If next year the American people pull the plug on the Obama presidency, mark down the past week as the beginning of the end . . . and what looks like the real beginning of Tim Pawlenty's candidacy. Incumbency isn't merely a function of political inevitability but of the fact that a presidency commands potent tools of self-restoration. Barack Obama's decision to kill Osama bin Laden was one such weapon. But we now see that this welcome May Surprise was insufficient to thwart the one force bigger than the American presidency—the U.S. economy. As of this week, it's looking like a long mudslide through the economy to November 2012.
The Washington Post/ABC poll out Tuesday reported that the bin Laden uptick in approval for the president has washed away already; some 59% profess disdain for the president's mishandling of the economy.
The catalyst was last Friday's depressing numbers on new job creation. Instead of the 175,000 new May jobs some economists thought they saw in their liquid crystal algorithms, only 54,000 jobs materialized in the real world. As bad, the Case-Shiller index revealed a bad housing market getting worse. Also as bad, most leading economic indicators appeared to be leading from behind. The stock market, the last redoubt of the optimists, is going south. Austan Goolsbee, the president's top economic adviser, used the Sunday morning platforms to argue that the "variable" jobs numbers were "bumps on the road to recovery." Pro-administration analysts, including Mr. Obama himself, argued that the economy was battling tough but temporary "headwinds" such as Asian tsunamis or Midwest tornadoes that disrupt supply chains. In defense of the integrity of the government's data gatherers, the Bureau of Labor Statistics put out a statement that "We found no clear impact of the disasters on the national employment and unemployment data for May."
Barack Obama's worst week was about more than bad data. The two great legislative monuments to the first Obama term, the remaking of the health-care industry and the Dodd-Frank financial reform, look like they've got serious structural cracks. A McKinsey report estimates that a third of employers will abandon their health-insurance plans come 2014. On Tuesday, The Wall Street Journal reported that the failure (or inability) of Dodd-Frank's regulatory arm to write new rules for the $583 trillion derivatives market has the financial sector in a panic over its legal exposure.
The worst was yet to come: Mr. Goolsbee announced he was departing the White House for the irresistible pull of academic tenure. What this signifies is that Mr. Goolsbee, a reputable economist, knows that in terms of economic policy, the Obama armory is empty. From within the exclusively demand-side context of the president's economic policy, there are no more bullets in the carbines. This president is now virtually defenseless against the inexorable forces of the U.S. economy. All that's left is whatever comes of Ben Bernanke's 30 months of close-to-zero interest rates atop two Quantitative Easings, the greatest untested economics experiment in the history of the world.
No wonder Tim Pawlenty is smiling. Amid a news cycle whose message is "nothing's working," Mr. Pawlenty delivered a major speech on economic policy whose title could have been: All the Things Barack Obama Has Not Tried to Do to Lift the Economy and Never Will.
Whether Gov. Pawlenty's prescriptions—dramatically lower individual and corporate taxes, zero taxes on capital gains and dividends, sunset provisions for federal regulations and a growth-rate target of 5%—are provable as solutions is politically beside the point at this moment. As substantive brand differentiation, the Pawlenty speech was a success.
