United States

The 2012 presidential campaign, a fluctuating economy, and the approaching “fiscal cliff”

As the summer progressed, the 2012 presidential campaign heated up. Mitt Romney, a former governor of Massachusetts, outdistanced a field of competitors that included former speaker of the House Newt Gingrich and former Pennsylvania senator Rick Santorum to gain the Republican nomination. Romney promised to repeal the Patient Protection and Affordable Care Act and pledged to limit government, preserve the Bush-era tax cuts while eliminating tax loopholes, and employ his acumen as a successful businessman to create 12 million new jobs within four years. He staked much of his campaign on his criticism of Obama’s handling of the economy.

Mitt Romney, 2010.© Christopher Halloran/Shutterstock.com

After expanding by 4.1 percent in the last quarter of 2011, GDP growth dropped to 2 percent and 1.3 percent, respectively, in the first and second quarters of 2012 before rebounding slightly to 2 percent in the third quarter. Unemployment hovered between 8.3 percent and 8.1 percent for most of the year before dropping to 7.8 percent in September, its lowest level since Obama had taken office in January 2009. Obama, who was unopposed for the Democratic nomination, defended his record on the economy, promised to attack the deficit by increasing the share of taxes paid by the wealthiest Americans, and claimed that Romney’s plan for the economy did not add up.

All this unfolded as the country drew closer to the so-called fiscal cliff, the series of economic measures mandated by law to either expire or be enforced at the turn of the new year. They included the expiration of the Bush-era tax cuts, temporary payroll tax cuts initiated by the Obama administration, and some tax breaks for businesses, along with the automatic application of across-the-board spending cuts to the military and nonmilitary programs required by the Budget Control Act of 2011. There was fear that, absent some compromise, those measures would result in another recession.