Obama's Cloud Economy

You just know the American economy is out there somewhere. If only someone knew which buttons to push to retrieve it from the storage cloud.

Here are three headlines that floated by on yesterday morning's screens alone:

"U.S. Manufacturing Growth Slows Substantially"

"Housing Imperils Recovery"

"Private Sector Added Few Jobs in May"

Let it be noted for the record that presidents normally do not take ownership of a weak economy. Jimmy Carter owned the 1980 election-year economy. George H.W. Bush owned the 1992 election-year economy. Both were one-term presidents. Happily for his opponents, Barack Obama has taken ownership of the 2011 economy, a full year and half before he has to face the voters. The Obama self-confidence is famously limitless.

Still, a doubter might ask if President Obama hasn't suffered his John McCain moment on the economy.

John McCain's presidential bid blew up for good when he announced in September 2008 that he was suspending his campaign and returning to Washington to address the national financial crisis. In the event, Mr. McCain had nothing to contribute, and the White House passed to Barack Obama.

Mr. Obama's McCain moment—raising expectations of economic seriousness and then dropping them over the cliff—was his hyperpartisan deficit speech at George Washington University in April.

Daniel Henninger says the economy is flying without instruments because of the White House's policy choices.

The day before that speech, all Washington expected Mr. Obama to make a major policy statement about the big deficit-reduction debate then unfolding. Agree or disagree, Paul Ryan's budget released the week before was all about policy. The Republicans were actually offering to take part-ownership of the economy by spending the year in dense discussions about the deficit and spending.

Expectations raised, the president contributed nothing. Instead he dumped ridicule and derision on the Republican leadership seated before him. With that speech, Mr. Obama kicked off his 2012 presidential campaign, and in so doing politicized the economy.

The timing was not good. Whether it's this week's report that consumer confidence has fallen to a six-month low or anecdotal conversation ("So what do you think happens when QE2 ends?"), the sense grows that people are starting to freak out over the economy—over persistently high unemployment and persistently weak growth.

With the U.S. economy, a Lazarus rising is always possible (or was). But the informed betting is going the other way. Private forecasters have reduced their estimates for economic growth the rest of the year well below the 3%-plus the Federal Reserve predicted in April. The Fed's 2012 growth forecast runs as high as 4.2%. They must be using high-powered telescopes.

It's ironic indeed that Barack Obama, in a slap at his predecessor, routinely said that his policies would be "smart" this or "smart" that. A "smart" economy would at least have the virtue of clarity for the purposes of planning and capital investment. The Obama economy does not. Economic decision-makers—from 401(k) investors to Fortune 500 CFOs—are flying instrument-less through the clouds because that is where the policy choices made by this White House have left them.

View Full Image

Blend Images/Corbis

The policy most explicitly intended to reboot the economy was 2009's $814 billion stimulus and successive budgets that raised federal spending to 25% of a $14 trillion economy. In this year's first quarter, the economy grew at 1.8%. Liberal economists, such as former Obama economic adviser Christina Romer, argue the stimulus should have been bigger, $1.2 trillion. Others wanted $2 trillion. We leave that to a generation of seminars in macroeconomics. Barack Obama, believing that $800 billion of injected "demand" would lift the economy, decided to devote his political capital and congressional majorities to reorganizing two major American industries, health care and finance.

Merits aside, both creations rose from the table as 2,000-page laws. Hundreds of thousands of economic actors across the country now wait while the bureaucracies struggle to interpret 4,000 pages of "smart" legislating. What evidence do liberals cite for their vestigial faith that these industries, employing millions of people in complex daily activities, can grow long term at greater than 3% from beneath the morass of Dodd-Frank and the Obama health-care law?

The housing sector, a monumental and intractable mess, chokes the economy. No matter. The president allowed (or told) "adviser" Elizabeth Warren of the new Consumer Financial Protection Bureau to engulf banks and mortgage servicers in negotiations over a complex regulatory scheme whose goal, literally, is to fix their "business model."

The White House now says the free trade agreements with Colombia, Panama and South Korea will be delayed absent payouts of more money for "trade adjustment assistance." Ergo, the past two years of uncertainty for trade commitments will be extended.

It is sometimes unfair to tag presidents with blame for an underperforming economy. Not this time. This president made conscious policy choices during a deep recession to reorder vast swaths of American industry. Strong-performing economies need clarity. Barack Obama has given ours indecision stretching to the horizon. And economic growth, like a long gray day, sits still below 3%.

Write to henninger@wsj.com