FOR BOTH parties, next year's presidential election is, in many ways, a race against the clock. For President Bush, the question is whether he peaks too early. For now, the economic news is good and the war news just barely tolerable.
But take a closer look at both fronts. On the economy, the ideal time for Bush's reelection would be about now, when everything is on an upswing. Unfortunately, the election is next fall. Economic growth and the beginning of job growth have returned. However, both are built on a unsustainable degree of economic stimulus. The federal budget deficit is about 5 percent of GDP, and rising. Interest rates are at five-decade lows.
With that amount of stimulus, of course the economy grows. Even so, jobs are not yet growing fast enough to reduce unemployment much, and wages are still fairly flat. The problem is that you can't sustain very high deficits and very low interest rates very long. Money markets look at the rising national debt, and start getting very nervous. That pushes up interest rates.
More ominously, huge budget deficits are linked to huge trade deficits. We finance our deficits and borrowing binge by absorbing capital from the rest of the world. That's not sustainable either.
At some point, our overseas creditors start getting nervous, too. The euro is now close to an all-time high against the dollar. If all those foreigners buying dollars and dollar-denominated investments start pulling back, the dollar goes into free fall. Trading partners like Japan and China, who depend on exports, have been buying huge quantities of dollars, to keep their own currencies from rising and the dollar from crashing. This game can't go on indefinitely. A senior international banker, who channels billions of dollars of capital to Asia, told me he puts the odds of a dollar crash at about 40 percent. Will Bush -- and the economy -- muddle through until November 2004? His election could well depend on it.
But the economy looks positively rosy compared with the foreign policy front. The president has served American troops a turkey, in more ways than one.
Ever since last month's emergency meeting with proconsul Paul Bremer, it's clear that the administration is belatedly looking for an exit strategy. Bush wants most troops home for the election. However, no serious observer of Iraq thinks that nation's political situation can be stabilized that quickly. An international peacekeeping force for Iraq under United Nations auspices is off the table because Bush refuses to share authority.
If power is turned over to the Iraqis in 2004, the likely result will be escalating violence, a serious risk of partition into three countries -- Shiite, Sunni, and Kurd -- and civil war. Iraq could easily be more of an international menace -- and a US foreign policy failure -- in 2004 than in 2002.
Of course, Bush and his political handlers are cynical enough to arrange a power transfer late in 2004, so that the newscasts will be filled with happy troops returning home all fall, and hope to delay the collapse until the election is over. But events have a way of mocking such split-second timing.
Over in the opposition camp, the Democrats have a very different timing problem. For 20 years, they have been tinkering with the nomination process in the hope of getting it done early, so that their standard bearer can be known early and the usual extended brawl avoided.
This year, however, the nomination process could drag on, leaving Democrats pounding on each other rather than honing their challenge to Bush. One of the Democrats' rule changes requires delegates to be awarded proportionally. No more winning New York by a few votes and being awarded all of its delegates. Every state will now have a split delegation. This change, coupled with a large field of candidates, makes it much harder for any candidate to win half the delegates, and the nomination contest could go all the way to the convention for the first time since 1960.
Of course, the cliffhanger outcome that year did not prevent John Kennedy from going on to win the presidency. But primaries have become more protracted and nastier in four decades and extended in-fighting can hardly be good for the opposition.
If Bush wins in 2004, a radicalized right wing will have wall-to-wall control of government. It is hard to think of another American election -- perhaps 1860 -- where the consequences were more momentous and the outcome more dependent on luck and timing.
Robert Kuttner's is co-editor of The American Prospect.
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