In a waning presidential first term nothing compares to the importance of securing another one. In Barack Obama’s case, there is an added spur to his drive for re-election. The president believes the American economy will spring back to life over the next four years and cannot abide the thought of Mitt Romney reaping the credit.
Mr Obama’s impulse is more than understandable. However unearned, an economic revival that coincided with a Romney first term would easily be marketed as a “Romney boom”. But even if – as many expect – Mr Obama wins on 6 November, he should be wary of the growing belief in America’s impending manufacturing renaissance.
Too much of it is based on hope. America’s pallid – and again waning – economic recovery is already into its fourth year. The typical length of the business cycle is about seven years. It requires optimism at this stage to believe the patient is about to arise and go for a jog.
Here is the case for America’s coming manufacturing boom. First, the US is in the early stages of an energy windfall that will transform its attractiveness as a location to do business. In addition to the unfolding energy supply shock, which will lower the cost of electricity and the feed-in stock for many kinds of production, the cost of American labour looks increasingly attractive next to wage inflation in China and other emerging market economies.
According to the Boston Consulting Group the US could create between 2m and 5m new direct and indirect manufacturing jobs between now and 2020. That would make up for about one-third of what it has lost in the past decade.
On top of that, the US housing market has finally bottomed out and is likely once again to become a net plus to US growth. Finally, as Roger Altman recently argued in the FT, Washington could surprise us all by skirting the cliff and striking a fiscal deal that would rekindle America’s animal spirits.
Much of this is indisputable; the US is well on the way to a new era of energy abundance. Estimates of its impact range from mildly positive to something far bigger. Much of it is also probable: it would take a huge shock to push the US housing market back into free fall.