The RNC reacted to December’s weak employment report with a press release blaming President Obama for “single handily preventing [sic]“ a recovery in the job market. Is that really wise? In the last issue of NR, Ramesh Ponnuru answered: probably not.
Ramesh’s caution springs from his optimism about the resilience of the U.S. economy. “The conventional wisdom has been that this recovery will conform to the pattern of slow job growth set by the early stages of the last two, which started in 1991 and 2001,” he wrote. ”But there is some reason to think that sharp recessions tend to be followed by strong recoveries (as happened soon after those 1982 elections).”
“The dangers for Republicans should be obvious,” he continued. “Their message now is that Obama’s policies are failing because unemployment is high. If unemployment starts to fall rapidly, Obama will, as president, naturally reap some of the credit. But he will reap an extra share because the Republican message will be discredited.”
It is wise to be cautious – and the RNC is certainly overstating the extent to which Obama is to blame for lingering high unemployment — but unlike Ramesh, I think a strong, jobs-full recovery is unlikely, and I think it’s fair to lay some of the blame at Obama’s feet.
First, why I’m not as optimistic as Ramesh: Among other reasons, I find this chart persuasive:
There are other reasons to think that, even with moderate GDP growth, unemployment could remain at 8 or 9 percent for the rest of the year. Home prices are likely to stay flat, i.e. the asset inflation that drove consumer spending during the credit bubble isn’t there to drive it now. The stock market has rallied, but an analysis of economy-wide stock prices to corporate earnings indicates that stocks might be overvalued. I tend to think that’s the case. Additionally, the number of people dropping out of the workforce is still quite high. As James Pethokoukis noted today, a growing economy will draw these discouraged job-seekers back into the labor force, offsetting jobs created and keeping the unemployment rate elevated.
Second, I think it’s fair to blame Obama and the Democrats for creating a climate that is not conducive to job creation. (I think Ramesh probably agrees with that.) I have a piece up today arguing that the administration’s agenda has created a deleterious level of regulatory uncertainty, particularly with regard to health-care costs, which has suppressed job growth. I actually think this point ties in well with the larger point of Ramesh’s piece, which is that it’s time for Republicans to pivot from opposition to Obama-Reid-Pelosi-Care to a positive message on health care.
Ramesh argues that it’s not enough for Republicans to champion typical pro-growth policies like low taxes and free trade, because out-of-control health-care costs impose real burdens on small and medium-sized businesses and eat into everyone’s wages. But health-care reform is simultaneously a jobs issue. The burden of high health-care costs falls disproportionately on the small and medium-sized businesses that drive job creation — and so would Obamacare’s taxes and penalties.
Republicans should run on the following message: The cost controls in the Democrats’ bill are a joke: Obamacare will drive premiums up and expose small businesses to new taxes and regulations. Republicans will repeal Obamacare as their first order of business and replace it with the right reforms, such as the refundable health-care tax credit that John McCain touted during his presidential campaign. Such a strategy would tie unease over the Democrats’ health-care bill to anger over high unemployment.