It's the Economy, Obama!

With the jobless rate at 9.1 percent, Obama's approval ratings below 50 percent, 60 percent believing the U.S. is on the wrong track, and only one-third of voters approving the president's handling of the economy, Obama could face a disaster in 2012 unless he devises a recovery plan, says Douglas E. Schoen.

06.07.11 5:22 AM ET

The report Friday that the economy had gained only 54,000 jobs in May and that unemployment has crept up to 9.1 percent should serve as a clear warning to the White House that not only has their economic strategy run into a problem, but their political strategy has as well.

Moreover, the administration’s cautiously optimistic approach of talking in generalities about emphasizing private-sector job development—as White House Chief Economic Adviser Austan Goolsbee said on Face the Nation over the weekend—and demonstrating a rhetorical commitment to job creation and regulatory reform will be of no great value if there continues to be the vacillation and unwillingness to articulate clear plans and policies that have been evident lately.

Put simply, the president must take the lead in working to develop a clear, proactive, positive strategy to revitalize the American economy and offer a long-term path to economic growth, tax reform, fiscal stability, and energy independence.

Fortunately for the Democrats, the Republicans themselves have not developed a strategy of their own.

But with more than 60 percent of Americans believing that the country is on the wrong track, and with only about one-third of the electorate saying they approve of the way the administration is handling the economy, it is becoming increasingly evident that there is not much more the Republicans have to do at this point—other than attack the administration’s economic performance.

In a certain sense, Howard Dean was right to say that Sarah Palin could beat President Obama under the right circumstances—although so far, none of the Republicans appears able to beat the president in one-on-one trial heats.

Indeed, what Dean should have said is that the only person who appears able to beat the president is the president himself—unless the administration changes course and adopts a profoundly different strategy and approach on fiscal matters than they have to date.

Here is why.

While it remains uncertain as to whom President Obama’s GOP challenger will ultimately be, his poor approval ratings—among all voters, and with Independents and whites specifically—in the most recent Gallup and Rasmussen tracking polls leave him deeply vulnerable.

Indeed, Obama’s job approval ratings have dropped below 50 percent in both the latest Gallup (47 percent) and Rasmussen (49 percent) polls.

But the real warning sign in the Rasmussen and Gallup polls is with whites and among self-identified Independents and those with no party preference. The president’s job approval is now at 42 percent among white voters, in both the Rasmussen Reports Presidential Approval Roundup for the first week in June, and Gallup’s weekly job approval average.

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Rasmussen's polling also provides clear guidance of what voters want. They are looking for lower rather than higher taxes, they are looking for cuts in spending rather than increases in spending—54 percent of voters in the most recent Rasmussen Reports poll said that generally speaking, tax cuts help the nation’s economy while only 21 percent said that they hurt the economy, and they said, 51 percent-24 percent , that decreases in spending will help the economy.

Moreover, recent polling underscores clearly that while voters may seem to favor higher taxes for the rich, in reality, when asked about redistribution in Gallup's 2011 Economics and Finance poll, conducted April 7-11, a plurality of voters overall (49 percent-47 percent) opposed taxing the rich to redistribute wealth. Indeed, a majority of whites (56 percent) and independents (53 percent) say that the government should not redistribute wealth.

Put simply, voters are and remain fiscal conservatives. That is why there is a reluctance to raise the debt ceiling in the absence of any spending cuts, and it is why voters look askance at any new proposals to expand the size and scope of government.

There is every reason to believe now that the administration’s failed economic policy and President Obama’s poor ratings on the economy could cost the Democrats dearly next November—unless the administration puts forth a series of bold, specific policies to manage and reduce the deficit, balance the budget, and get the country going again—something that has been absent to date.

The Democrats suffered a landslide defeat in the midterm elections because they lost the independent voters—who supported President Obama 52 percent to 44 percent in 2008—by a margin of 37 percent-56 percent. And in combined Gallup polls taken in May, the president’s approval among independents dropped to 38 percent.

And indeed, in a certain sense, these findings underscore how profoundly misguided a decision it was for the White House to abandon the Deficit Commission’s report and instead embrace a strategy of polarization.

To be sure, attacking the Republicans over the Ryan plan’s proposed overhaul of Medicare and Medicaid may provide political gain in the short term—as it did vis-a-vis Democrat Kathy Hochul’s upset victory in New York's 26th Congressional District. But in the longer term, it emphasizes that the administration has no program to revitalize America and strengthen our economy.

What then should the administration do?

President Obama needs to turn to themes he has previously touched upon but has not emphasized.

First and foremost, he must initiate negotiations with the Republicans on balancing the budget, and tie this to the longer-term issues of reducing the debt and deficit. Moreover, the president must embrace a plan that would seek to offer tax reform, lowering rates in exchange for getting rid of tax preferences, removing regulation, and recognizing that we do need to cut entitlements—as President Clinton himself made clear when he adopted a similar approach in 1995.

This means inviting the Republicans to negotiate different solutions such as health-care exchanges and interstate insurance purchasing plans that have some bipartisan support, and some possibility of producing consensus.

It means getting rid of the precondition that Republicans put tax increases on the table—as this is a deal breaker for them and the White House should know that.

More generally, the administration has to retrieve and reinvigorate its small-business initiative—calling for progress on stalled trade pacts, investments in roads and education, reworking the corporate tax code, and freezing discretionary spending to cut the deficit—which Obama underscored during his 2011 State of the Union Address in January and then promptly forgot about.

They need to underscore the need to embrace an extension of the 2 percent payroll tax cut, which expires at the end of the year, and extend it for at least another year or two, if not making it permanent.

More generally, they have to allow the immediate expensing of capital investment and begin an initiative to remove regulation as the president did back in February, and to specifically embrace initiatives to help small business.

Beyond that, the president should and must talk about the components of building a successful country, specifically revitalizing an educational system that is failing to keep America competitive, as well as offering a more liberalized visa policy for those with Ph.Ds and those who bring jobs to America. Put simply, we need a broad-based agenda that will increase employment and increase job opportunities sooner rather than later.

One of the reasons the Democrats have in large part managed to avoid more serious political problems with their partisan agenda is that the Republicans lack a comprehensive agenda of their own. By simply trotting out the Ryan plan and coming out for smaller government and lower taxes, they have failed in their own terms to embrace anything that would represent a jobs strategy for economic revitalization.

And indeed polling I have done for Newsweek/The Daily Beast shows that the Republicans are actually seen more negatively than the Democrats.

But ultimately, elections are referenda on the incumbent, and unless President Obama develops a plan to revitalize America that is fiscally prudent, pro-growth, and offers clear opportunities to expand opportunities, he could well suffer the fate that befell Jimmy Carter in the 1980 election.

Arielle Alter Confino contributed to this story