The New York Times – probably trying to buck up sagging liberal spirits – has an article which features the 2012 prediction of a Yale economist: Landslide win for Obama. How so? Well, “it’s the economy, stupid”. The Yale economist – Ray C. Fair – plugs in to his election model a GDP growth rate of 3.69% and, presto, people vote Obama ’cause he’s done such a good job.
Is this valid? Certainly, as far as it goes – if the economy improves and we really get growth significantly above 3% for some an extended period of time before November, 2012, then unemployment will go down, wages will go up and people will feel that things are getting better. Even if they are not back to where they were pre-Obama, there is a strong chance that in such a scenario, Obama gets re-elected. The key, though, is to have that level of growth for a long enough period of time to matter.
Are we likely to get such a thing? Fair thinks so – probably because he’s got a Keynesian model some where which says that if you do X amount of stimulus you’ll get Y amount of growth over a period of time. Of course, if Keynes was wrong and you don’t really get that kind of growth, then things might not work out so well for you. But even if Keynes is wrong (and he is) there still could be a bit of alleged growth coming from stimulus such as the Fed’s quantitative easing and continued borrow-and-spend by Treasury – after all, a trillion dollars or so of stimulus got us “growth” in 2010. Bogus growth, but growth none the less.
Keep in mind that the flip side of Fair’s theory holds true – if the economy is going well, Obama has a very strong chance of being elected; if, on the other hand, its in the tank, then he’s probably going to lose. And in both cases it is not absolutely important whom the GOP nominates (some can make it easier or harder, but the best candidate will have a hard time winning in prosperity, the worst will have a hard time losing in recession). Obama and Co are not entirely stupid and so probably realize this – how the economy is in 2012 will go a very long way in determining if Obama wins re-election.
Given this, there is every chance in the world that Obama, his Administration and the financial industry led by Bernanke will do what they can to prop up the economy. They can’t get new spending out of the incoming GOP House, but there is still plenty they can do. And they will do it – and it won’t matter if its legal or not. This is a Ruling Class facing political Armageddon – they won’t go out quietly. The economy really is Obama’s only hope; it is in the tank right now, Obama’s policies will likely put it even more so by 2012…but this won’t stop Obama and Co from trying and trying and trying their liberal prescriptions to try and get it off the ground (it won’t occur to them that they are just wrong; in other words, they are very unlikely to embrace conservative economic ideas – they haven’t the wit to make such a shift).
Could be an interesting two years – and, once again, I mean in terms of the Chinese curse, “may you live in interesting times”.
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