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President Obama is exceptionally lucky when it comes to the weaknesses of the Republican field and its stunning penchant for mutually assured destruction. Who would have expected, for instance, that Newt Gingrich’s billionaire-backed super-PAC, aiming to destroy front-runner Mitt Romney, would produce a documentary advertisement on private equity slightly to the left of what we might have expected of Michael Moore? Or that Gingrich, reprimanded by leading free-market ideologues, would then request that the ad be pulled? In this hilariously bungled caper, Marx meets the Marx Brothers.

But it remains to be seen whether Obama will be as lucky when it comes to the shape of the economy as the election year unfolds. Some of what will occur this year is partly within the president’s control; much is not.

Consider the several vulnerabilities of the still fragile recovery:

The Jobs Mirage. Democrats were cheered and Republicans caught off guard when the Labor Department’s December jobs numbers showed a net increase of 200,000 jobs — a nice improvement over previous months. However, a closer look showed that some 42,000 of these were seasonal courier jobs — all the people hired to deliver holiday gifts purchased via Amazon and other online vendors.

Jared Bernstein, the former senior Administration economic advisor now at the Center on Budget and Policy Priorities, calculates that the 200,000 jobs number should be deflated by about 30,000. This brings it closer in line with other recent months, and suggests that the economy is still a ways from a strong recovery.

The biggest problem retarding a strong recovery is that wages are lagging far behind the economy’s productivity growth. Recent Federal Reserve statistics show that consumers increased their borrowing to finance their holiday spending, but that can’t last unless wages begin following. (more…)

A well-funded, faux-reformist group known as Americans Elect is promoting a third party presidential candidacy and anticipates qualifying its candidate to be on the ballot in nearly all states. It is doing this by collecting millions of petition signatures, over 2.2 million so far, taking advantage of voter frustration with political blockage in Washington. The actual candidate will be decided later, by Internet Convention.

Despite the superficial populism, just about everything about this exercise is misguided.

For starters, consider the premise that sensible centrism starts with budget balance. The storyline is that the obstacle to economic recovery is the budget deficit, prevented by partisan extremism. If only the left would agree to cutting social programs like Social Security and the right would accept raising taxes, fiscal responsibility and recovery would ensue.

But fiscal tightening during a deep slump would retard the recovery. The centrists get the cause and effect backwards. The recession caused the deficit, not vice versa.

Cut the deficit while the economy is still shaky, and you abort a fragile recovery. If anything, the economy needs a lot more public investment to jump start job creation and put income in workers’ pockets. The last thing it needs is high-minded austerity.

Social Security is in fine shape for decades, and Medicare reform needs to be part of broader healthcare reform, meaning national health insurance. Social insurance has little to do with the the current or near-term deficit. As for the rest of federal domestic spending, it’s already at its lowest share of GDP since the Eisenhower years. (more…)