5 Economic Issues That Doom Obama to 1 Term

InvestorPlace.com ^ | Apr. 18, 2011 | Jeff Reeves

[neverdem]

Though 18 months out, narrative for 2012 elections is already created

As the old phrase about voter sentiment goes, “it’s the economy, stupid.” And like it or lump it, one of the reasons President Obama rode to victory in 2008 was a foot-in-mouth moment from opponent Sen. John McCain during the height of the market meltdown.

That famous gaffe was a quote from McCain that “the fundamentals of our economy are strong” while the Dow Jones tanked 500-plus points or over 4% in a single day on Sept. 15, 2008.

Whether McCain’s words were taken out of context – the senator claimed he was waxing philosophical about the fundamental strength of the American economy and its workers – is irrelevant. In politics, it’s less about reality and more about what the America people believe and what the media chooses to focus on.

I don’t pretend to know what will happen with the economy or the stock market between now and November 2012. But as a former opinion page editor for a daily newspaper, I’d like to think I have a pretty good sense for the behavior of politicos and the mainstream press. And based on current trends, here are 5 issues I think that are going to be front and center in the coming months as the presidential contest comes into focus.

And as you’ll see, all five of these issues could work decidedly against Obama’s re-election.

The Fed

Personally, I believe that criticism of the Federal Reserve is overdone. Every sane economist agrees that an independent central bank is crucial to a functional economy, though intelligent people can and will disagree about the level of oversight necessary for such an important institution.

But people like to blame someone in hard times, and with the dual mandate of both fighting inflation and fighting unemployment the Fed is the perfect whipping boy. Gasoline prices are soaring and unemployment remains stubbornly high as the sheer enormity of the unemployed means the recent jobs added to payrolls is just a drop in the bucket.

What’s more, voters don’t appreciate nuanced positions. As a friend of mine says, “ The chicken in the middle of the road gets run over.” Ron Paul and his tea party buddies have decisively staked out a position against the Fed – and as long as rhetoric doesn’t spin out of control with promises of a gold standard or legislation demanding the Fed chairman be subject to popular vote, Obama’s opponents have the high ground on this issue.

Unemployment

As I just mentioned, payrolls just can’t grow fast enough to erode the high unemployment rate. Consider that in March, about 216,000 nonfarm jobs were added – and that didn’t even move the needle from an 8.8% jobless rate. If the economy needs to add a million jobs a month to significantly draw down that glaring percentage that so easily fits into headlines and news teasers, Obama is in big trouble.

Logically, it’s not Obama’s fault. From December 2007 to October 2010, a total of 7.5 million jobs were lost in the U.S. The unemployment rate peaked in the summer of 2009 at about 10.6%, the highest since 1983, and the average unemployment rate across that brutal year was the highest average since 1948. That’s a heck of a deck to be playing with.

But we are a nation of fast food, short attention spans and instant gratification. Heck, four years ago the iPhone didn’t even exist! One presidential term is a lifetime to an electorate, and a lack of progress will be seen as a failure no matter how rough the situation was when the incumbent took office.

Family Finances

The average American consumer is poorer because of the financial crisis, according to a survey released by the Federal Reserve. How can this be, considering the market is off only about -13% from its 2007 peak?

Well, because housing values have fallen off a cliff – and if you’ve seen a 20% decline in the value of your $300,000 loan, that’s a cool sixty grand you’re in the hole on paper. Also, many folks had to tap 401k plans or savings to get through lean times due to a job loss. Lastly, while many savvy investors bought the bottom of the market in 2009 many others panicked and headed for the hills – or were left holding the bag on Lehman Brothers, Fannie Mae, AIG, Citigroup, GM or a host of other investments that could have crippled even a diversified portfolio.

Like the unemployment picture, a family’s rainy day fund or retirement nest egg can’t be replaced overnight. But unfortunately for Obama there is no wiggle room in the question, “Are you better off now than you were four years ago?” Considering that the worst of the financial crisis came to roost in 2009 via staggering unemployment and foreclosure trends, the answer for many voters will be a decided “no.”

U.S. Debt

If you look at any line graph representing U.S. debts, you’ll notice that the gut-wrenching climb started about 30 years ago – and aside from a tiny dip in the early 2000s, the trend has been steadily upwards year after year.

This is not President Obama’s fault. But it is now his problem.

However well-meaning the healthcare legislation was and however effective it would be in reducing costs over the next several years, it was poorly timed. Expanding government’s reach at the very moment America acknowledged how bloated federal spending has become was unwise. The immediate $787 stimulus can at least be defended with estimates of jobs and platitudes about how it was an immediate reaction to an emergency. No such luck with the slow-starting healthcare legislation.

What’s more, while I fully believe that tax increases will be a necessary part of balancing the budget and tackling our enormous debt, Obama’s suggestion of taxing higher earners alongside his spending efforts conveniently paints him as that old cliché of a tax-and-spend liberal.

Unfair? Incomplete? Sure. But that’s how elections are decided.

Gas Prices

Inflation could very well move from boring economic theory to serious campaign issue in the coming months. Most Americans don’t need an MBA to understand that food is costing more and coming in smaller packages , TVs and electronics aren’t as affordable as several months ago — but wages have remained pretty stagnant. In fact, in the last consumer price index report the real hourly wage was reported at November 2009 levels — despite a headline inflation number of about 2%.

Oil, and more specifically gasoline, is the biggest inflation story right now and could be even bigger in the run-up to Election Day.

Picture this TV ad in September of 2012 – first, signs of $4 gas prices in 2008 and soundbites of citizens complaining on the local news. Then, fade in video of $4 gas prices in 2012 and similar comments from select voters who take shots at the president.

Powerful stuff, eh? Anyone who needs strategists or campaign advisors for the upcoming election, contact me via information below.

