Some Thoughts on Where We Are

These next 5-6 months will go a long way to determine what happens in the fall 2012 elections.  Much of what happens in 2012 will depend on whether voters feel that the economy is improving when they go to vote next November.  If they do, President Obama is likely to be re-elected.  If not, then his chances are even or even less than even. These next 5-6 months will be a continuation of the very consequential economic debate the country has been having since late 2009.  We will see the President's "jobs" speech next week; what will be a very difficult appropriations process; the new Super Committee process and potential "sequestration;" and then early next year we are back at it again with the State of the Union and budget submission to Congress.  The decisions made in this period will go a long way to determining whether the economy is improving in the fall of 2012 or not, and provide further opportunity for the two parties to define their approach to the single greatest domestic challenge facing the US today, getting the economy moving again and ensuring that every day people fair much better in the coming decade than they did in the last. 

Right now, 2012 is looking to be a true toss up, with the Presidency, Senate and House up for grabs.  Add in the first election after reapportionment, and 2012 looks like an all hands on deck election, with so much up in the air.  The volatility, and anti-incumbent sentiment, we've seen in the last three elections will likely remain unless the economy improves.  Add to that the new, plutocratic "Super-PAC" campaign finance laws and 2012 is shaping up to be a wild, volatile and consequential year. 

Heading into the fall economic debate neither party should be happy with where they are.  The President has to be worried with the weakening economy now, the troubles in Europe, the reckless intransigence and theological nuttiness of the right, and how the current deficit reduction promised in the new Super Committee process could, of course, make all this much worse.  Leading economists, including the Fed Chairman, have warned that what the US economy needs in the short term is more stimulus not austerity, but austerity seems to be where we are headed.  There is a real risk this fall that we see more political dysfunction and end up with more draconian cuts - something that will not play well with the markets or the public, and will certainly further weaken an already weakened US economy.

While we must put the nation on a more sustainable fiscal path, there is real political risk for both parties in the current deficit debate.  The current "cuts only" strategy coming from the right is neither economically desirable in the short term, nor is it politically popular.  Poll after poll tells the same story - the country wants their leaders to focus on jobs and wages, austerity is only supported by about a third of the public, mostly conservaitve Republicans, and the only things the public wants to see done to reduce the deficit are cutting defense and raising taxes on rich people and corporations.  The more intensely the public sees a political party identifying with an agenda that means less for them and more for the wealthy, the more likely it is we will see that party's poll numbers decline -- something that of course happened after the budget deal this summer.   If I were a Republican, I would be very worried about how far from both mainstream economic thought and public opinion their current economic approach is.  Their party already had very weak poll numbers, and this year's debate has driven these already weak numbers down even further.  As a result, the closer the eventual GOP nominee is to the current ideological approach of the Washington Republicans, I believe, the less likely they are to get elected next fall.  Unlike 2010, the economic views of the Republican Party will be well known by the voters in 2012, and while many in the GOP view the current economic debate as an opportunity I think it more a liability if they do not somehow shed their current anti-middle class approach.

Given all this, what is President Obama to do? I am quoted in an ABC News piece today about all this, and talked about it on Fox News yesterday.  My basic advice to the White House, echoing what Rob Shapiro has written of late, is that they have to create a clear contrast between what he wants and what they want.   If the President is to win the election next year, he will have to first win the economic debate with the Republicans, something, to date, he has not done.  My hope is that his speech next week makes a strong case for where he wants to take the country, as he did in the State of the Union address earlier this year, and makes very very clear the he is on the side of struggling people and communities in this time of great national challenge.  And he then takes this message and argument and pounds it home over the next 12 months, and as much as possible rejects the current austerity path offered by the right, a path for him that will neither be politically popular nor economically effective in 2012.

As I have written before, I have come to believe in a time when the greatest economic challenge facing the United States is our lack of a strategy to deal with the "rise of the rest" and greater global competition, austerity is a guarantor of accelerated national decline.   The only way we are going to succeed in the 21st century as we did in the 20th is by raising our game, by giving our workers and kids more; by making our infrastructure and networks the most modern in the world; by creating a digital age government that does more with less; by making the investments in R & D which have given us so much, including the Internet; by liberating ourselves from the 20th century energy paradigm which has become too expensive, too volatile and too dangerous for the planet; by continuing to reform our health care system so it covers more people, is less expensive and continues to lead the world in innovation.

I could go on.  But the bottom line for me is that it is a prerequisite for the President to win the economic debate with the right for him to win the election next year.   Given what is in front of us in the next 5-6 months, it is possible that debate will be won or lost by then.  So these are consequential months ahead for President Obama, and both political parties in a time of great volatilty and challenge here at home.