[T]he president himself imagined that he was going to run a re-election campaign that reprised the Reagan "Morning in America" campaign of 1984. He really thought that the turnaround would begin in earnest in 2011 and expand into 2012, thus enabling him to say that he had seen us through the worst and was now leading us to a great and glorious future. In this fantasy, he (like Reagan before him) would barely have to acknowledge his opposition. He would float to victory.
All that is out the window now, obviously. Obama running on the Reagan narrative is a complete non-starter. So his options are basically two: he can go scorched earth or he can quit. He himself now says that the economy won't start to improve until next year. So any kind of natural lift will not occur until (in the best case) this time next year. And that's probably another pipe dream. Political professionals will tell you that public perception of "economic improvement" lags statistical "economic improvement" by as much as one year.
Let's just let the citiation to "political professionals" slide, because it's right. The Obama re-election scenario relied/relies on the economy growing enough by the middle of 2012 so that voters feel like it's growing. The model for this: Reagan '84. You had a president whom the public soured on (after the first burst of approval following John Hinkley's rampage). You had economic policies that didn't show any benefits for a year. You had a midterm election loss. And then, boom, recovery followed by landslide -- but a recovery with unemployment nearly as high as it was when Reagan won his first term.
What's missing for Obama? Growth. In the first quarter of 1983, GDP growth was 5.1%. In the second quarter, it was 9.3%. It stayed above 7% per quarter until the end of 1984, when it fell to a still-impressive 3.9%. That, not an ad with some washed-out pictures of kids and flags, was morning in America.
How does Obama get there? Either 1) magically or 2) not at all. Reagan had the advantage of being able to cut taxes and spend money because that's what a Democratic House allowed him to do. Barack Obama has to agree to a series of anti-stimulative spending cuts, which he's attempting to sweeten for Democrats with anti-stimulative tax increases. (And, okay, maybe a payroll tax cut.)