Jeff Reeves is editor of InvestorPlace.com. As of this writing, he did not own a position in any of the stocks or funds named here. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.

[avacado]

I’d like to believe that but the clown is pulling a 47% approval on Rasmussen. Go watch the evening news on CBS, NBC, or ABC. It’s all unicorns and skittles.

[PetroniusMaximus]

1 Sociological Issue That Guarantees Obama 2 Terms

1. The abject ignorance of a large portion of the U.S. population.

[ex-snook]

Add another one.

Trade deficits

[MBB1984]

Five Factors that help Obama win a second term:

1. African Americans voting 95%+ for Obama
2. Hispanics, legal or illegal, voting 70%+ for Obama
3. Students recently indoctrinated by the left and unemployed voters 18-27
4. Labor Unions
5. State and Federal employees

[spodefly]

The propaganda machine for Obama is the biggest in human history. The major media in this country are stenographers for any utterance from the Hope and Change regime. And they will sacrifice any standards to spin for more government a la Obama ...

Furthermore, and I am not pleased to say this, but, half this country has their head stuck so far up their ass they are just looking for someone to tell them what to think. And who better than Obama’s stenographers.

It is an uphill battle for any Republican candidate

[geologist]

Pay attention to the man on the stage, Obama, the man behind most of our severe problems, and his actions behind the curtains. We must see how deadly are his intentions for America. We may not survive it.

[Old Teufel Hunden]

I noticed in the whole article, while the writer did not blame Bush, he claims all of this is not Obama’s fault. It just “happened”...

[neverdem]

I’d like to believe that but the clown is pulling a 47% approval on Rasmussen.

Obama approval now down to 41 percent: Gallup

Rasmussen will admit that sometimes you get a bad sample of likely voters. Gallup doesn't even use registered voters and historically has polls favoring rats.

Don't be so glum. Obama has lost the historic base of the rats, the Jacksonian Democrats aka bitter clingers. He's also losing support in suburbia and among working class whites.

[Cementjungle]

I’d like to believe that but the clown is pulling a 47% approval on Rasmussen

Government "workers", union "workers", welfare recipients, etc. are all guaranteed votes.

[A'elian' nation]

I do not believe these Affirmative Action polls. Never have.
People polled do not want to be construed as racist.
It’s that simple.

I believe Obama is doomed to be a one-term prez.
His free ride ends on November 6, 2012.
Although he will be in terminal vacation mode the day after, provided anyone notices the difference.

All you got to say is,
“Are you better off than you were 4 years ago?”

[ConservativeDude]

It is entirely possible that Obama can be defeated....it will be difficult, for sure.

But it is entirely possible.

[aegiscg47]

Agreed. The tone of the article was something like, "Obama is doing everything possible and we should give him a second chance!"

[Colonel_Flagg]

As I just mentioned, payrolls just can’t grow fast enough to erode the high unemployment rate. Consider that in March, about 216,000 nonfarm jobs were added – and that didn’t even move the needle from an 8.8% jobless rate.

And, of course, we all know that the real rate is much higher than that.

[brownsfan]

One issue that I fear will top the 5 issues, and lead to a second Obama term:

The American public has been successfully dumbed down by the public school system and is as ill informed and apathetic as any Marxist could ever hope for in an electorate.

[Uncle Miltie]

"Unemployment: Logically, it’s not Obama’s fault."

PAH!

Unemployment is entirely 0bama's fault at this point and will be especially at election time. His malfeasance on the Economy has caused a bad recession to become the worst recession of the modern era, and has specifically retarded job creation.

Job creation killers that are 0bama's Fault include:

1) 0bamaCare

2) Nationalization of Industries, including but not limited to:
a) Healthcare
b) Financial Institutions
c) Autos
d) Student Loans
e) Housing Loans (FHA this time instead of Fannie and Freddie)

3) Theft by Diktat:
a) BP
b) Chrysler bondholders

4) Tax Increases

5) Massive Budget Deficits (crowding out private investment)

6) Massive Government Spending(therefore especially wasteful)

7) Stimulus

What Entreprenuer in their right minds would hire under 0bamanomics?

Here are the results of this economic malfeasance: The destruction of American Lives on a modern historically unprecedented scale:

[A'elian' nation]

” The abject ignorance of a large portion of the U.S. population.”

Ooops, forget what I just said in post 11.

Ignorance and Bread and Circuses.
Spells the end of Civilizations.

[Lurker]

Every sane economist agrees...

So Frederik Hayek was insane?

[Uncle Miltie]

"Gasoline prices are soaring"

Rightly or wrongly blamed on the President:

[SW6906]

As I just mentioned, payrolls just can’t grow fast enough to erode the high unemployment rate. Consider that in March, about 216,000 nonfarm jobs were added – and that didn’t even move the needle from an 8.8% jobless rate. If the economy needs to add a million jobs a month to significantly draw down that glaring percentage that so easily fits into headlines and news teasers, Obama is in big trouble.

Logically, it’s not Obama’s fault. From December 2007 to October 2010, a total of 7.5 million jobs were lost in the U.S. The unemployment rate peaked in the summer of 2009 at about 10.6%, the highest since 1983, and the average unemployment rate across that brutal year was the highest average since 1948. That’s a heck of a deck to be playing with.

But we are a nation of fast food, short attention spans and instant gratification. Heck, four years ago the iPhone didn’t even exist! One presidential term is a lifetime to an electorate, and a lack of progress will be seen as a failure no matter how rough the situation was when the incumbent took office.

Notice he makes no mention of how Obama has been manipulating the unemployment numbers down by just subtracting jobs off the total. It would have made his point even stronger. I look forward to seeing candidates and commercials stating the "real" Obama unemployment rate.