It is far too early to open up the champagne … the U.S. economy faces real threats to our recovery … but from Obama’s point of view, the development of the past couple weeks that may be most important to his political future are the signals that U.S. growth may top 3 percent this year and that some economists are predicting it may go to 4. While the state and municipal financial crises, the budget deficit, the Eurozone crisis, the bubbles in the emerging world, spiking commodity prices and the potential for trade conflict or currency wars with China are all real risks, the news is better than it has been in a couple years and the outlook of business leaders with whom I have recently spoken is cautiously optimistic. If Obama uses a changed political mood and his momentum to go bold with his State of the Union and to really make an effort to implement the recommendations of the budget commission and to implement job creation initiatives (that don’t have to bust the budget) like the infrastructure bank, a program to attract foreign investment, reduced corporate taxes, a real effort to cut back regulatory impediments to investment, etc. … well, that could provide just the boost that will get markets believing again.
Bad Week for his Rivals and Adversaries
Not only was the progress for the president significant this week, it was not a good week to be his adversary or rival. Not only do they have to contend with a U.S. president with momentum but they have been creating trouble for themselves. And I don’t just mean Sarah Palin although, as I have already written, I think that particular inexplicable cultural phenomenon is done … at least until we get to “Real Housewives of Wasilla” in a couple of years. And I don’t just mean his other potential opponents or those on the right who were counting on being propelled into office on a tide of uncontrollable national anger and ugly rhetoric. That’s just become a whole lot more difficult. I also mean Mahmoud Ahmadinejad who was already losing ground with the world thanks to progress on the Iran sanctions but who will soon be seen as partially responsible for the potential debacle in Lebanon (as a supporter of Hezbollah.) I also mean the Chinese who went too far with their rebuff of Bob Gates and their flaunting their stealth aircraft developments and who helped make the case for those who feel the United States should be tougher on China. And I also mean the Democratic left who are seeing a more centrist president succeed (as more centrist presidents invariably do).
This is no time for complacency. It’s just one week. The next big challenge for the president will be a State of the Union for which expectations, post-Tucson, will be high both in terms of its potential emotional lift and in terms of whether it contains the kind of big ideas that a precariously posed economy desperately needs. But that’s a couple weeks from now. And the good news that most of the above steps … regaining his voice, making his team work to its full potential, riding some economic momentum … are all longer-term developments like to produce even more progress in the future.