If you want to understand why the presidential race is basically tied, take a good look at Friday's report from the Commerce Department on the state of the economy. The headline is not too bad from President Obama's point of view. The economy grew at the rate of 2 percent in the third quarter, up a bit from the 1.3 percent in the second quarter.
But look below the headlines and it's a dismal story for the middle class families to which both candidates are appealing.
Nearly a third of the growth came from a one-time spike in military spending that is not likely to be repeated.
Much of the uptick resulted from increased household borrowing, not from an increase in consumer incomes.
Business investment was basically flat.
Exports were down slightly.
Shrinking state and local spending continued to be a drag on the recovery.
The only good news was that the housing collapse has apparently bottomed out, and home-buying and home construction are both increasing.
But this is not a strong enough recovery to either raise wages, create the 10 million jobs that the economy needs, or increase living standards. In fact, it is the weakest recovery of all the postwar recessions, especially measured against the depth of the collapse.
There have been 13 quarters -- just over four years -- since the official end of the recession. At this point in the typical postwar recovery, total growth had averaged 16.8 percent -- 4 percent a year. In the current recovery, total expansion has been just 7.2 percent -- under 2 percent per year.
The improbable hero of the story is that radical, Ben Bernanke. By keeping interest rates rock bottom, the Fed Chairman at least assures that for those consumers and businesses who can get credit, it is dirt cheap. This puts more purchasing power in consumers' pockets.
But the homeowners who most need refinancing can't get it, because their homes are still underwater. And as the lousy business investment numbers demonstrate, too few businesses see reasons to expand (and by the way, tax cuts for small businesses won't solve that problem any more than low interest rates do -- businesses need to see customers with money to spend before they will expand.)
And as Bernanke is the first to point out, cheap money by itself can't solve the problem. That takes fiscal policy. And though he dares not say it out loud, he doesn't mean less government spending, he means more.
Bernanke has been courted by the deficit hawks to insist on the kind of deal that his predecessor Alan Greenspan imposed on Bill Clinton -- lower interest rates in exchange for deficit reduction. But Bernanke is a good enough economist to appreciate that in a serious slump we need both monetary and fiscal stimulus. He is conspicuously absent from the ranks of those elites promoting budget cuts. But I digress.
The long term source of all this misery is of course right-wing economic policies. But by failing to clean out and restructure the financial system, and to at least fight for much stronger recovery measures despite Republican obstruction, our president has given his opponent an opening to make the continuing slump Obama's fault.
All of which explains the following apparent paradox: Mitt Romney can have a dismal convention, a series of gaffes, the contempt of much of his own party's base, as well as the highest disapproval rating of any recent major party nominee -- and still fight Obama to a draw based on one better-than-expected debate performance.
The reason is that when Romney declares that the economy is lousy, it resonates with people's lived experience.
This bulletproofs him against two fine performances by Obama in the final two debates, which only gained Obama back a point or two. Romney can even survive one appalling pronouncement after another by the Republican rape patrol and still make gains among women.
Why? Because many women tell pollsters that they don't like Romney's views on reproductive rights but they are inclined to vote for him based on the economy. Why would you vote for Romney based on the economy? Because he's not Obama. Not enough voters, male or female, look at Romney's blarney in any detail; they just know that Obama hasn't solved a prolonged slump.
In the parlance of economists, the economy is stuck in what the economist Irving Fisher called a debt-deflation, where the continuing damage from a financial collapse acts as a lead weight on the recovery. The only entity that can blast the economy out of a debt deflation is more public spending -- which of course cycles right back into the private economy.
So what is our president doing to shore up his support by reassuring voters that things will pick up in the next four years? More public investment, more jobs, more overhaul of the financial system, more relief for the mortgage mess, right?
Well, not exactly. While he gives lip service to these goals, Obama is preparing to do a major deal for deficit reduction, which will only add to the drag on the recovery. His administration has bought into the argument that the business elite and the money markets expect deficit reduction, and that it will also play well with the voters.
In his recent off-the-record conversation with the editors and publisher of Iowa's largest paper, the Des Moines Register, which was made public under pressure from that newspaper, Obama had this to say about deficit reduction:
I am absolutely confident that we can get what is the equivalent of the grand bargain that essentially I've been offering to the Republicans for a very long time, which is $2.50 worth of cuts for every dollar in spending, and work to reduce the costs of our health care programs.
And we can easily meet -- "easily" is the wrong word -- we can credibly meet the target that the Bowles-Simpson Commission established of $4 trillion in deficit reduction, and even more in the out-years, and we can stabilize our deficit-to-GDP ratio in a way that is really going to be a good foundation for long-term growth. Now, once we get that done, that takes a huge piece of business off the table.
Say what? Four trillion dollars of deficit-reduction, otherwise known as economic contraction. Really? If Obama strikes such a deal, it guarantees that a sluggish economy will continue.
Oh, and I almost forgot. The Register was so appreciative of Obama for releasing the transcript and so persuaded by his economic logic that they endorsed Mitt Romney.
Thanks to his exceptional luck in drawing Romney as his opponent, Obama will probably win a narrow re-election despite the dismal recovery. But on Wednesday morning, a struggle begins within the Democratic Party to save him (and us) from himself -- to keep him from agreeing to a budget deal that will only slow growth, needlessly sacrifice Social Security and Medicare, and make the next four years much like the last four years.
What a waste, what a pity. Progressive Democrats should be resisting the economic lunacy and political sway of an extremist Republican Party. Instead, they will be working to keep their own president from capitulating to fiscal folly.
Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. His latest book is A Presidency in Peril.