Playing It Cool

Nate Silver argues that Harry Reid's admission that there will be no health care bill before the August recess is not a problem.

Ten days ago, I wrote a piece entitled, "Why Democrats Have No Time to Waste", the thesis of which was basically that Obama's approval ratings were liable to decline over the near-to-medium term and so Democrats had better get busy on health care while they could.

But a couple of things have happened since then.

Firstly, the media environment has become very treacherous. There's been all sorts of piling on, for instance, about last night's satisfactory press conference -- this is almost certainly the most sustained stretch of bad coverage for Obama since back when Jeremiah Wright became a household name after the Ohio primary.

I don't think the media has a liberal bias or a conservative bias so much as it has a bias toward overreacting to short-term trends and a tendency toward groupthink. The fact is that there have been some pretty decent signals on health care. Yes, it has stalled in some committees, but it has advanced in others; yes, the Mayo Clinic expressed their skepticism but also the AMA -- surprisingly -- endorsed it; yes, the CBO's Doug Elmendorf got walked into a somewhat deceptive and undoubtedly damaging line of questioning about the measure's capacities on cost control, but also, the CBO's actual cost estimates have generally been lower than expected and also favorable to particular Democratic priorities like the public option. This all seems pretty par for the course, even if you wouldn't know it from reading Politico or Jake Tapper, who giddily report on each new poll telling us the exact same thing as though there's some sort of actual news value there.

The media likes to talk about "momentum". It usually talks about the momentum in the present tense -- as in, "health care has no momentum". But almost always, those observations are formulated based on events of the past and sloppily extrapolated to imply events of the future, often to embarrassing effect: see also, New Hampshire, the 15-day infatuation with Sarah Palin, the Straight Talk express being left for dead somewhere in the summer of 2007, the overreaction to "Bittergate" and the whole lot, and the naive assumption that Obama's high-60's approval ratings represented a paradigm shift and not a honeymoon period that new Presidents almost always experience.

I also believe that the media can, in the short term, amplify and sometimes even create waves of momentum. But almost always only in the short term. And that is reason #1 why it's not such a bad thing that the Democrats are getting a breather on health care. They're at, what I believe, may be something of a 'trough' or 'bottom' as far as this media-induced momentum goes. By some point in August, the media will at least have tired of the present storyline and may in fact be looking for excuses to declare a shift in momentum and report that some relatively ordinary moment is in fact the "game changer" that the Democrats needed. This is not to say that the real, underlying momentum on health care has especially good -- and the Democrats' selling of the measure certianly hasn't been. But it hasn't been especially poor either . As I've said before, the health care process has played out just about how an intelligent observer might have expected it to beforehand.

The second reason why the delay might be OK for the Democrats is because of the economy. Nobody much seems to have noticed, but the Dow is now over 9,000 and at its highest point of the Obama presidency; the S&P is nearing 1,000 and the NASDAQ has gained almost 55 percent since its bottom and has moved upward on 12 consecutive trading days. There are ample reasons to be skeptical about the rally -- it isn't supported by strong volumes, and it's almost entirely the result of surprisingly solid corporate earnings numbers rather than the sorts of figures that Main Street cares about. But, there are two big dates to watch out for. On July 31, an advance estimate of second quarter GDP growth will be released, and on August 7th, we'll get the monthly report on the unemployment situation. If either of those reports reflect the optimism elicited by the corporate earnings numbers -- in this context, a job loss number under ~250,000 or a 2Q GDP number somewhere close to zero -- there will be a lot of quite optimistic chatter about the end of the recession which might not penetrate to Main Street, but which will at least have some reverberations on Capitol Hill.

While I actually believe Nate is correct about the first reason, that same Village groupthink tendency causing Obama problems is exactly why the economy is not going to be an advantage for Obama anytime soon. As long as the unemployment rate continues to rise, it actually may hurt Obama to point out that the Dow is rising. The groupthink has assured that the only economic data that exists as a Village criteria for a succesful economy is the unemployment numbers.

Now, as Nate said, should the numbers in two weeks actually be a significant improvement in number of jobs lost, Obama will be able to say his plan is working. But I don't think that's going to happen for a while, I think we're still going to be in a situation where we are losing 400-500k+ jobs a month for at least the rest of this year, and as far as the Dow, I think we're overdue for a correction pretty soon.

Still, the problem is that groupthink. The Dow could go higher, but as long as the unemployment rate keeps rising, it's going to hurt. The real problem is that the longer this takes, the more we'll get towards the Reconciliation scenario in Nate's projections. At some point, if the GOP keeps stalling and the Democratic leaders keep stalling, Obama's going to eventually have to pull the trigger on making this part of the budget. September still leaves open the possibility, and work has progressed. But the forces arrayed against Obamacare have grown in power and volume as well. All things being equal, we end up with the status quo...as Obama said on Wednesday, the default is inertia.

We need enough to beat that to get this passed. Time degrades that momentum unless something happens to boost it. Without Congress actually in session to advance the issue, there's going to be backslide, and the Village will have plenty of time to proclaim it...even if there have been significant advances up until now. We'll need more advances, and that means the President is going to have to spend a healthy chunk of the next six weeks pushing the ball forward.