What Obama Really Needs: Robust Income Growth for Americans

White House and income growthPresident Barack Obama's second State of the Union address showcased his more centrist, pro-business stance. That new approach may be alienating some of his base, but it's had a salutary effect on stocks and Obama's approval ratings. The Dow Jones Industrial Average ($INDU) has added about 800 points since the Democrats were "shellacked," as the president described it, in the midterm elections, while his approval ratings have moved above 50%.

But as much as the market and Corporate America may like what they heard in the president's speech Tuesday night, if history is any guide, Obama's reelection in 2012 remains pinned to creating income growth with new jobs, according to research from Jeffrey Kleintop, chief market strategist at LPL Financial.

The 3% Threshold

True, Obama named General Electric (GE) Chief Executive Jeffrey Immelt as chairman of his outside panel of economic advisers, presumably because Immelt knows something about building a workforce and generating export growth. And naming former JPMorgan Chase (JPM) executive William Daley as White House Chief of Staff likely gives the administration more cred on the Street.

But unless those guys can whip up some impressive personal income growth in a hurry for Americans, history doesn't favor the president getting a second term. At least that's what the data suggest by Kleintop's reckoning.

"Inflation-adjusted, after-tax income growth of about 3% appears to be the threshold for incumbents to get 50% of the popular vote," Kleintop writes in his weekly note to clients. Anything below that tends to favor the challenger. See the chart below.



As of now, this measure of per capita income is growing at just 1.4%. That means it will need to more than double in the 12 months leading up to November 2012 to favor Obama's reelection.

"Of course, politics can drive economic outcomes, but the economy also affects political outcomes," Kleintop writes. "Clearly, factors other than jobs have a bearing on the election. However, job creation may be the key measure by which his presidency will be judged when he is up for reelection in 2012."


Increase your money and finance knowledge from home

Forex for Beginners

Learn about trading currencies and foreign exchange transactions

View Course »

Introduction to ETFs

The basics of Exchange Traded Funds and why ETFs are hot.

View Course »

Add a Comment

*0 / 3000 Character Maximum

736 Comments

Filter by:
CherMoeLin

Well, I think that must be President Obama's pipe dream. I voted for him, and the Democrats passed up their big opportunity. Obama's promises about the war were not kept and they caved in to the Republicans time after time on every matter of the greatest concern, including eliminating a Public Option from Health Care and eliminating Single Payer in particular. The torture continues, the Bush policies continue, the Bush crimes continue. Any improvement in the economy will be claimed a victory by the Republicans as they slash and cut and destroy the Middle Class in order to give to the Top 1%. I think, President Obama, you sided with the Corporations and against the people. Under that scenario, the American workers CANNOT advance and the only "growth" that can occur is more profit to hoard for the rich.

March 16 2011 at 5:42 PM Report abuse +1 rate up rate down Reply
taxguy527

What obama needs is robust growth? What America needs is for obama to go back to the country whose passport he carried & claimed citizenship for when he traveled the World as a young adult. Recently Gen Colin Powell said "we didn't elect Superman". Yes, Mr. Powell. You are correct in saying that we didn't elect Superman. And not only did we not elect Superman, we elected a youngster who has never even had a full time "real job", never met a payroll, never operated a small (or any other) business, never had any real world experience. Further, we elected a young man who, in his early 20's, traveled on a passport showing citizenship from some other country, and who has blocked the release of his actual birth certificate, as well as most of his college records & transcripts. Sorry to have to inform you of those things, Mr. Powell.

January 28 2011 at 1:39 AM Report abuse +1 rate up rate down Reply
1 reply to taxguy527's comment
CherMoeLin

By those "qualifications", Taxguy, neither did George Bush meet the business qualifications to be president. He failed at every endeavor and his Daddy had to bail him out. He never READ anything and his daily briefings had to be given ORALLY, and all he had to do was sign on the "dotted line". Bush had Cheney and others running the country. He was nothing more than a name and a "figurehead" and his HANDLERS took care of the rest .... which, by law, DOES NOT excuse him from his crimes, by the way.

