As the media focuses on Beyoncé???s lip syncing and First Lady Michelle Obama???s bangs, the national unemployment rate now stands at 7.8 percent???where it was when Obama first took office in 2009. Even rosy forecasts don???t see the unemployment rate dropping to pre-recession levels until 2016 at the very earliest. Millions of workers have fled the job market, so a return to George W. Bush-era work force numbers would take years under the best economic circumstances.
Circumstances we aren???t enjoying. The Obama economy is only expected to grow at a meager 1 percent to 2 percent rate for the foreseeable future. Fannie Mae, the mortgage-finance company, recently called the sluggish pace of the recovery the ???new normal.??? Setting aside the real-life consequences of rotten growth, it also means weak revenue will persist, and without any genuine spending or tax reform in our future, the dynamics that have dominated Washington will continue to do so.
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Though we???ve just experienced the worst recovery in modern history, the president has yet to offer any tangible ideas to spur growth as he begins his second term. Then again, Obama era ???economic??? policy has always been an excuse to push social policy so it was hardly surprising that his inauguration speech focused on an array of liberal hobbyhorses???climate change, immigration reform, same-sex marriage and limiting gun right???or that it defended economy-crushing entitlement programs as pathways to prosperity. Inequity, rather than stagnation, is the president???s primary concern. As he said last week, ???our country cannot succeed when a shrinking few do very well and a growing many barely make it.??? Well, righting this wrong is going to cost us.
The good news for conservatives might be that incumbent presidents are typically unable to offer any legacy-building reforms in their second term. The bad news is that Obama has done some of his best work in sneaking through increased spending and redistributive policies using these looming emergencies as a political cudgel. And we???re going to have political crises galore in the next few years.
In the short term, economic policy will be fought over budgeting. Last week, the House approved a measure to suspend the debt ceiling for three months. The Senate will pass the bill and Obama will sign it. Though this defuses one nasty fight (for now), a more consequential battle remains, one that Republicans will be more inclined to see through to the end???if, for no other reason, their own political survival.
The sequester that takes effect March 1 and threat of a government shutdown soon after will likely define much of the next two years. To secure a short-term suspension of the debt limit, Speaker John Boehner has promised conservatives in his caucus that he would pursue reform to balance the budget within 10 years. A noble goal, no doubt, but judging from the president???s uncompromising position on spending and the promise of endless ???investments,??? reaching such an agreement without massive tax increases is a long shot. This leaves the GOP two choices: Agree to a long-term deal that would enrage its base or agree on a number of short-term deals that generate more crises for the president to use.
Republicans are left with little choice, having spent four years trying to deflect hard left economic policies. They have not been particularly triumphant politically in this endeavor, but frankly, often they don???t get enough credit from fellow conservatives for stopping many economically destructive policies???including cap and trade???which would have further devastated growth. Until Republicans begin to figure out their messaging and take the offensive, expect more of the same. That is, if Republicans can hold the House in 2014. If not, the second half of the Obama second term will be a nightmare for fiscal conservatives. Well, bigger nightmares than they???re already dealing with.