The Big Picture: What Will Determine the Outcome of the 2004 Election:
My own theory about the economy is all over this blog, but to reiterate: We have just come out of the biggest bubble in Human history. There was massive overinvestment, tremendous overspending, all of which has lead to significant overcapacity. In a post-bubble environment, one cannot merely stimulate your way out of the business cycle. What it will take mostly is time — something no President wants to say. “Hey, voters, just wait a decade or so and jobs will return.”
During the interregnum, policymakers can identify the biggest obstacles towards job creation, and do what they can to remove them. They may determine its rising health care costs, or high taxes on small businesses, or its the expenses of IRS filings for new workers, or litigation exposure or whatever. Identify the key issues, and deal with them.
There’s the entire election for you: How the Jobs issue gets defined. The party out of power has a few months (at most) to clarify this definition. Since they have a contested primary (while the incumbent party does not), they have an opportunity to frame the issue, and to some degree, define the debate in a very public manner — for now.
Like pére, like fils? George H. W. Bush was stunned by a supermarket scanner, demonstrating how out of touch with commonplace reality he was: is W going to show us the same thing by ignoring the fact that the world has changed and the old rules of “wait, cut taxes, and see” don’t work? And can his opponents make anything of it?