Welcome Summer (Recovery Again Deferred)

How quickly one year has passed. It was only one year ago this June  that the White House blogproclaimed: “This summer is sure to be a Summer of Economic Recovery.”

As reported at the time, Vice President Joe Biden marked “the Obama administration’s ‘Recovery Summer,’” with “a six-week-long push designed to highlight the jobs accompanying a surge in stimulus-funded projects to improve highways, parks, drinking water and other public works.”

When the Vice President was asked about polls that revealed a public skeptical of the effects of the Recovery Act, he responded: “The proof of the pudding is in the eating.”

A year later, the pudding has not proven quite as filling as the Vice President might have hoped. As Ben White observes (Politico), things look far different than the administration had anticipated:

A series of troubling signs for the U.S. economy threatens to dash hopes that 2011 would be a year of robust recovery — and that could prove troublesome for President Barack Obama’s reelection chances.

The Obama team has long hoped that the president’s 2012 campaign would be underpinned by an economy that was clearly accelerating out of the Great Recession, showing strong growth and job creation. But recent economic data paint a picture of an economy stuck in low gear, held down by continued high personal debt, a moribund housing market, high food and gas prices, persistent weather disasters and widespread unease about what the future holds.

This leaves the administration with the difficult task of making “the case that people are not as bad off as they might be.”  Obviously, there are a host of explanations as to why the Summer of Recovery never occurred, ranging from insufficient stimulus (Paul Krugman) to regime uncertainty. While this debate will rage on, one can only wonder what the summer of 2011 will hold.

With the extension of the debt-ceiling approaching fast and little sign that (once again) Vice President Biden will be able to deliver a negotiated settlement, the next several months might prove quite interesting.

One wonders whether the GOP will overplay its hand in weeks to come, leading to a temporary failure to pass a debt-ceiling extension and provoking a market drop comparable to what occurred when Congress balked (initially) at passing TARP. If this occurs, the GOP will give the administration a great gift.

Polls reveal that 70% of Republicans oppose raising the debt ceiling, so the Republican base could view intransigence on the part of the House GOP positively. Such an act—particularly if followed by a market reaction—could allow Democrats to argue that things are as bad as they are precisely because of the irresponsible zealotry of House Republicans. Fiscal turmoil, in short, could benefit both parties and those who are concerned with nothing more than the little arts of popularity.

Whatever the outcome, there is little reason to believe that the summer of 2011 will become a genuine “Summer of Recovery.”

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