WASHINGTON – If we go back to the 2012 presidential campaign, the brilliance of the Obama team was in its ability to turn the tables on Romney. Republican challenger Mitt Romney believed that “he had to win” because of the relatively poor state of the US economy. He honestly believed that the elections would turn into a national referendum on Obama’s manifestly mediocre skills as an economic policy manager.
How Romney was defeated
Well, it did not work that way. The Obama people counter attacked by successfully painting Romney as a heartless “vulture capitalist”, a predator who stripped assets from the companies he bought, tossed the scraps away, and enriched himself in the process. This was and is a ridiculous caricature of a successful business person. But the demonization strategy worked, very well.
From that point on, contrary to all predictions and plans, Romney was on the defensive. Add to this a number of egregious self-inflicted wounds, (such as comments about 50% of America being dependent on public largesse), and we can see how Romney, for a long moment the inevitable 2012 winner, was sunk.
Difficult to use the same script in 2016
Now, as we approach the 2016 elections, it is my contention that Hillary Clinton’s main political vulnerability is also going to be a very soft US economy, or worse an economy in recession. However, contrary to 2012, I am not sure that she will have another Mitt Romney who could be just as easily demonized. This trick would not work with former Florida Governor Jeb Bush or Ohio Governor John Kasich.
The US economy is getting weaker
Of course, predictions about what may happen more than a year from now are likely to be wrong. But this is the way I see it. The US economy right nows is performing in a mediocre but semi-acceptable way only because of the compounded effects of the longest zero interest rates policy (ZIRP) period in modern history. We know that the Federal Reserve will have to stop this insanity at some point. It may be later than we think. But it will have to be done. We also know that rising interest rates will cause the end of the current Wall Street bubble, with unknown, but mostly negative ripple effects.
Over stretched consumers
In the meantime, the US consumer –the traditional engine of US GDP growth– is once again over leveraged and over stretched. Do not count on the average Joe to pull the American economy forward on the basis of his willingness to keep spending more and more by getting deeper into debt. The average Joe is maxed out. He has already used up all his credit, while his disposable income is flat. And the consequences of high debt and income stagnation are huge. Flat or lower consumer spending will act as an enormous brake on an economy that is mostly driven by it.
No new exports
More broadly, the international economic scene is not that promising. Countries that buy from America, (think of Europe and Japan), are in serious trouble. If they are lucky they will stay out of recession. Any new growth will be very modest, (may be 1%). Therefore they will buy less from Caterpillar, IBM, General Electric, or United Technologies. Add to weak export markets the parallel phenomenon of a rising dollar and you see that growing or even keeping traditional export markets will be an impossible challenge for US producers.
Time is everything
All these trends indicate a weakening, not a strengthening, US economy, possibly a recession coming soon. Of course, here timing is everything. If (with luck) things continue along present trends, (modest economic growth, low unemployment), right up to the elections, then Hillary Clinton has almost nothing to fear.
But if we have a real slow down, or may be a recession, right before the elections, Hillary Clinton’s chances to get to the White House will diminish, may be they will vanish altogether. Whatever her customized “new” message may be, after all she is another establishment Democrat who served under Barack Obama. Really hard for her to distance herself from his legacy when it comes to economic policies.
US economy chugging along, Hillary Clinton wins
If none of this will happen, if, come September-October 2016, the economy is alright or on the upswing, then beating Clinton will be very, very difficult. She would be able to claim that more of the same economic recipe, with a twist here and there, works well.
Unfortunately, America has gotten used to mediocre economic performance softened by subsidies and public assistance here and there. The Republican basic message focused on relaunching private enterprise while cutting down suffocating regulations will resonate with some, but not with a majority of Americans. Most of them, assuming no sudden crisis hitting them, are likely to choose the devil they know.
It is a sad commentary on America that the Republicans should hope on a recession as the lucky development that will increase the chances of their nominee to gain the White House.