WASHINGTON -- Federal Reserve Chairman Ben Bernanke's lower economic growth estimates for this year and next diminish President Obama's already weakened prospects for a second term.
Bernanke said Wednesday that the anemic recovery would be a lot slower than he had expected for the remainder of this year and in 2012, when Obama will be up for re-election.
The Fed's two-year projections were the political equivalent of a cold shower for Obama, whose mishandling of a persistently weak economy has earned him failing grades from a large majority of the electorate.
Bernanke's report that the economy is facing "head winds ... (that) may be stronger or more persistent than we thought" came in the midst of other data that showed a significant jump in unemployment claims, and a Congressional Budget Office (CBO) forecast that the federal government's debt, if the growth in entitlements is left unchecked, could swell to twice the size of the economy.
In a sharp turnaround from the Fed's earlier 3.1 to 3.3 percent growth forecasts that the economy would reach later this year, the central bank now expects the gross domestic product will be in the mid-to-high 2 percent range -- 2.7 percent to 2.9 percent. That's well below the growth needed to bring the economy's high unemployment rate down to normal levels anytime soon.
The Fed's 2012 growth forecasts, which were projected in April to be as high as 4.2 percent, are now estimated at 3.3 percent to 3.7 percent.
But the Fed says the average unemployment rate will still remain high this year and next, declining to between nearly 8 percent and 8.2 percent by the fourth quarter of 2012 -- the worst scenario for a beleaguered president who was hoping to run a "morning in America" re-election campaign.
Notably, the Fed sees only long-term, subpar economic growth in the 2.5 to 2.8 percent range, an anemic rate that Washington Post economics reporter Neil Irwin said would bring down the national jobless rate only "at a glacial pace."
The Fed's forecasts put a lot more wind in the Republicans' sails, as recent polls show that voters now have a lot more confidence in the GOP's ability to handle the economy than either the White House or the Democrats in Congress.
The critical question for Republicans now is whether the Obama economy's precipitous slowdown demands that they nominate the strongest candidate on the one issue that will decide the outcome of the election.
For all intents and purposes, the top Republican contenders are the three former governors who have thus far entered the race: Mitt Romney of Massachusetts, Tim Pawlenty of Minnesota and Jon Huntsman of Utah.
Texas Gov. Rick Perry may still get into the race, as could former Alaska Gov. Sarah Palin, but both may be too late to mount the kind of well-funded nationwide campaign needed to win the nomination, let alone the election. In this day and age, presidential campaigns take a full four years or more, and that rule still stands the test of time.
Pawlenty's campaign has been seriously undermined by weak fundraising and his own anonymity. Huntsman, a late entry, got off to a poor start this week after several embarrassing blunders by his inexperienced campaign staff, but he is largely unknown by the electorate at large and also faces fundraising challenges.
Romney, on the other hand, who has been running for more than four years, has built a sizable campaign war chest, raising a hefty $10 million in a single day earlier this month. He has made the weak economy and jobs his No. 1 issue, identifying himself as a career venture-capital investor who has helped build some of the most successful business enterprises in the country and knows how to create jobs.
Although he faces several challenges, including the Romneycare plan that he enacted as governor, he is the clear front-runner at this point.
The rapidly deteriorating Obama economy plays to Romney's experience and political strengths and, in the end, will likely trump all other issues the Democrats -- and his rivals for the nomination -- will throw at him.
Meantime, a little more than six months before the 2012 election year begins, the economy looms as Obama's potential Waterloo.
The economic recovery, if there ever was one, is clearly sliding backward. Punishing 9- to 10-percent unemployment rates show no sign of any significant decline this year or next, and one poll finds 80 percent of recent college graduates are unable to find work. The stock market is weakening, and with it, tens of millions of pension plans. Home sales continue to plunge along with home values.
And if all this weren't enough, the CBO says that under Obamacare, "an aging population and rapidly rising health care costs will sharply increase federal spending for health care programs and Social Security," causing "federal debt to grow to unsustainable levels."
If the economy is tanking, jobs are disappearing and America is on a slippery slope into bankruptcy, whom can Obama blame? George W. Bush?