Goldman Sachs, which just six months ago forecast a stronger-than-expected recovery, has downgraded its prediction, saying economic growth will slow to a snail-like 1.5 percent in the second quarter of 2011, and 2.5 percent in the third. The investment banking firm also crystal-balled that unemployment will still hover near 9 percent at the end of 2012, and that the U.S. is running a real risk of slipping into another recession. With voters increasingly focused on the economy, is Goldman essentially predicting disaster for President Obama and his fellow Democrats in next year's election?
Yes. If this prediction comes true, Obama is doomed: "Alarms bells must be ringing all over Obamaland," says James Pethokoukis at Reuters. The Obama administration, in an "astoundingly optimistic forecast," promised that the economy would be "off to the races" this year, thanks to its $800 billion stimulus. Now, as per Goldman, we're looking at unemployment on Election Day 2012 that's about where it is now. Slashing tax rates and scrapping regulation "may be the only way Obama can win another term," but don't hold your breath.
"Panic at the White House? Gloomy Goldman Sachs sees high unemployment, possible recession"
And Republicans would rather blame Obama than help: "If you have an ounce of actual humanity, you see this as an unmitigated catastrophe," says David Dayen at Firedoglake. But Republicans, who can "use a crappy economy to take down a president," are cheering. Instead of pushing policies to put people back to work, the GOP is defying all economic theory and pushing Obama to focus on cutting spending to close the deficit — a move that will only pull money out of the economy and worsen matters for everyone except the GOP's presidential candidates.
"Goldman Sachs: Jobs crisis will continue for foreseeable future"
This is nothing for the GOP to celebrate: History confirms that a poor economy is likely to hurt any president, says Nate Silver at The New York Times. But it also shows that Obama's "situation is by no means completely hopeless." If he can pass along the blame to the legislative branch, as Harry Truman did in 1948, he can hang on, and even help Democrats pick up seats in Congress. Perhaps it's House Republicans who should be panicking.
"A bad economy can hurt House Republicans"