The US Presidential Election: A Democratic alternative?

By all accounts, President Obama has had a difficult summer 2011.  His approval ratings are close to their all times low.  More worrisome than the overall score are the underlying dynamics. 

The Rasmussen Presidential Tracking Poll is calculated by substracting the percentage of voters who Strongly Disagree with Mr. Obama’s conduct of affairs from those who Strongly Agree.  While the Strongly Disagree rating has fluctuated around the low 40s mark since the spring of 2010, the Strongly Agree rating had fallen from the high 20s to the high teens.  In other words, the President is not gaining core supporters, and he is crystallizing opposition against him.  According to IBOPE Zogby, the President’s approval rating now stands at 40%; Gallup gives him 42%.

But it is the economy that is Mr. Obama’s biggest challenge, as only 26% of voters approve of his management according to Gallup.  Given the depth and range of the problems and the inability so far of the President to reach a consensus with the Republicans, it seems unlikely that he will be able to turn the situation around quickly.

This week, he is to present his plan to create more jobs.  Some of the leaks point toward money for infrastructure, unemployment benefits and reduction in payroll taxes.  Will this package be big enough to change sentiment and to make a difference? Are there enough “shovel ready” infrastructure projects? Will the bidding terms be designed to stimulate rapid mobilization or to secure high union participation?  The President suffers from a credibility gap both with his left and the opposition.  It is therefore difficult to expect a miracle from this forthcoming announcement.

So far, no Republican candidate has succeeded in rallying both Republicans and Independents; moderates such as Romney and Huntsman are viewed with suspicion by party members, while more conservatives candidates like Perry seem unlikely to win over many Independents if they win the primaries.

But the President remains vulnerable as the Democratic Party may not want to go with a candidate who has low ratings and is unlikely to win votes across party lines.  Democrats will also worry that of the 33 seats in the Senate that will be contested, they currently hold 21 vs. 10 for the Republicans.  Incumbents are very unpopular, so that Democratic seats are proportionately more exposed, and with that, the control Democrats have of the Senate.

Thus, the main danger for Mr. Obama, in my view, is the rise of a moderate Democratic candidate for the presidency who could appeal to Independents and some Republicans, and also who could protect Senate seats.  If she were to run for president, Secretary Clinton would keep most of the Democratic votes (losing some on the left to abstention) and she could win over many Independents.  By winning 20% of the Republicans she should secure victory.

Clearly, it would be very awkward for her to campaign, even if she left the cabinet.  Even then, I suspect that she would not want to run against the man who offered her the second most powerful position in government.  There are only two ways for her to secure the nomination: for President Obama to announce that he is not running, or for the Democratic Convention to make the decision for both of them.

This is not an issue that is receiving much attention for the moment.  It may never materialize if the President succeeds in turning sentiment and the economy around, although this would likely require him to make some very important changes in his goals and modus operandi.

If he does, the prospects of the US economy look brighter.  If he doesn’t, they also look brighter because markets will start factoring the possible entry of a moderate Democratic challenger.

So far however, markets extrapolate current trends in a straight line; they do not consider the possibility of an inflection point.  In the real word, there is no such thing as a straight line for ever.

If only Europe could make progress on its debt problems!  But there too, although it is probably too early, trends do not follow straight lines and they will inevitably encounter an inflection point.