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The Tipping Point

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There is a natural tendency to overestimate the economic and political consequences of major events, particularly a calamity the size of Hurricane Katrina's path of destruction. But, this time, it could turn out that the consequences are so enormous that overestimating them would have been difficult. As the people of Louisiana, Mississippi, and Alabama begin to take stock of the damage, other Americans are already contemplating the eventual impact on the nation's economy and politics.

Katrina's possible ramifications bring to mind Malcolm Gladwell's 2000 bestseller, The Tipping Point: How Little Things Can Make a Big Difference. Gladwell described "that magic moment when an idea, trend, or social behavior crosses a threshold, tips, and spreads like wildfire." He argued that fairly small, seemingly insignificant shifts can sometimes push something over a tipping point -- triggering enormous consequences. Katrina may have, at least for now, stopped the momentum toward one political tipping point, but it could push the economy past another tipping point.

President Bush has had a very bad summer. His ratings have dropped to their lowest plateau so far, driven both by bad news from Iraq and by rising gasoline prices. From the time Bush first took office until mid-June 2005, only two of 170 national Gallup surveys measuring his performance showed that at least half of the public disapproved of the job he was doing. But since mid-June, seven of nine Gallup surveys put Bush's disapproval score above 50 percent.

According to the most recent Gallup Poll, conducted August 22-25, just 40 percent approve of Bush's performance, while 56 percent disapprove. Since the beginning of August, an Associated Press/Ipsos poll and a Newsweek/Princeton Survey Research poll both reported 42 percent approval ratings, while a previous Gallup Poll, a CBS News poll, and an ABC News/Washington Post poll all reported 45 percent approvals. An average of these six polls puts Bush's approval rating at 43 percent. Perhaps most alarming for the White House was the ABC/Post finding that 41 percent of Americans strongly disapprove of Bush's performance.

Arguably, before Katrina, opposition to the war and to Bush's handling of it was approaching a tipping point. But will the Katrina-triggered shift in focus away from Iraq prevent or delay that tipping point from being reached? With Katrina having struck so fiercely, with Bush back in Washington, with John Roberts's confirmation hearings on tap, and the president's tax commission due to report soon, anti-war mother Cindy Sheehan will be out of the spotlight. That might halt Bush's freefall.

On the other hand, most knowledgeable analysts expect the violence in Iraq to get worse before it gets better, and many think the run-up to the October referendum on Iraq's proposed constitution could be particularly bloody. So, Bush's respite could be very brief.

On the economic front, while most economists think the slowdown reflected in recent indicators is temporary, others, notably the New York-based consulting firm International Strategy & Investment, argue that this "soft patch" might be enduring. Economists are divided over the severity of the effects of sharply higher energy prices. One side says that our service- and technology-oriented economy is less vulnerable to energy price surges than it was when manufacturing was king. ISI and other bears counter that our economy is only a bit less energy-dependent now than in the past and that high energy prices will be very harmful. ISI points to worrisome economic signs, including rising interest rates, the cooling of the housing sector, slowing auto sales, and disappointing "back-to-school" sales.

Will the Katrina-caused oil shock push the nation closer to an economic tipping point? Some argue that incredibly low interest rates and risky real estate lending practices have softened the blow of higher energy costs over the past year but can do so no longer. Some analysts are predicting that average gasoline prices may jump above $3 a gallon, further challenging household budgets, although only the most ardent Bush-bashers will blame the president rather than an act of God for this surge.

Still, the more the people feel economically threatened, the worse it is for presidents and others in power. And it is probably also true that the more fearful people are about their personal finances, the more negative they may feel about the continuing cost of the war in Iraq.

 
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