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The Good Ol’ Days Are Long Gone

Posted on Tuesday, 9th August 2011 @ 01:39 AM by Text Size A | A | A

By JOHN HARWOOD

WASHINGTON—Here is the bad news forPresident Obamaand incumbents in both parties: it can get worse — and stay that way for a long time.

That might sound like catastrophic thinking after Mr. Obama’s nerve-jangling birthday week, during which he got several gag gifts: a near default, a 500-point market drop and the first-ever downgrade ofUnited Statesdebt by a majorcreditratings agency.

But step back from events this month, this year or even this decade, and a more ominous portrait comes into focus.

It shows an American economy under ever-increasing competitive pressure, demographic trends making those pressures more acute and a voting public facing repeated disappointment as it yearns for better times.

That disappointment may represent the long-term political consequence of a financial crisis andrecessionthat has forced the nation to finally come to terms with its economic vulnerability.

For a generation, “our economy has been, for the majority of people, a slow-growth economy,” said Robert D. Reischauer, who was the director of theCongressional Budget Office in the early 1990s. “But our standards of living have improved much more, due to some factors that can’t and won’t be repeated.”

 

Republicans felt the voters’ wrath in 2008, as Democrats did last year. There is no sign of a Morning in America in 2012, or anytime soon.

“We’re going to see turbulence” in more elections, Mr. Reischauer concluded. “It’s a very grim picture.”

Then and Now

Any American economy would suffer compared with the one that emerged as a dominant force after World War II. In 1960, according to theWorld Bank, the United States accounted for 39 percent of global economic output.

Millions of soldiers came home to attend college under the G.I. Bill, lifting worker productivity and expanding the suburban middle class. Annual economic growth topped 5 percent four times each in the 1950s, ’60s and ’70s.

Those trend lines eventually turned down. But changes in American society helped mask the effects.

While international competition shrank the American share of the global economy, women poured into the work force and gave more and more families two breadwinners instead of one.

While men’s median income declined slightly between 1970 and 1990, the median income for women rose nearly 50 percent. So household income rose.

While overall growth slowed — the economy expanded at least 5 percent in a year just once in the 1980s, and not since — so did the rate at which Americans had children. Smaller families stretched family incomes further.

And as increases in education and the number of women in the work force reached a plateau, cheap and easy credit encouraged Americans to consume more. So did the “wealth effect” from the Internet-fueled stock market of the 1990s, and the real estate boom after that.

From 1980 to 2005, personal savings as a proportion of disposable income shrank to 1.5 percent from 9.8 percent. All the while, politicians and voters grew accustomed to more government services than they were willing to pay for.

“The 2007-2009 collapse brought this era to an end,” Mr. Reischauer said. In the new one, ordinary Americans “are going to be very frustrated, because the political system can’t deliver the rising economic performance and living standards they’ve come to expect.”

Electoral Turmoil

That does not mean that Mr. Obama will lose his bid for re-election, though his approval rating in a New York Times/CBS News Poll last week remained 2 percentage points below the 50 percent mark.

Nor does it mean that Republicans will lose their House majority, even though the same survey showed a record 82 percent voter disapproval of Congress.

Given the advantages of incumbency, even sluggish growth and a glacial decline in the 9.1 percent unemployment rate could preserve the current divided government.

“Americans traditionally are much more interested in the direction the economy’s going than in the absolute level,” said Mark Mellman, a Democratic pollster. “The absolute level can be not so good, unemployment can be relatively high, and incumbents can still get re-elected as long as things are moving in the right direction.”

But it does suggest that after “change” elections in 2006, 2008 and 2010, stability is no longer the presumption.

Thus, most incumbents enter each contest on the defensive — from intraparty rebels in primaries if not from the other party in general elections. The opening for a third-party insurgency has grown wider should an independent candidate emerge with the right profile and financial backing.

“It’s a problem for everybody in office,” said Tom Davis, a former chairman of the National Republican Congressional Committee who describes himself as happily retired from the House.

“The political system, Republican or Democrat, over the last decade has delivered two failed wars, an economic meltdown, 20 percent of homes underwater, stagnant wages,” he said. “Voters look at the political system as a whole as just not giving them anything.”

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