Business, the economy, the election and the apocalypse of 2012

Filed under: Contributed Column,Opinion,Print | Tags:

If you believe the latest doomsday cranks, the apocalypse arrives on December 21, 2012, a date marking the close of the ancient Mayan civilization’s “Long Count” calendar.

Don’t ask me — or any reliable historian — how the Mayan calendar became a means for apocalyptic prophesies. It’s another combination of myth making, book selling, and some lost and/or desperate people willing to believe just about anything. There was that “2012” movie starring John Cusack as well.

Anyway, from a business perspective, some might be relieved if things ended in 2012. The November elections would not have any lasting consequences, and we’d avoid the ugly, costly taxes, regulations and spending scheduled to kick in under ObamaCare in 2013 and 2014.

But if we must choose reality, then what does 2012 hold from a political and policy perspective?

It’s all about the presidential and congressional elections. Sure, there will be a few issues that President Barack Obama, the Democrat-led U.S. Senate, and Republican majority in the House of Representatives agree on during the coming year. And some items will make a difference for business and the economy, but not much. The big, consequential matters will be reserved for the campaign trail, not for actual lawmaking in 2012.

In fact, the November 2012 elections rank as one of the most important political moments in recent history.

At the end of the Bush administration and in President Barack Obama’s first term (especially during the first two years), an unprecedented expansion in the size and scope of government occurred, particularly in terms of federal spending and regulation. If things don’t change markedly, the threat lurks for even more spending and regulation, along with large tax increases, in the future.

The November elections will determine if the United States continues to go down this economically destructive path; if we stop where we are; or if we choose to reverse some or much of the governmental intrusions and impositions of the past few years. Make no mistake, the outcome will matter to our immediate and long-term economic well being. Will we choose to become much more like big-government, fiscally-troubled, slow-growth Europe — and we’ve all seen how that has worked out — or reclaim our position as an entrepreneurial, free-enterprise, growth-oriented economy?

At this juncture, both President Obama and Congress have abysmal approval ratings. In addition, though passed in March 2010, ObamaCare remains unpopular in the polls, with a majority of likely voters consistently favoring its repeal, including in a mid-December Rasmussen Reports poll. And people still lack confidence in an economy that has performed poorly for four years. Indeed, it was both the bad economy and ObamaCare that led to big Republican gains in the November 2010 elections, including taking control of the House of Representatives.

Obviously, this is not a favorable environment to seek re-election, especially for a president. When a sitting president seeks a second term, the race is about him. If things are generally going well, voters will give a president four more years, as was the case in recent times with George W. Bush in 2004, Bill Clinton in 1996, and Ronald Reagan in 1984. In contrast, if the nation, especially the economy, is not doing well, then voters are more than willing to make a president a one-termer, as was the case with George H.W. Bush in 1992 and Jimmy Carter in 1980.

Of course, the opposing party must still have at least a satisfactory alternative. That’s what Republicans will be trying to come up with during the caucus/primary season kicking off in Iowa on January 3, followed by New Hampshire on January 10 and South Carolina on January 21. The eventual Republican candidate’s principles, policies, background, temperament, ethics and ability to communicate certainly will matter. But, again, the 2012 campaign ultimately will be about President Obama and his record.

And no matter who wins the White House in November, it will be just as important to see which party controls Congress. Will we have divided government, as is the case for 2011 and 2012, or one party controlling the White House and Congress, as with the Democrats in 2009 and 2010?

If the focus is on changing policy to get business, investment, economic growth and job creation back on track, then divided government would accomplish nothing more than not making matters even worse. For example, the tax and regulatory costs scheduled under ObamaCare, as well as all or part of the tax increases set to kick in at the end of this year, would take hold. Investors and businesses could not count on any substantive reduction in the unprecedented levels of government spending currently imposed and projected for the future.

If President Obama gets re-elected, and the Democrats keep the Senate and re-take the House, then we’re back to the 2009-2010 scenario under which government activism reached new levels.

In the end, hopes on the economy seem to lie with a Republican-controlled Congress and White House reversing the damage done by government over the past four-plus years, and implementing pro-growth tax and regulatory relief. Are Republicans up to the political and governing challenges? Good question. If not, 2012 might bring about a different kind of apocalypse than that peddled by the Mayan calendar cranks.

Raymond J. Keating is the chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.