In His Administration’s Own Economic Outlook, Signs of Obama’s Grim Re-Election Prospects

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Michael Scherer’s story in our new issue offers a great window into the Obama White House’s plans for taking back the initiative this fall after a fairly dismal summer. Michael shared part of his reporting online with this item on the solace the Obama team is taking from the historical examples of Franklin Roosevelt and Ronald Reagan, each of whom won re-election at a time of high unemployment. The idea keeping chins up in the West Wing is that an incumbent president who can credibly argue that things are getting better (and that the other party will make them worse) stands a reasonable chance of surviving a bad economy.

The theory makes sense. And the public is still wary of Republican economic policies. But it’s going to be awfully tough for Obama to make the case for steady improvement under his watch. That became clearer than ever on Thursday, with the latest gloomy economic projections by the White House’s Office of Management and Budget. The OMB now expects unemployment to average 9% next year, higher than it had previously envisioned, and to stay above seven percent until 2015.

When the “substantial” economic “turbulence” of the last two months are considered, the administration expects the economy to grow as little as 1.7 percent in 2011 compared to last year. That is down from a rosier projection of 2.7 percent growth, made in February.

That’s nothing compared to the growth rate enjoyed by Reagan in 1984 (7.2% for the year) and FDR in 1936 (13.1%). I suppose there’s still time for the economy to start turning the corner in a way that benefits Obama. But there’s still plenty of reason to think things might get worse before they get better, including the seeming Gordian knot of the Euro Zone’s financial crisis, which drags on the global economy and keeps the risk of a 2008-style economic catastrophe hovering in the minds of investors.

If the OMB projection is right, then, and bear in mind that official economic projections have consistently been too rosy since the great crash of 2008, the economy is likely to feel about as stagnant a year from now as it does today. That means the argument that the economy is improving will ring hollow, especially among voters jaded from hearing such talk for months now. (Remember the “recovery summer” of 2010?)

Which leaves Obama with the negative case, the argument that Republican policies got us into this mess and will only make things worse. I don’t discount the power of this argument (especially if Rick Perry is the nominee and Obama successfully paints him as an extremist.). But Obama and the Democrats tried that message in the fall of 2010, and it wasn’t nearly enough to save them. The haunting question for Obama is why 2012 will be any different.