March 16 2011 at 5:46 PM Report abuse +1 rate up rate down Reply
jmm8254

"What Obama Really Needs . . . ."? The first four words of the headline reflect one of our major problems in this country - narcissistic politicians. How about, "What Americans Really Need is Robust Income Growth (and less political BS and less government intrusion into our lives and a new president and . . . .)

Government and its pompous officials - what is REALLY WRONG with America.

Get government out of the way of American business and our country will once again prosper.

January 27 2011 at 4:26 PM Report abuse +2 rate up rate down Reply
m451moochie

Have you,the reader,Entertained the Thought that stocks are going up, so investors can maximize HOW MANY DOLLARS(HowEVER INflated they may BE)they can get. Gold,Silver,Platinum,Hard Commodities,ETC, reflect this Reality. Why are Stocks any different. WATCH out for the NEXT BUBBLE,however. Musical Chairs, anybody?? You have all seen The commercials,"I WORK WITH MONKEYS"?? This is the Mindset running Economic Policy,currently. Absent "O" Care,Cap&Trade,Stimulus,DADT,ETC, we COULD have had a Two year head start on Growth.. But simple thoughts Escape The NOMENKLATURA, do They Not?? And All of us suffer Their HUBRIS. Denial of Same, ain't going to make it in this Debate,try as some might. In Future Generations, Progressivism ,like Wilsonian Theory,or KEYNES(ISM) is NOT going to be something to be BRAGGED ABOUT. That is ,unless Public Schools and Universities have something to say about it.

January 27 2011 at 4:16 PM Report abuse +1 rate up rate down Reply
jkennedy806

Robust income growth Bust is more like it

January 27 2011 at 1:13 PM Report abuse +2 rate up rate down Reply
pllove49

Boy..I'll tell ya..my family sure could use having our income double or triple..and we don't itemize or whatever so we'd be payin more in taxes too..

January 27 2011 at 8:11 AM Report abuse +1 rate up rate down Reply
ilduce2

$1.5 trillion dollar deficit last year.......Over $ 3 Trillion since Obama took ofice.......and te economy and jobs keep getting worse.

January 27 2011 at 6:19 AM Report abuse +5 rate up rate down Reply
ilduce2

Obama needs a birth certificate.......The LIB MEDIA won't report that he has one...... They Question the motives of we who ask to see it......and call us names like BIRTHERS....... WE need to REGULATE the CORRUPT LIB MEDIA.

January 27 2011 at 6:18 AM Report abuse +7 rate up rate down Reply
ilduce2

26 states are sueing the Federal goverment over Obamacare.........800 major corporations have asked for waivers....... and the US House just voted to overturn the law....... It ain't working folks...... what Obama needs is a new job........what we need is a new president.

January 27 2011 at 6:15 AM Report abuse +6 rate up rate down Reply
1 reply to ilduce2's comment
Rebecca

Said correctly, 26 state attorney generals are suing the federal government over the PPACA. And some of those attorney generals did not have the backing of their governors or the people of their states before doing so. The House voted to overturn the law to fullfill a campaign promise nothing else. They are playing politics with my health care.

January 27 2011 at 7:14 PM Report abuse +1 rate up rate down Reply
cshae89546

Something else Barack Obama needs? this is the transcript of an interview with Gov. Abercrombie of Hawaii;

Q: You stirred up quite a controversy with your comments regarding birthers and your plans to release more information regarding President Barack Obama's birth certificate. How is that coming?

A: I got a letter from someone the other day who was genuinely concerned about it; it is not all just political agenda. They were talking on Olelo last night about this; it has a political implication for 2012 that we simply cannot have.

It was actually written....I am told...., this is what our investigation is showing, it actually exists in the archives, written down ...

http://www.staradvertiser.com/editorials/20110118_This_is_a_collaborative_endeavor.html

January 27 2011 at 6:07 AM Report abuse +1 rate up rate down Reply