure.