It's time to do what the late, great New York Governor Al Smith would do, and cut through the rhetoric and the hype and "look at the record" to evaluate the economic players in Washington. Investors have probably read a lot about the drop in President Barack Obama's job-approval rating. And they're correct. It has declined to about 50% in the first quarter of 2009 from about 63% at the start of his presidency, according to a Gallup Poll. But what many investors probably don't know is that the job-approval rating for every president declines in his first year in office.Briefly, a new presidency is a new start for the nation, and the public -- wanting to see the president start on the right foot -- expresses this in a higher approval rating when he assumes the role. Political scientists and pollsters call it a "bump" in the polls.
However, as the weighty problems of the everyday settle in, the new president's approval rating typically has dropped about 5 percentage points from the first year to the second year. Further, more recently, in increasingly partisan Washington, the president's approval rating has dropped even more after the first year.
An Inevitable Drop
Here's a breakdown on every president's Gallup public approval rating -- first-year average versus second-year average -- since Gallup starting polling on the subject.
Truman 79% / 42%
Eisenhower 69% / 65%
Kennedy 76% / 72%
Johnson 76% / 73%
Nixon 61% / 56%
Ford 51% / 44%
Carter 62% / 45%
Reagan 57% / 43%
George H.W. Bush 66% / 67%
Clinton 49% / 46%
George W. Bush 68% / 71%
Obama 57% / 50% (Second-year data contain only 1 month.)
The Bush Exception
Hence, one can see that with the exception of the two Bush's, every president's approval rating has dropped from the first year to the second. Even the enormously popular presidents Dwight D. Eisenhower, John F. Kennedy and Ronald Reagan suffered this pattern.
What accounts for the Bush anomalies? In Bush 43's case, it most certainly was a surge in patriotism and support for the nation, and by extension, for the U.S. president in the wake of the 9/11 terrorist attacks. Meanwhile, Bush senior's lack of an approval drop in his second year in office (1990) reflected a growing economy and a universal era-of-good-feelings following the fall of the Berlin Wall and the approaching end of Soviet Communism.
Further, given the U.S.'s high, 10% unemployment rate in 2010 and the myriad of unprecedented Federal Reserve and U.S. Treasury interventions triggered by the financial crisis, it's impressive that Obama's approval rating has remained as high as it has. To say that the American people have had a lot to adjust to from an economic policy standpoint in the past 18 months would be an understatement.
A Polarized Washington
However, where Obama does differ is in the gap in his approval between Democrats and Republicans. A president's approval rating is always higher among his party's registered voters than among the opposition party's registered voters. But President Obama's gap is enormous. Here are the party vs. party approval gaps for the presidents since 1953:
Eisenhower, 32%; Kennedy, 29%; LBJ, 19%; Nixon, 34%; Ford, 28%; Carter, 27%; Reagan, 45%; H.W. Bush, 32%; Clinton, 52%; W. Bush 43%, 45%; Obama, 65%.
As one can see, President Obama's approval gap even exceeded that of two other polarizing presidents -- President Clinton and President Reagan. Voter attitudes toward President Obama are the most polarized in the modern polling era.
The Recession Hurts
What accounts for the enormous Democrat-to-Republican approval gap regarding President Obama? Certainly, part of it is the worst economic U.S. recession since the Great Depression, with Democrats favoring government measures as a tool to end it, and most Republicans appalled by this strategy.
Part of it also is the more-partisan climate of today's politics. Washington started to become polarized in the Vietnam War era, and the divide grew as a result of the late-1960s cultural split.
But things really started to get divisive following the election of President Clinton in 1992. Part of it is also due to the health care reform bill, which Republicans, again, strongly oppose. And part of it, sadly, is due to the reality of racism that unfortunately still plagues our society.
Only One Year
But as one can see from the Year 1/Year 2 approval data, it's normal for a president to experience a dip after the first year, so investors shouldn't assert or assume that the dip implies Obama's presidency is over, or that the Democrats are destined to lose majority-party status in Congress. Far from it.
Further, Republicans, in particular, shouldn't gloat or assume their recent victories guarantee their electoral resurgence. That's because three factors -- currently tilting in the GOP's favor -- could soon reverse and give Obama and the Democrats a tailwind.
First, the Republican strategy of obstruction has worked -- it has so far helped stop the major health care reform legislation -- but political science research tells us that saying "no" works for only so long. Eventually, you have to show how you'll solve the nation's problems. If the Republican Party doesn't offer a credible plan, its standing with the American people will not rise.
Still a Majority
Second, while Obama recorded a disappointing first year legislatively, his party is still the majority party, and Congress can and will likely propose legislation to address the economic, social and energy problems, as well as national security concerns. And in the process Obama may also force the Republicans into some embarrassing votes -- such as daring them to vote "no" on a tax on the banking sector to pay for the federal government's bank bailout.
Third, and most important, the U.S. economy appears to be turning the corner. Provided substantial, monthly job growth ensues, the party in power will get the credit, boosting their electoral prospects. If so, the worst economic news may be behind Obama and the Democrats.
Analogies are rarely perfect, but President Obama's and the Democrats' status in early 2010 is roughly equivalent to losing the first game of baseball's World Series.
And as the New York Yankees demonstrated in 2009, it's a best-of-seven series.
Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.
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