The Key to Obama’s Re-election
Since this article was written last April the Q1 GDP has been revised DOWNWARD from 2.2% to 2.0%. The 2012 second quarter Q2 GDP was announced as only 1.5% annual growth.
The downward revision and the Q2 GDP both spell trouble for Obama.
The most important election news of the year came out on Friday. It was barely mentioned in the U.S. press.
Boil President Obama’s chances for re-election down into one number and that number is real GDP growth.
Real GDP growth for the first three months of 2012 was released on Friday. It was 2.2%. That part was on the news. What it means wasn’t.
Real GDP growth is the barometer of a nation’s economic health. Everything that affects its citizen’s fiscal well being is reflected in that one innocent looking number.
How Does GDP Growth Affect President Obama’s Electability?
Friday’s latest Quarter-to-Quarter U.S. Department of Commerce GDP growth chart tells all. This chart should have been shown on the national news. It wasn’t.
The simple chart shows real GDP growth by 3-month quarterly increments since near the start of the Great Recession of 2008.
The 2012 election is all about jobs and the economy. If the economy improves then the President will be re-elected. If the economy does not improve or gets worse then the President will not be re-elected.
The Hidden Secrets of the Chart
The chart is easy to understand. By traditional definition, a recession is two consecutive quarters of negative GDP growth.
Any bars below the zero percent line show a shrinking economy. Any bars above the zero percent line show a growing economy.
For example, for four consecutive quarters from 2008-Q3 through 2009-Q2 the bars are below the zero percent line. That marks the deepest depths of the Great Recession.
In just four sterile numbers it shows:
- The mortgage housing collapse
- The stock market crash
- The loss of about 8 million total jobs from December 2006 to December 2009
- The largest bankruptcy – Lehman Brothers – in U.S. history
- The near total collapse of the entire U.S. economy
Q4 2008 was the worst hour in the U.S. economy since the Great Depression.
The chart shows two partial recoveries since the dark days of 2008. The first peaked at 3.9% growth at the end of 2009. That is healthy GDP growth, but the jobs never returned in that first “jobless recovery”.
As a result the economy dipped again to a dismal 0.4% in Q1 2011 before the economy finally started showing weak, but broad positive signs of real life again.
The 2nd recovery apparently peaked at 3.0% late last year and is now on the decline once again.
That spells trouble for President Obama.
Today it looks like the 2nd economic recovery was weaker and was for a far shorter duration than the recovery in late 2009. Current economic indicators give little reason for optimism going forward.
There are still two more quarters of real GDP growth that will come out between now and election day.
Should those quarterly numbers drop further and joblessness remain high then its curtains for the Obama presidency.
Should those numbers turn upwards and employment increase then its party time in the White House come November.
It’s as simple as that.