Obama Has Lost All Economic Control, Both Good and Bad

President Obama's greatest danger could be that it's too late for an economic recovery. Now in office longer than Bush has been out, Obama has effectively lost his best excuse for a poor economy. What is unrecognized is that he may equally have lost his ability to take credit for a good one.

With almost four and a half years in office, Obama has largely established his economic record in the public mind. It is not a pretty one. While Reagan and Clinton are both remembered for long runs of prosperity, that is not the case for the 44th president.

The administration's economic record has been nothing if not consistent. The only question for the public is not what the record is, but whether they hold Obama culpable for it.

During his presidency, GDP growth has been: -3.1% in 2009, 2.4% in 2010, 1.8% in 2011, and 2.2% in 2012. This year's Q1 growth was just 1.8% - and this was supposed to be 2013's "good" quarter!

Employment has been, if anything, worse. The unemployment rate did not drop below 7.8% until this year and is still 7.6%. And that high figure comes despite abnormally low labor force participation, without which the unemployment rate would be in double digits.

If the public's mind is already made up on the current and past performance, what about the as yet unseen, other side of the economic coin: What happens if the economy really recovers?

The answer may be no better for the administration. The reason is that this year Obama has lost his best reasons to claim credit for a strong economy.

The White House has held fast to the need for continued high federal spending as an economic stabilizer. As a result, its spending as a percentage of GDP has been well above the 40-year 21% average: 25.2% in 2009, 24.1% in 2010 and 2011, and 22.8% in 2012.

However, this year - thanks in large part to a sequester the administration continues to determinedly fight - the Congressional Budget Office has estimated federal spending will fall to 22.2%. While still above the long-term average, it is also well below the administration's average.

The point of difficulty for Obama is this: if the administration's desired, far higher federal spending (as a percent of GDP) did not produce strong economic growth, how could it then take credit for an economic recovery if it should begin when federal spending is lower and in contravention to its preferred policy?

Nor is spending the only policy handicap against administration claims of an economic recovery, should one occur.

The other major policy change this year has been a large tax increase - on which the administration insisted. As a result revenues are projected to jump - going from 15.4% in 2011, to 15.8% in 2012, to 16% in 2013, to 18% next year.

It is hard to sell such tax increases as economic positives. If an economic recovery should occur now, it would be far easier to argue that recovery occurred in spite of them, than because of them. The one possible route for claiming credit under such circumstances - falling interest rates as government deficits fall - is also foreclosed because interest rates have been rising instead.

Notably, the administration has not really had the luxury to contemplate the potential communication problems a recovery could mean for them. They have had to remain focused on the problems presented by the prolonged slow economy.

There is a dual reason they have remained so focused on a sequester now four months old - despite 2013's tax hikes having a far greater impact this fiscal year (according to CBO, revenues are estimated to be $363 billion over last fiscal year's, while spending is estimated at just $82 billion lower than 2012's). Certainly as a matter of policy, the administration has no problem with federal spending at a higher level than in the past.

However, there is also a political element to it as well. The continued focus on reduced federal spending is a valuable insurance policy against blame should the economy slow even further - hardly a remote possibility with slow Q1 growth and a CBO estimate of just 1.4% overall growth.

The administration finds itself continuing to look over its shoulder at an economy still going sideways. Yet its greatest threat might actually be an economic recovery that is rapidly racing away from its political grasp.

As the administration approaches the 2014 midterms, it may be too late to alter the public's perception of its economic stewardship. And even should the economy begin a rebound it has yet to show, the administration may no longer have plausible grounds to lay claim to it.

In sum, Obama may still be fully exposed to economic downside risk, but unable to claim credit for any upside potential. To paraphrase the old adage: Obama may find himself in the peculiar situation of being damned if the economy doesn't, and damned if it does.