Team Obama's narrative -- that the stimulative measures he took were precisely what the country needed, and as a result America is on the mend -- is based on a gamble that the economy will be in a steady recovery come Election Day. But if outside factors diminish the outlook, it will leave voters with the impression that Obama's approach itself was the problem, rather than the vigorous Republican resistance that forced him to scale back his ambitions.
"What they should be saying is, 'We have the right ideas and we're pursuing them as far as we can given the opposition from Republicans,' which would be more or less the true narrative," Krugman said. "They have decided that it sounds like weakness to say that we haven't been doing everything that we should be doing. And so they have instead opted to always pretend that what they thought they were able to get is also exactly what they should have done. So they've never conceded that that first stimulus was too small, or that there really should have been a second round of stimulus. And that means that if things go badly, they end up owning it. They can't say, 'Don't blame us, blame the do-nothing Congress.'"
In his book, which hit shelves May 1, Krugman laments the "shadow of economic catastrophe" we live in, and the opportunity cost of huge stockpiles of underutilized human and physical capital. The government should put that to work, Krugman says, first by reversing the state layoffs of teachers, firefighters and other employees, and then ideally with a New Deal-style public works push to rebuild American infrastructure by putting the unemployed to work. But even though GOP opposition makes that all but impossible, Krugman believes it's a mistake for Obama not to go the extra mile and at least tell voters what more he would do if only he could.
"There is a political danger to Obama, which is that [Mitt] Romney can go around saying, 'The economy is still lousy,' which is true," Krugman said. "And the fact that Obama has never made a really clear case for his own economic leadership hurts. Now, I still think Obama will probably win, because there are other issues, but they have created a trap for themselves on the economic policy front by allowing themselves to own a weak economy in a way that they shouldn't, because a lot of the problem has been tortured opposition from the Republicans."
The White House's narrative developed amid strong political headwinds. Pressure not only from Republicans but many Democrats and even administration officials, along with a broad establishment consensus, compelled Obama to pivot to deficit-reduction, after the Democrats' 2010 congressional losses and in the face of an exploding national debt.
When the ensuing negotiations with Republicans collapsed and nearly took the U.S. economy with it, Obama turned to his current narrative. Krugman worries that the story's not strong enough, and there's still some chance that the economic recovery could slip and toss the election to the GOP.
"We have a slowly developing cycle of an improving economy and improving household balance sheets that lead you on the road to recovery," Krugman said. "But obviously a lot can go wrong if there's some kind of major setback -- problems in Europe could still hurt the United States, or a spike in oil prices as a result of what's happening in the Middle East. ... We could have morning in America still. But probably not in 2012. So I don't think there's going to be a strong enough recovery to make it easy for [Obama]."