President Obama has said, over and over, that “this can be a breakthrough year for America.” On the surface, Wednesday morning's report on economic growth – or rather, lack thereof – gave the impression that we’re still stuck deep in the doldrums.
The government reports that the economy expanded at a paltry .1 percent during the first three months of the year. That is, in a word, horrible. The White House was quick to note that this year’s insanely cold winter slowed growth, and indicators in March, when temperatures warmed a bit, were stronger. Many independent economists had a similar view. Still, Republicans pounced. “I can assure you that if this is the Democrats’ idea of a recovery, the people in my state at least aren’t terribly impressed,” Senate Minority Leader Mitch McConnell (R-Ky.) said.
The truth is, nobody knows how much of this slowdown represents a blip that will reverse in coming months is -- and how much of it reflects fundamental weakness in the economy. The weather does a good job of explaining why businesses held back on investment during the beginning of the year, but it doesn’t explain stubborn weakness in housing or why companies aren’t exporting more. The economic recovery – now almost five years old – is replete with false starts and dashed optimism.
The spring and summer should be revealing – and are enormously important for the debate in Washington and the mid-term election campaign. Economic growth is an important factor in many models predicting the outcome of mid-term elections. If it continues to perform poorly, endangered Democrats could have even more reason to worry. And there could be compounding factors. It’s been a bit of a mystery about why Obama’s approval numbers – another factor in the mid-term races – have fared poorly after his administration was able to turn the Affordable Care Act enrollment period into something of a success. Perhaps slow growth – hey, bad weather makes people depressed, too – had something to do with it.
If the economy fails to take off before November, it could pose a problem for Democrats’ economic messaging as well, and help the GOP. The top two items on the Democratic agenda right now are raising the minimum wage and pay equity for men and women. These are important issues for ensuring wages rise and the economy benefits workers fairly, but they are hardly fuel for short-term economic growth. If Republicans cry “jobs” – as they are doing – and Democrats respond with calls to raise the minimum wage, that could be a problem.
That’s not to say Republicans have short-term solutions to lift the rate of growth. Most of their ideas, like tax reform, seek to lift the long-term potential of the economy. And the GOP opposes short-term measures like government spending, which would most definitely help.
It’s premature to state that the economy will remain weak deep into the mid-term season. Most economists don’t think that will happen. There will be another jobs report this Friday, and that could indicate a different trend. But for now, Democrats should only draw cold comfort from the idea that the weather explained this year’s weak economic growth.