With apologies to Chris Cillizza, the most important number in politics, one that may well help determine the fate of major health care legislation this year, will be released by the Department of Labor on July 31. It's the first estimate of economic growth during the second three months of the year. Administration officials are crossing their fingers and hoping that it will be interpreted as a sign that the economy is turning around. It's hard to determine what constitutes a "good" number, since demand almost certainly declined in the second quarter. But the if the rate of decline dropped off sharply, economists will up their confidence levels that the economy, right now as I type, early in the third quarter, has begun to grow again.
The chain of logic goes like this: when the House and Senate conference report on health care hits the floor in September, a large number of wavering members will think prospectively about the state of politics in November 2010. If I vote for this bill, they'll say to themselves, will I be punished? Less prosaically: this is Obama's health care bill. Will Obama be popular enough by November of 2010 in my district (or state?)
This seems on first glance to be a rational calculation. But it's not. The members will use the information available to them at the time to project the future. (Potentially perilous: if the late September revised GDP estimate for the second quarter is worse than the July projections.) They'll take account of the unemployment rate and the trend lines, to be sure, but the administration has done a fairly solid job of keeping expectations for a 2009 turnaround in check.
One reason why Republican arguments against health care reform and on the deficit have gained traction is that the administration's counterargument on the economy is weak. Undeniably, it's valid -- we'd be in a second Great Depression if not for the intervention -- but until there's a better number to cite, all the administration can really say is "hang in there." That's allowed Republicans to back away from the open hand extended by Sen. Max Baucus.
What will bolster the confidence of Democrats? A hard datum. If the first estimate of Q2 GDP is "good" -- and good here means either positive or only very slightly negative -- Democrats in Congress will undoubtedly deploy the availability bias: the one piece of hard evidence they have to support their future projections about the economy will be a sign that the economy is turning around.
In the grander schemes of political thought, the unemployment numbers are much more important than GDP and much easier to actualize. The administration suffered a fairly tough punch when it turned out that the rate of unemployment increases sped up in June -- an artifact, to be sure, of many factors beyond the White House's control, but a sudden curve of the trend line in the zero sum politics game.
If the numbers had been reversed -- if June was better than May, then Democrats would feel more confident about their prospective assessment of the future, and therefore feel more confident about the health reform process.
Another problem for the Democrats: it didn't help that everyone, White House included, jumped onto the bandwagon when Fed chair Ben Bernanke thought he saw "green shoots". You won't be hearing much positive rhetoric from the administration for a while...
"we'd be in a second Great Depression if not for the intervention..."
"If the first estimate of Q2 GDP is "good" -- and good here means either positive or only very slightly negative..."
Good God, what galaxy are you living on???
Even the most fervent devotee of the latest Keynesian econometric models doesn't claim that the stimulus (or the gifts to the UAW) has yet had any appreciable effect on the economy. Even Obama's people now say that only "150,000 jobs have been saved" — but, of course, that's a patently unprovable claim.
And just because a couple of forecasters think that an aberrant lower trade deficit might lead to higher Q2 GDP, remember that every other indicator is still pointing pretty much straight down.
Biden sure was the master of understatement when he said "We mis-read the economy."
They never even opened the book.
circleglider: You haven't been paying attention if you think the interventions, that began late 2008 and were subsequently refined and augmented by the new Administration, did not walk us back from a precipice.
The 2nd Stimulus and auto bailouts were connected but entirely separate. You can Monday Morning Quarterback on the effectiveness of these two interventions up to this point but in the same way allowing Lehman to fail devastated financials, so would have been the economy if the government took a passive role beyond just banks and mortgages.
The Administration "mis-read the economy" but they didn't misread it to conclude that the government should do nothing except let GM/Chrysler abruptly fail and Keynes should be left on the shelf. If anything, they misread it by not doing enough.
To put it another way... the Obama Administration opened the book, opposition was clamoring to burn it, and rather than burn it the Administration (and support from Congress) gave us the Cliff's Notes version to save it.
Which intervention? GM and Chrysler? TARP? The Bush stimulus last year? Monetary policy? Certainly you don't mean the stimulus package from earlier this year, as everyone including the President admits that it hasn't ramped up and only a small percentage of the money has been disbursed.
Even if you believe that the stimulus from this year was too small and should have been bigger, it's already too late to do a second stimulus, at least along the lines that Democrats support with government appropriations. It won't take effect soon enough. Something like the original GOP proposal, with payroll tax cuts, could take effect quickly.
It's a pretty narrow reading to say that the 'intervention' is limited to the stimulus package, as most posters here seem to have done. I'm a fan of stimulus, but not this stimulus package (too small) but that is quantifiably the single SMALLEST form of goverment intervention to date, save the auto bailouts.
Actually, it was the Atlantic itself that threw up a graph a month back, showing the aggregate spending of the government through the crisis. Things like the TARP fund were large, but even larger were the implicit committments and guarantees and quantitative easing provided by the government to ease the liquidity crisis. They dwarf all other forms of stimulus, but they're intervention, for sure.
And those forms of intervention, by allowing our economy to tick over without destroying every single major financial instituion in the country, did prevent a Depression.
Another important number is 100% ... the chairman of the Senate Budget Committee said he could foresee 100% of the GNP being used to pay the debts of the nation.
Some same good economy some say bad economy ... can't both be correct ... it must be political positioning??