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THE COOK REPORT

Colossal Miscalculation On Health Care

Obama and Hill Democrats should have focused much more on the economy.

Honorable and intelligent people can disagree over the substance and details of what President Obama and congressional Democrats are trying to do on health care reform and climate change. But nearly a year after Obama's inauguration, judging by where the Democrats stand today, it's clear that they have made a colossal miscalculation.

The latest unemployment and housing numbers underscore the folly of their decision to pay so much attention to health care and climate change instead of focusing on the economy "like a laser beam," as President Clinton pledged to do during his 1992 campaign. Although no one can fairly accuse Obama and his party's leaders of ignoring the economy, they certainly haven't focused on it like a laser beam.

 

Could joblessness still be above 9 percent when the 2012 presidential election year begins?

Last week's disappointing December unemployment report was the final blow in what was already a bad week for Democrats. One of the most sobering findings in the report was that if 661,000 Americans had not given up even looking for work that month, the unemployment rate would have moved up rather than holding steady at a horrific 10 percent.

Most economists had been expecting an increase of about 50,000 jobs in December; instead, the total declined by 85,000. Some 6.1 million Americans, the highest number in the post-World War II era, have been unemployed for 27 weeks or more. The "U-6" rate of unemployment, which adds in people who are working part-time while seeking full-time work and those who have stopped looking, stands at 17.3 percent, the highest level in the 15 years that the Labor Department has calculated it.

 

A number of economists expect that unemployment will get worse before it gets better. Even if that prediction is wrong, some analysts estimate that Labor's household employment survey would have to show a net increase of 150,000 jobs a month for 48 straight months for the unemployment rate to drop to just 9 percent.

Since World War II, unemployment has exceeded 8 percent in a total of only 12 months in even-numbered (meaning, congressional election) years. All 12 months were in 1982.

Even before December's negative jobs report, economist Robert Reich, who was Labor secretary in the Clinton administration, wrote on talkingpointsmemo.com that "the chances of unemployment being 10 percent next November are overwhelmingly high." The number of newly created jobs will be offset by discouraged workers beginning to once again seek employment, Reich predicted, resulting in little change in the overall unemployment rate. Could joblessness still be above 9 percent when the 2012 presidential election year begins?

Another piece of bad news was the distressing late-December report that the housing sector's slow improvement had stalled, raising the specter of a second dip. As Wellesley College economist Karl Case, one of the developers of the definitive Standard & Poor's/Case-Shiller home price index, told The New York Times recently, "I'm worried. Everyone's worried." He added, "If prices sink 15 percent from here, which is a possibility, and the 2008 and 2009 loans go bad, then we're back where we were before -- in a nightmare." Faster action in Congress to renew (or even increase) the tax credit for first-time homebuyers might have boosted housing prices, which in turn would have improved mortgage lenders' balance sheets.

 

Much of the political debate, meanwhile, has been obsessed with details of competing health care reform bills. Some analysts have wondered whether Democrats in Congress would be better off passing an unpopular bill or risking the consequences of failing to pass one at all. More to the point, though, is the probability that if Obama and Hill Democrats had taken a more modest approach to health care reform, they could have pivoted back to jobs and the economy sooner. It doesn't take much imagination to envision Obama declaring, "Health care reform is a journey; not a single step. We are today laying a foundation on which America can build better health care."

As political analyst and data-cruncher extraordinaire Rhodes Cook noted in the December issue of The Rhodes Cook Letter, no other president in the past half-century has seen his Gallup job-approval rating drop as far as Obama's has in his first year (down 21 points), and no president in that same half-century has seen his approval rating go up, even as much as 1 point, between the end of his first year and the eve of his first midterm election.

Obama and his party have no doubt taken on big and important fights. But given the nation's tremendous economic troubles, they don't seem to have picked the most urgent ones.

This article appears in the January 16, 2010 edition of National Journal Magazine.

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