[Posted by Karl]
“The overture has finished and now it truly begins,” an Obama adviser told ABCNews, referring to the healthcare, energy, and automaker debates to come.
Megan McArdle notes just how fantastical the math is behind Obama’s agenda:
So far, Obama’s only proposal for dealing with the funding shortage is a tax increase on high earners, leaving “95% of working families” untouched. But the math doesn’t work. In 2006, the latest year for which data are available, the top 5% of families took home a whopping 36% of national taxable income, and paid 20% of that, or around $600 billion, in Federal income tax. But even before the president’s ambitious health care plan emerges from the Congressional policy grinder, the CBO estimates that his budget plans to spend an additional $400 billion each year. He’s not going to get there with a small, or even a large, tax increase on high earners. For one thing, the share of national income collected by the top 5% has undoubtedly dropped sharply since 2006, because their incomes tend to depend more on capital and business income, and on bonuses, all of which have fallen off. (That’s why tax revenues fell off so steeply in 2001.) And work by economists Thomas Piketty and Emmanuel Saez suggests that the deeper the crisis, the longer and deeper the hit to top incomes: the lessening of the gap between rich and poor during the fifties and sixties may in fact have been largely attributable to the deleterious effects of the Great Depression and World War II.
Now, however, the bill for Obama’s central proposals is about to come due. Unless Obama thinks he can borrow something like a trillion dollars a year indefinitely, he is going to have to ask Americans to make sacrifices to pay for the goodies.
And the taxes needed to pay for the new programs are not the only costs he will ask us to bear. Like most as yet unimplemented programs theoretically designed to make the world a better place, a cap-and-trade regime for reducing carbon emissions polls well. But when Americans actually have to start paying more for gas, electricity, and heating oil, they will not be so enthusiastic — especially if their budgets are still shrinking. And if health care is not to carry a shocking price tag, it will have to achieve some sort of savings through rationing: drug makers simply don’t make enough in profits to foot the entire bill through lower pharmaceutical prices. Richard Epstein has argued convincingly that ClintonCare foundered because most American voters have health insurance they are satisfied with. In theory, they support a government health care program–but when they are confronted by the details of how their health care will change, that support evaporates.
Byron York asks:
Will Obama’s health care proposal, which will probably involve the government rationing medical treatment, make him more popular? Unlikely. Will his environmental proposal, which will result in higher energy prices for millions of Americans, make him more popular? Unlikely. Will his education proposal, crafted to safeguard the teachers’ unions’ interests, make him more popular? Unlikely. If Obama goes forward — “boldly,” as his supporters like to say — his popularity will suffer.
GOP strategists are looking carefully at the first months of Ronald Reagan’s presidency. In April 1981, Reagan’s job approval rating stood at 67 percent, with 19 percent disapproval. Like Obama, Reagan’s personal approval rating out-polled his policies. A year later, in April 1982, Reagan’s approval rating had dropped to 45 percent, with 46 percent disapproval.
At the beginning of his term, Reagan could legitimately blame Jimmy Carter for the mess in Washington. But at some point, the problem became Reagan’s, and when unemployment began to rise during Reagan’s watch, the GOP paid a political price. In the 1982 mid-term elections, the president’s party lost 26 seats in the House.
Today, the key for Obama, as it was for Reagan, is unemployment. The talking heads in Washington say unemployment is a “lagging indicator” of economic improvement. Maybe so, but the rest of the country doesn’t see it that way. “It may be a lagging indicator to economists, but to Americans out there, it’s a front-and-center indicator,” one plugged-in GOP pollster told me. If unemployment doesn’t improve by the end of this year, Obama’s popularity will drop.
Economists surveyed by USA Today increasingly say the outlook on unemployment is not good:
The unemployment rate will peak at 9.8%, according to their median forecast, up a full percentage point from the prior survey in January. Twenty-one economists predict the unemployment rate will top out at 10% or higher, according to the survey of 51 economists by USA TODAY April 16-22.
Economists also predict the jobless rate will rise for a longer time. Two-thirds say it won’t stop rising until 2010 or later, vs. 51% in January.
When that survey was completed, the conensus forecast was that the US economy shrank at annual pace of five percent; the latest estimate is now six percent. As the unemployment trend may be more politically salient than the rate, delays in economic recovery and re-employment cannot look good to Democrats facing re-election in 2010.