When in Doubt, Revisit James Carville

The most spot-on and eternally accurate statement ever made in Presidential politics:

"It's the Economy, Stupid"

The rallying cry of Bill Clinton's 1992 Presidential Campaign made popular by his campaign strategist, James Carville, was initially just one of 3 campaign mantras and was intended for internal use only (without the leading "It's"). It helped galvanize public opinion in favor of Clinton and turned George H. W. Bush's popularity upside down from a Gulf War high of 90% down into the 30s. As much as we pride ourselves in being part of a nation that fights for world peace and democracy, most of the time, what is in our pockets is our greatest motivator.

With this in mind, the prognosis by many economists of the next 2 years does not bode well for Republican Presidential hopefuls. While many economists are calling for GDP growth in 2011 & 2012 to be in the mid 3% range, Mark Zandi of Moody's Analytics is calling for 4.4% GDP growth in 2011.

Perhaps more importantly, as there are an increasing number of signs that the economy is recovering and a double-dip is unlikely (5% increase in holiday sales, 10%+ increase in December auto & truck sales over previous year, factory output increases, etc.) has seemed to create a more positive economic outlook on the minds of business owners and consumers. In economics as in many things in life, perception of reality creates reality. There is a lot of cash on the sidelines and businesses and consumers have been holding off buying things and hiring more until they were more confident about the future. The pressure of delayed purchases has built to a level that it will not take very much good news for a spending wave to be unleashed. As a positive reinforcing cycle, the news that others are spending will make businesses and consumers even more willing to spend and all these injections into the economy will produce GDP growth numbers and employment numbers that make everyone more confident in the economy.

This trend started to late and slowly to help Democrats in the mid-term elections, but the delayed impact is likely to make it almost impossible to unseat President Obama. The economy will be the biggest issue in the 2012 elections. The improving economy will still be a new enough story that the public won't discount it and move on to non-economic issues. Health Care either will not be a determining issue or will turn against Republicans slightly as they will be continuing to oppose and attempting to overturn/defund a law that will continue to slowly grow in popularity. International Affairs either positive or negative are not likely to overwhelm the impact of the state of the economy. Social issues only take center stage in times of steady prosperity and it is unlikely we will already feel steady in just 22 months.

Nope, James Carville got it right and before anyone spends too much time over-thinking how the 2012 elections will turn out, they best return to that phrase made popular almost 20 years ago.