It’s Still The Economy, Stupid

Ronald Reagan is in deep trouble. He probably won’t be re-elected. He may not even run.

That was the conventional wisdom in January 1982, when Reagan delivered his third State of the Union address. Barack Obama is at precisely the same point in his presidency, but the conventional wisdom on Obama’s future is quite different. And that is hugely significant.

As different as Barack Obama and Ronald Reagan may be in political ideology, their presidential fortunes have been startlingly similar for a very long time.

With more than two-thirds of American approving of his performance, Obama was enormously popular when he entered the White House in January, 2009. Reagan came to power with only 51 per cent approval (as measured by Gallup). But Obama’s presidency started in the midst of a fierce recession. Reagan came to power after the recession of 1980 had ended and the American economy was recovering nicely. A hundred days into his first term, Reagan’s approval rating had soared to 68 per cent.

At the same point in his first term, Obama was at 65 per cent. That’s when the parallel between those two very different presidents begins.

In 1981, the U.S. economy faltered. Reagan was sunny, as usual. There won’t be a second recession, he said. But there was. And it was brutal.

Presiding over shrinking economies and growing unemployment lines, both Reagan and Obama saw their approval ratings fall steadily for more than a year and a half. In November, 1982, Reagan’s rating was a dismal 43 per cent. Obama’s in November, 2010, was 45 per cent. In midterm Congressional elections, Reagan’s Republicans and Obama’s Democrats were hammered.

After the mid-terms, Reagan’s approval rating plunged. By the end of December, it was 37 per cent. The Great Communicator’s State of the Union address didn’t even slow the free fall. At the end of January, Ronald Reagan’s approval rating was a wretched 35 per cent. That’s Jimmy Carter territory.

Inevitably, Reagan’s troubles led many pundits to conclude he couldn’t possibly win re-election in 1984. He may even fail to land the Republican nomination, they said. Others speculated Reagan would avoid humiliation by not seeking re-election. Among those doing the speculating was Nancy Reagan. Even Reagan’s longtime biographer, Lou Cannon, predicted that Reagan was unlikely to seek a second term.

Today, the buzz around Obama is quite different – thanks to Obama’s quite different approval rating.

Despite suffering a worse defeat than Reagan in the mid-terms, Obama’s approval rating did not slump as Reagan’s did. Instead, it edged up. By the end of December, it was 48 per cent. Today, most polls put it around 49 or 50 per cent. That’s a 12-point gap over the Gipper.

It’s a modest turnaround. But still, it’s a turnaround. Why did it happen?

Legislative victories in Congress, say the pundits. Obama tacked to the centre. He started communicating better. He re-connected with the American people. He got his mojo back.

These explanations mirror those offered to explain Obama’s long slide in the polls. He didn’t emote enough, pundits said. His speeches didn’t connect. He went too far left. “During the first two years of his presidency, Barack Obama failed to sell his agenda to Americans,” a pundit wrote Tuesday. “It cost his Democrats control of Congress.”

With respect, all this stuff is marginal, at best. At worst, it’s hooey. Neither Obama’s decline nor his modest recovery have much to do with speeches, politics, or mojos.

It’s the economy, stupid.

In 2009 and 2010, Barack Obama could have given speeches that put Shakespeare to shame. He could have played Congress like a Stradivarius. He could have had the mojo of Austin Powers. And his approval rating would have slid just the same. Indeed, with the United States enduring the worst recession since the Great Depression and an unemployment rate over 10 per cent, the wonder is that Obama’s numbers didn’t plunge even deeper.

And now, in the last couple of months, the unemployment rate and Obama’s approval rating have both shown some modest improvement. Occam’s razor, anyone?

The point is underscored by Ronald Reagan. In the second quarter of 1983, unemployment finally stopped climbing. Reagan’s approval rating stopped falling. In the third quarter of 1983, unemployment started falling. And Reagan’s approval rating started rose like Lazarus. It topped 50 per cent – where Obama is now – in November, 1983.

Of course Reagan went on to win a massive landslide in 1984. Does the fact that Obama is now well ahead of where Reagan was at the same point mean he will do the same? Or better? Re-election is looking increasingly likely. But a landslide is questionable. The recession that hammered Reagan’s approval rating into the floor was intensified by the high interest rates Federal Reserve chairman Paul Volcker used to strangle inflation. When inflation gave up the ghost and Volcker relented, the economy surged. Today, interest rates are at rock bottom so it’s hard to see how the economy could surge between now and election day, 2012.

But then, in early 1983, few people saw happy days ahead and the pessimists had a hundred reasons why things would get worse. So who knows?

The only thing we can say with confidence is that both the unemployment rate and the president’s approval rating were worse in January 1983, than they are in January 2011. And that as the economy goes, so goes Barack Obama’s fortunes.