The red line shows unemployment starting in January 1982; the blue line starts in January 2009 and projects forward. What the chart nicely shows is the parallel economic situations faced by Reagan and Obama -- a sharp rise in unemployment peaking at around 10%. But unemployment under Reagan dropped pretty precipitously after that. This was due, in part, to aggressive moves to loosen up lending by Fed chair Paul Volcker, who believed (correctly) that inflation would not be a significant concern. Conversely, current Fed chair Ben Bernanke seems more concerned about inflation and is willing to tolerate much higher levels of unemployment as a result.
The horrifying part, to me, is that the Obama administration seems okay with this. Indeed, they just pushed Bernanke's renomination through the Senate. Remember, Democrats are supposed to be the party that generates jobs. If Obama is someday asked why his administration wasn't as good at generating jobs as Reagan's was, "Reagan had a more liberal Fed chair" was always going to be a pretty lame excuse, but now it's a useless one since Obama decided to keep Bernanke in charge.
Hopefully, the economy will outperform these dour expectations. Today's news is encouraging.
That chart is troubling, and I am convinced that the state of the economy will dictate whether or not Obama is re-elected. But there is something that those lines have in common that favors Obama. That is, they both head downward. Three years hence it may be enough that the unemployment situation has improved under Obama's watch, even if we aren't in the midst of a boom cycle. The "Morning in America" theme was about change - things were bad before but now dawn has broken and we're doing better. If that blue line is right, Obama will be able to say something similar. And, I would guess that the media will tend to reflect his optimism, if only because the press needs a new story, i.e., people tire of telling and reading the same story about bad economic news. If anything, I worry that after this current cycle where the narrative is "Obama and economy are in the dumps," there is plenty of time to go through an "Obama and economy bounce back" narrative in 2011 and then be on to a new narrative that isn't so favorable in 2012.
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