The Politics Of The "New Normal"

Along with today's news that President Obama's poll numbers are slipping on health care and the economy, we also get a report from Gallup's Frank Newport on the "new normal"--a trend wherein Americans accept the dismal economic present as norm.

The term specifically applies to consumer spending. Americans are spending less and plan to continue spending at those levels in the future, Gallup reported today, as it has reported before. About a third of Americans, 32 percent, say they are spending less now and expect to make their present habits a "new normal" of their future budgetings.

One can't help but wonder if the "new normal" has political ramifications. The economy's relationship with Obama's approval/favorability ratings has loomed as a macro question over his presidency: how long can he stay so popular without a significant recovery? Will it harm his ability to pass health care, energy, and education reform, the three pillars of his domestic platform? It's a question of public expectations, and the "new normal" is, explicitly, a phenomenon of the same category.

The new normal trend suggests two things: lowered expectations for economic activity, and a climate of frugality.

The personal fiscal restraint ushered in by the economic downturn has accompanied a trend of fiscal conservatism, nationally, according to the Post/ABC numbers: 55 percent of Americans now favor holding the deficit in check over new spending as an economic fix, a shift from January, the Post tells us, when a slim majority favored spending. 43 percent approve of Obama's handling of the deficit, while, 49 percent disapprove.

In that regard, it appears Obama has suffered from the settling in of economic malaise, as spendthriftness at home accompanies less tolerance for deficit spending on the part of the administration and more concerns over how the government is spending.

At the same time, though, there's a certain advantage for Obama in the "new normal" trend: lowered expectations remove some public apprehension. A crisis, by definition, is a plot point that demands immediate resolution; a norm, by definition, doesn't. As Americans get used to their inabilities to spend, there's less pressure on the administration to make things better. The stimulus debate is over; we are where we are.

At the same time, for people who expect to continue living lean, an economic turnaround might feel better than for people who don't. The more our current economic state is normalized, the more a turnaround (sometime in the next few years?) would lead to an economic euphoria that's almost always a benefit for the ruling party. Even if the "new normal"-ites do continue to spend less, better economic conditions will mean more money saved, anyway. (My colleague Derek Thompson has suggested that, based on economists' predictions, the recession will be recovering in 2010, just in time for the midterm elections, with impeccably good timing for Democrats and bad timing for the GOP.)

But the double-edged sword is actually a triple-edged sword: without spending, the economy can't get better. Consumption accounts for about 70 percent of our GDP; if the "new normal" persists, there won't be enough consumer activity to bring about the rebound in question. One of the administration's big tasks has ben to spur demand, and the very idea of the "new normal" is demand's antithesis. It's the suggestion that the current recession has impacted Americans' spending patterns in a permanent way, and it's the risk that, in normalizing their economic coping mechanisms, Americans will prolong the problem Obama and his team are trying to shorten.

So, despite its various implications, it's an economic dragon for the administration to slay, regardless of any connection it might have to fiscal conservatism, and even if the normalization of our present state eases pressure on the White House to fix it.