Obama's Economic Burden

Can the president win a second term?

Candidates for president generally blare recorded rock or country hits before their campaign rallies. At President Obama's appearances, expect a different form of music: whistling in the dark.

Amid grim economic news, Democrats contemplating his re-election bid find two reasons for hope. One is the multitude of weaknesses among the Republican presidential candidates, who might not be able to sell beer on a troop ship.

The other is that bad economic conditions need not be fatal—as demonstrated by Ronald Reagan, who presided over a serious recession in his first term only to win 49 out of 50 states in 1984. With more than a year to go, the economy has plenty of time to rebound, lifting Obama to victory.

There are only two flaws in this logic. The first is that Obama's economy makes Reagan's look like the end of the rainbow. The second is that it shows no signs of getting appreciably better.

At first glance, Obama's plight may not look so terrible. The unemployment rate in September was 9.1 percent, compared to 9.2 percent in September 1983. But those figures are snapshots that conceal the overall direction of the economy. At this point, Reagan's economy was roaring back to life. Obama's is curled up in the fetal position, whimpering.

In the first quarter of 1983, real gross domestic product grew at a pace of 5.1 percent, rising to 9.3 percent in the second quarter. In the first quarter of 2011, by contrast, the growth rate was 0.4 percent, and in the second, it was 1.3 percent.

The economy has been stuck in neutral not just this year but for a long time. Under Reagan, total output soon regained its pre-recession level. But as of the second quarter of this year, the U.S. economy was still producing less than it was before this latest recession hit in 2007.

That's why it feels as though the recession never ended. In a sense, it is still going on.

This bleak reality shows up in a dearth of jobs that the official unemployment rate doesn't fully capture because it omits people who have given up looking for work. The number of people employed in the United States dropped by 2 million in the Reagan recession. In the Bush-Obama downturn, the number plunged by 8.6 million. Today, it's 7 million below the previous peak.

A lot of Americans no longer show up in the jobless statistics because they have lost all hope. In normal recessions, the proportion of people in the labor force falls a bit and then bounces back. In this one, it went down and stayed down.

Before the contraction hit, 66.4 percent of all adults had jobs or were looking for them. Today, the figure is 64.2 percent. That may not sound like a big change, but there has been no comparable decline anytime in the past 60 years. It's a symptom of endless stagnation and profound despair.

Nor can we expect an early turnaround. Last month, the International Monetary Fund cut its forecast for GDP growth in the United States. This year, it expects the economy to expand by a puny 1.5 percent, and next year by 1.8 percent. In 1984, it grew by 7.2 percent.

Another big difference is that the Reagan recession was seen as painful but necessary—the price of halting the double-digit inflation that ripped through the economy under President Jimmy Carter. And it succeeded. But under this president, inflation has gone up. Under Obama, it's been all pain and no gain.

All these gloomy indicators are only partly the fault of Obama, who inherited an economic train wreck engineered by George W. Bush. But after four years in office, he will have to answer for them.

Solutions, as it happens, are either out of reach or nonexistent. Liberal economists think the economy needs a big stimulus program, which can't pass Congress. Conservative economists think it needs less regulation and lower taxes, which will not happen under Obama.

Other economists say weak, slow recoveries are an inevitable consequence of financial crises like the one the U.S. suffered in 2008. No matter what your school of economic thought, you will need to keep taking Prozac for some time to come.

It's always possible that Republican hubris or ineptitude will come to Obama's rescue. But if he wins the race, it appears, he will have to do it carrying a piano on his back.

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