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GDP report puts Obama in economic 'gray zone.' Will Republicans profit?

GDP increased at a 2.2 percent annual rate in the first quarter, Commerce Department said Friday. That's below economists' expectations. The news gives Republicans ammunition against Obama.

By Ron SchererStaff writer / April 27, 2012

President Obama delivers remarks on job creation at Lorain County Community College in Elyria, Ohio, April 18. Obama is in Ohio for an event on jobs and the economy, before going to Michigan for election fundraisers.

Jason Reed/Reuters

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New York

The US economy started the year at a less than scintillating pace, giving the Republicans, especially likely presidential challenger Mitt Romney, fodder against President Obama.

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In its preliminary look at the first quarter’s Gross Domestic Product, the Commerce Department reported Friday that the economy grew at a 2.2 percent rate, down from a 3 percent rate in the fourth quarter of last year. Economists had anticipated the US economy would slow slightly, but had expected the growth rate to be closer to 2.5 percent.

Although the economy is in no danger of sinking into another recession, the slower rate of growth is now in what economists term the “gray zone” for Mr. Obama. If the economy grows at 3 percent or more, voters are generally happy. If the economy grows at 2 percent or less, voters are antsy.

“This is what makes it difficult for someone facing reelection,” says Linda Hooks, a professor of economics at Washington and Lee University in Lexington, Va. “There is a bit of a trend that when the numbers are below 3 percent, things don’t work out so well for you.”

For example, the last time the economy was this slow was in the last year of President George H.W. Bush’s one term in office, when GDP grew at 2.7 percent.

“The economy was actually recovering, but the president was unable to sell it,” says Larry Sabato, a political scientist at the University of Virginia, in Charlottesville. “Bill Clinton convinced people things were truly bad.”

On Friday, that’s exactly what Republicans started to do. Rep. Kevin Brady (R) of Texas, vice chairman of the congressional Joint Economic Committee, termed the report “beyond disappointing,” in a statement. “While I am thankful that the economy continues to expand, the damage done by the Obama administration’s policies have produced a weak recovery.”

The White House tried to put a more positive tone on the economic data. In a blog post, Alan Kreuger, chairman of the Council of Economic Advisers, called the continued expansion “encouraging,” but he added, “additional growth is needed to replace the jobs lost in the deep recession that began at the end of 2007.”

Mr. Kreuger noted that one big drag on the economy is the belt-tightening in government spending, especially for defense. National defense expenditures fell by 8.1 percent in the first quarter, according to the Commerce Department’s Bureau of Economic Analysis. Kreuger estimated the reduction in government spending subtracted 0.6 percent from overall GDP growth. 

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