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Why Economic Growth May Not Be Enough

Historically, incumbent presidents have fared well when economic growth numbers were good and not so well when they weren't. That's why, when economic growth in the third quarter of last year came in at a sizzling 8 percent annualized rate, pundits were quick to pronounce Bush's re-election a sure thing.

Since then, economic growth has subsided, but still came in at a solid 4 percent rate in the fourth quarter of last year. Most economists expect this kind of reasonably good growth to continue. By the standards of most economy-based election forecasting models, this should be good enough to give Bush the election.

But will it? DR has previously written on the foibles of these election forecasting models and their spotty track record. And here is a very interesting analysis released by Gallup, based on their latest poll, that goes into some detail about how the jobs issue continues to bedevil Bush, even as the growth rate has improved. The key findings are:

1. The public thinks Bush's economic policies do matter. Nine in ten think the president's policies affect national economic conditions and 8 in ten think his policies affect their own personal economic situations.

2. The number of people mentioning some aspect of the economy as the top national problem has started to increase again. That number has now reached 46 percent, including 20 percent who specifically mention unemployment or jobs. The latter figure is twice as high as a year ago and the highest figure for unemployment/jobs as the top national problem in 10 years.

3. Consumer confidence in the economy is declining again. In the last month, there has been a 10 point decline in the number saying current economic conditions are "good" or "excellent" and a 5 point increase in the number saying they are "poor". There has also been a 13 point decline in those who say economic conditions are getting better and a 13 point increase in those who say they are getting worse.

4. Bush's approval rating on the economy--consistent with other national polls--has slipped to net negative (45 percent approval/52 percent disapproval) after being net positive (54/43) a month ago.

Conclusion: weak job growth is dragging down Bush's image on the economy, despite the pickup in overall economic growth. Therefore, economic growth is unlikely to be enough, by itself, to lift Bush to re-election.

Corollary: the Democratic position on jobs in 2004 will be key. You can check out Edwards' position on jobs here and Kerry's position on jobs here. Both Edwards' and Kerry's approaches seem reasonable enough as far as they go, but a bit scattered and difficult to summarize in a crisp fashion. And both give relatively short shrift to infrastructure spending and put fairly heavy emphasis on tax incentives for manufacturers and getting tough on trade. It seems to DR that reversing the relative emphases here might be desirable given the easily-understood connection between infrastructure spending and job creation, particularly of non-manufacturing jobs. Non-manufacturing jobs, after all, are the overwhelming proportion of jobs in the United States and the kind of jobs most American voters hold. If Democrats hope to capitalize effectively on the jobs issue, they need to be responsive to that reality.

Comments

So, Ruy . . . do you typically see a boneheaded story in the mainstream press and then respond with a more fact-based blog entry, or is it just coincidence?

Today's WaPo has yet another "Rah! Rah! We Love Bush!" article today titled "Economy May Work in Bush's Favor" here:

http://www.washingtonpost.com/wp-dyn/articles/A46543-2004Feb16.html

And I see that the Times is running an "All Spin All the Time" article on rich Arab-Americans and Muslims who support Bush, downplaying the massive defection of ordinary Arab-American voters.

Seems to me this echoes the situation of 1992. The most common economic models (and many all-knowing pundits) predicted an easy Bush win then, because of GDP growth. But jobs were very slow to return (as Ruy & John's book points out, they didn't really come back for several years more), and the public perception was that we were still in recession. At this point, the job situation seems worse, with "outsourced to India" apparently the main area of growth. Were GDP to slice down to 2% or lower, I think the election would be a no-brainer Dem win. But even as is, I think the economic issue breaks against the GOP.

There's also this interesting Challenger, Gray and Christmas study that suggests that modest growth in the job market may push the nominal unemployment rate up - perhaps as high as 7.9% - because of the number of "discouraged" (e.g. uncounted) jobless workers that a glimmer of hope will pull in from the sidelines. That would make it very hard to hide the actual economic impact of the Bush policies behind a curtain of rosy statistics.

http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2004/02/16/daily1.html

Did anyone notice the new CBS News poll showing Kerry beating Bush 48-43?

The most important detail of this poll is that Kerry beats Bush 49-41 in the Midwest. Can you say Ohio and Missouri?