“For both parties, next year’s presidential election is, in many ways, a race against the clock. For President Bush, the question is whether he peaks too early. For now, the economic news is good and the war news just barely tolerable.
But take a closer look at both fronts. On the economy, the ideal time for Bush’s reelection would be about now, when everything is on an upswing. Unfortunately, the election is next fall. Economic growth and the beginning of job growth have returned. However, both are built on a unsustainable degree of economic stimulus. The federal budget deficit is about 5 percent of GDP, and rising. Interest rates are at five-decade lows.
With that amount of stimulus, of course the economy grows. Even so, jobs are not yet growing fast enough to reduce unemployment much, and wages are still fairly flat. The problem is that you can’t sustain very high deficits and very low interest rates very long. Money markets look at the rising national debt, and start getting very nervous. That pushes up interest rates.
More ominously, huge budget deficits are linked to huge trade deficits. We finance our deficits and borrowing binge by absorbing capital from the rest of the world. That’s not sustainable either….
Over in the opposition camp, the Democrats have a very different timing problem. For 20 years, they have been tinkering with the nomination process in the hope of getting it done early, so that their standard bearer can be known early and the usual extended brawl avoided.
This year, however, the nomination process could drag on, leaving Democrats pounding on each other rather than honing their challenge to Bush. One of the Democrats’ rule changes requires delegates to be awarded proportionally. No more winning New York by a few votes and being awarded all of its delegates. Every state will now have a split delegation. This change, coupled with a large field of candidates, makes it much harder for any candidate to win half the delegates, and the nomination contest could go all the way to the convention for the first time since 1960…” — Robert Kuttner, TomPaine.com
