Built to Last: Obama Recovery Beats Beltway Wisdom on the Economics and Politics of Gas Prices

The conventional wisdom has been that the high gas prices are hurting economic growth in a fledgling recovery, and that the American people, largely unhappy with the prices at the pump, are going to take it out on the President. Both of these are proving to be wrong as of now, however.

The economy isn't exactly showing signs of dying. We all know about the stellar jobs numbers in the past few months, capping off a total of 4 million private sector jobs created in the last 23 months. The Commerce Department reported today that consumer spending grew in February at the fastest pace in seven months, driven by the strong jobs growth of late. New orders for durable goods grew to $212 billion in February, an increase of 2.2% over the previous month. Yesterday, the Labor Department reported that initial jobless claims fell to 359,000, a 4-year low. Economists believe that initials claims below 400,000 represent an economy returning to health. Here is how the jobless claims data has looked over the Great Recession and the ensuing Obama Recovery (Credit: CS Monitor).
Of course, as the economy has improved thanks to President Obama's steadfast leadership and the Republican party has en masse opposed and stifled the President's jobs agenda to the extend they could, the American people have smartened to their tricks. A CNN/ORC poll showed this week the President's approval rating rising to 51% and his disapproval falling (albeit by just a few percentage points), and had him opening up double-digit lead over Mitt Romney. The President is also opening up leads in so-called battleground states. A Quinnipiac poll had the President leading Romney in Ohio, Florida, and Pennsylvania. And in a Marist poll released in the last hours shows the President pummeling Romney in Wisconsin by 17 points, 52% to 35%.

So why, one might ask, is conventional wisdom so wrong, besides for the fact that it's conventional wisdom? Maybe it has something to do with the need for a horserace narrative. Maybe the beltway bubble is just irresistible. But I think it's also because of a few things that has been happening under the noses of the pundits that they have failed to notice.

Americans seem to have had enough of these ups and downs in the gas prices to do two things: (a) quit blaming the president for it, and (b) find alternatives to guzzling gas that don't hurt the consumer economy elsewhere. Americans are switching to smaller, more fuel efficient cars. From four years ago, fuel efficiency of vehicles purchased in February was up by 16% (it went from an average of 20.4 mpg in February of 2008 to 23.7 mpg last month), nearly matching the gas price increase over the same period. People are planning their trips and carpooling. The use of public transit is up. They are saving on energy costs in their homes as a result of more efficient lighting. The President's weatherization program for low income family homes is now paying off by reducing heating and cooling costs. Production is ramping up for alternative sources, and the cost of battery for electric cars is being driven down.

In short, the president's strategy to fight high energy costs through more efficient use of energy and diversifying the sources of energy from oil and gas to cleaner sources is working. It's not just working to boost his approval. It's working to cushion the economy from hard blows from high unit prices of energy. Consumers and businesses have overall made their energy use more efficient, more diversified, and less of a hostage to gas prices. And that is great news for America.