Monday, March 12, 2012

Stagnation Nation: Rising gasoline prices put Obama’s polls in reverse

By James Pethokoukis

Like I’ve been saying … (via the WaPo):

Disapproval of President Obama’s handling of the economy is heading higher — alongside gasoline prices — as a record number of Americans now give the president “strongly” negative reviews on the 2012 presidential campaign’s most important issue, according to a new Washington Post-ABC News poll. … Gas prices are a main culprit: Nearly two-thirds of Americans say they disapprove of the way the president is handling the situation at the pump, where rising prices have already hit hard. Just 26 percent approve of his work on the issue, his lowest rating in the poll. Most Americans say higher prices are already taking a toll on family finances, and nearly half say they think that prices will continue to rise, and stay high … the survey — conducted Wednesday through Saturday — finds 59 percent of Americans giving Obama negative ratings on the economy, up from early last month. Now, 50 percent give him intensely low marks, the most yet in a Post-ABC News poll, and a jump of nine percentage points.
The negative movement has also stalled what had been a gradual increase since the fall in the president’s overall approval rating. In the new poll, 46 percent approve of the way Obama is handling his job; 50 percent disapprove. That’s a mirror image of his 50 to 46 positive split in early February. The downshift is particularly notable among independents — 57 percent of whom now disapprove — and among white people without college degrees, with disapproval among this group now topping approval by a ratio of more than 2 to 1, at 66 versus 28 percent.
These groups are also the ones whose shifting support has re-shuffled prospective general-election matchups. Among registered voters, Obama is now on par with Romney (47 percent for the president, 49 percent for Romney) and Santorum (49 to 46 percent). Previously, Obama held significant advantages over both.
1. As the above chart shows, high gasoline prices are bad for presidential approval ratings (though the opposite tends not be true).
2. I think the White House has completely lost control of economic expectations. Avoiding recession is one thing. Returning to prosperity is quite another. Yes, the economy is growing. Yes, the economy is adding jobs. But the current situation is a far walk from a return to prosperity. The broadest official gauge of unemployment is 14.9%. Real after-tax per capita income, or real take-home pay, has fallen in two of the past three months and is down modestly over the past year. This sounds like stagnation rather than expansion. Last week, both Goldman Sachs and JPMorgan said they expect GDP growth of less than 2% in the first quarter. And here is former Obama White House economic adviser Austan Goolsbee yesterday on ABC News:
“I think the main thing that [President Obama] ought to worry anybody is that the growth rate is probably not as sustainable as at high a rate as it’s been, so the pace of expansion, which for six months has been pretty impressive, it may just slow down a bit,” Austan Goolsbee, now an ABC News contributor, said Sunday on “This Week.”
Goolsbee said he did not think the economy would plunge into a “double dip” recession, but warned that the growth rate would likely slow from 3 percent to 1.5-2 percent. He also said the unemployment rate, which could be vital to Obama’s re-election, could spike upward after six months of decreasing rates.
“As the economy’s improving, you’re also going to see, as you have the last couple of months, a whole lot of people coming out of the labor force, back into the job market,” Goolsbee said. “So the unemployment rate might actually go back up.”
3. The White House has continually overestimated the strength of the recovery. Growth of 4% or more is always just around the corner, according to Team Obama. In the 2010 Economic Report of the President, the White House econ team predicted GDP growth of 4.3% in 2011 (it was actually 1.7%), 4.3% in 2012 (good luck with that), 4.2% in 2013 and 3.9% in 2014. In the 2011 report, it was 3.1% in 2011, 4.0% in 2012, 4.5% in 2013, and 4.2% in 2014. And in the most recent report, the forecast looks for 3.0% growth this year, 3.0% next year, and 4.0% in 2014.
One more thing: Research from the Federal Reserve finds that since 1947, whenever two-quarter annualized real GDP growth falls below 2 percent, recession follows within a year 48 percent of the time. (And when year-over-year real GDP growth falls below 2 percent, recession follows within a year 70 percent of the time.)

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