It's All Politics
Fri October 26, 2012
Why The Economy Won't Help Obama — Or Romney
Originally published on Fri October 26, 2012 1:37 pm
The U.S. economy remains in a gray area, so it's no wonder that the presidential race is essentially tied.
Gross domestic product grew at a 2 percent annual rate between June and September, according to figures out Friday. The White House says this means the economy has been growing for 13 straight quarters.
"This report provides further evidence that the economy is moving in the right direction," Alan Krueger, head of President Obama's Council of Economic Advisers, said in a statement.
But the economy isn't performing nearly well enough, Republican presidential nominee Mitt Romney said in a speech in Ames, Iowa, after the report came out.
"President Obama frequently reminds us that he inherited a troubled economy. But a troubled economy is not all that he inherited. He also inherited the greatest nation in the history of the Earth," Romney said. "What he did with what he inherited made the problem worse."
The final jobs report before the election will be released next Friday. The September report saw the unemployment rate fall below 8 percent for the first time in nearly four years — but just barely, to 7.8 percent.
That's how most of the economic data are looking now. Things are improving, but are nowhere near where an incumbent president would like them to be.
"I think the data are consistent with expectations," says Phillip Swagel, a public policy professor at the University of Maryland, who worked in the Treasury Department under President George W. Bush.
"The economy is growing, but at a modest pace, with only modest job creation and stagnant incomes for American families," Swagel says. "Not recession, but not satisfactory."
On the other hand, sustained if not tremendous growth makes it more difficult for a challenger like Romney to convince the voting public that a change in course is required.
Recent polling shows Romney beating Obama in terms of whom voters would prefer to see managing the U.S. economy. In a Washington Post-ABC News poll released Thursday, 53 percent of likely voters said they trusted Romney more on the economy, compared with 43 percent who favored Obama.
But an Associated Press-GfK poll out Friday showed a much narrower advantage for Romney on economic issues: 47 percent, compared with 45 percent for Obama.
That poll also pointed to some economic optimism among voters, with nearly 60 percent saying they expect to see things get better over the coming year.
"Maybe it's direction that matters," says Thomas Hyclak, an economist at Lehigh University in Pennsylvania.
"If things are bad and getting better, it doesn't hurt the incumbent as much," he says. "If things are bad and getting worse, it really does affect the chances for the incumbent."
There's also some evidence to suggest that people's perceptions of the state of the economy is skewed by their partisan inclinations. That is, voters who support Obama are more likely to see the economy as improving than Republicans are. "There's a huge partisan component to views about the economy," says Shanto Iyengar, a political scientist at Stanford University.
A recent Purple Strategies poll found that 37 percent of voters in 12 swing states believe the economy is getting better. Ninety-four percent of those voters say they support Obama, compared with just 5 percent of those who believe the economy is getting worse.
The economy is about where most economists would expect it to be at this point, Hyclak says. History suggests that a recession triggered by a collapse in the housing market and a financial crisis is bound to lead to a sluggish recovery with slow job growth.
Yet the nation's economic growth remains at risk. The looming fiscal cliff has shaved 0.6 percent off of GDP growth this year and cost a million jobs, according to a report from the National Association of Manufacturers. And the mixed corporate earnings season has caused the stock market to zig and zag.
Economists are predicting that the nation's financial picture will brighten over the next couple of years. The research firm Moody's Analytics predicts GDP growth will approach 4 percent in 2014, with unemployment coming down. And the latest forecast from the International Monetary Fund predicts annual growth of about 3 percent in the U.S. economy over the next four years, which would be much better than in other rich nations.
Happy days might not be here again, but consumers are opening their wallets. Back-to-school spending was up this year, while holiday spending is expected to grow modestly. Recent GDP growth was driven by consumer spending and improvements in the housing market.
A survey released Friday showed the Thomson Reuters/University of Michigan consumer sentiment index at its most optimistic reading since September 2007.
It's possible that people who do have jobs are starting to feel a little less uncertain than they were a couple of years back, suggests Hyclak, the Lehigh economist.
Timing matters. The last one-term president, George H.W. Bush, lost his re-election bid in 1992 — the "it's the economy, stupid," election — even though the economy was growing at a much faster clip than it is today.
GDP grew by 3.8 percent in the summer of 1992 and was growing even faster by the time the election was held. "Yet Americans did not feel as if the economy was recovering," Princeton University historian Sean Wilentz writes in his book The Age of Reagan. "Rather, they thought Bush was out of touch with the suffering and anxieties of middle- and working-class citizens."
Obama doesn't face those same image problems. Polls have consistently shown that Americans believe the president has a good feel for the hard times they're going through.
Still, they're not convinced he's done enough to make things better. At least, a firm majority isn't convinced. And it may be too late at this point to change many minds.
"It will take a large dose of very good news or very bad news to affect the election at this late date," says John Sides, a political scientist at George Washington University. "To me, the [new] GDP numbers are neither."