Magazine

That Sinking Feeling


For months, President George W. Bush has recited a litany of statistics that, he says, reflect a robust economy: rising gross domestic product, low unemployment rates, higher wages, record homeownership, declining deficits. The bad news for Bush is that the public doesn't buy his numbers. Instead, voters have become increasingly disgruntled about a different set of factors describing rising energy and health-care costs and wages that don't keep pace with inflation.

Now, the politics of the economy could go from bad to worse for Bush and his fellow Republicans. The most recent round of government economic numbers indicates slower growth, falling productivity, skittering home sales, and rising joblessness, all factors that could loosen the GOP's 12-year grip on Congress. Among the Republican lawmakers imperiled by resurgent pessimism: Representatives Heather A. Wilson (N.M.), Nancy L. Johnson (Conn.), Curt Weldon (Pa.), and Deborah Pryce (Ohio).

Although most economists remain bullish on the overall economy, all but the wealthiest voters are distinctly bearish. A July 18-21 survey by the nonpartisan American Research Group found that just 6% of Americans believe the economy will improve in the next year, while 67% are convinced it will get worse. "There is a very big disconnect between the way the public thinks about things and how economists think about things," concludes Andrew Kohut, director of the nonpartisan Pew Research Center.

The result is a mixture of befuddlement and anxiety in Republican circles as strategists try to figure out how to convince Americans that things are really better than they believe. "The experts tell us the economy is humming along," says Representative Thomas M. Reynolds (R-N.Y.), chairman of the National Republican Congressional Committee. "It's just not burning in. I can't explain it."

THE FRIEND FACTOR

Pollsters who study the nexus of pocketbooks and politics say the old big-picture factors that used to predict how the economy would influence elections -- unemployment, inflation, and GDP growth -- are out of date. "We need a new set of economic indicators," says independent pollster John Zogby.

Analysts say the new basket of stats should include those that directly affect a family's bottom line, such as inflation-adjusted wages, energy prices, and out-of-pocket health-care costs. But the most important economic predictor of political behavior, pollsters say, is a voter's subjective view of the future. Zogby thinks the key to a dimmer outlook is whether an individual has a friend or relative who recently lost a job or was forced into lower-paying work.

Pollster Thomas H. Riehle of RT Strategies concludes that the gap between perceptions of the national economy today and expectations for the coming year show that voters "are saying we're in risky times, and that's very negative for incumbents."

American Enterprise Institute economist Kevin A. Hassett, a former advisor to the campaigns of President Bush and Senator John McCain (R-Ariz.), says that the war in Iraq has clouded traditional economic models used to predict voter behavior. "There is an unusually high correlation between how we're doing in the Middle East and [perceptions of] the economy," he says. "People keep on spending, but they say they don't feel good about the economy."

Is there any good news for Republicans? In the second quarter of 2006, civilian wages and salaries rose at a 3.6% annual rate, the fastest pace since 2003. Republicans believe that if wage growth continues to accelerate, and inflation cools, Americans may feel a bit more cheerful as they see their real earnings increase for the first time in years.

But Democratic strategists say any wage growth is more than offset by soaring costs of food, fuel, medical costs, local taxes, and tuition. "The more they talk about the economy and Iraq, the more it hurts them," says Democratic pollster Stanley B. Greenberg.

Republican strategists hope to reframe the debate by depicting Democrats as advocates of job-killing tax hikes. At the same time, they're prepared to focus more attention on immigration, flag burning, and same-sex marriage -- social issues that tend to rally the GOP faithful.

By Richard S. Dunham


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