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The Unrelenting Economy The Unrelenting Economy

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OFF TO THE RACES

The Unrelenting Economy

Whatever Else Is Going The Democrats' Way, Unemployment Numbers Are Still Working Against Them

One of the fascinating things about wave elections is that the party in power often has raised significantly more money nationally, district by district and state by state; it may have invested in strong field organization efforts; it may have done everything in its power to insulate itself from a hostile political environment; and in many cases, it's to little or no avail. We saw that in 2006 for Republicans, and it certainly appears to be the case this year. Every week we see more and more truly grisly state and district-level poll numbers for Democrats; incumbents who until recently were thought to be relatively safe now running even or behind, in some cases by double digits.

On the mechanical and financial side, the blocking and tackling side of politics, it is hard to fault the effort that Democrats are putting in. In one key race after another, the Democratic incumbent has outraised the Republican challenger by significant margins. And on the national party committee level, Democrats still hold a big advantage. There are also signs that some of the major national independent groups allegedly planning to spend large sums of money on behalf of Republican candidates may all but bypass the House and focus on the Senate instead. But for all those factors, things aren't getting better for Democrats, either nationally or race by race.

 

Whether one agrees or disagrees with the substance of what President Obama and congressional Democrats did or tried to do, no one can say that they didn't try to do big, ambitious things. They broke a lot of eggs to make this omelet. Many of the challenges that Democrats face this year are the direct result of the decisions that the president and congressional Democrats made -- fallout from the stimulus package, cap-and-trade climate change legislation and health care reform, not to mention the ongoing fallout from the TARP program and various takeovers and bailouts, some occurring during the Bush administration, others on President Obama's watch. There does seem to have been a recoiling from many of these efforts, with a faction of independents who used to support more governmental intervention now strongly opposing it.

When one considers that Democrats haven't really won an important messaging fight since, say, November 2008, it leads to some skepticism over whether they will start winning a big one now.

But clearly the economy is a huge and unrelenting factor for this majority party. We now have had 15 straight months of unemployment at 9 percent or higher, 12 months at the current 9.5 percent level or higher. Since unemployment rates began being compiled by the Bureau of Labor Statistics in January 1948, in only 13 of those 751 months has unemployment been at the current 9.5 percent or worse. Of the 14.6 million currently unemployed, 6.6 million -- 45 percent -- have been out of work for 27 weeks or more.

 

Among two of the most important groups in the Democratic coalition, things are much worse. The unemployment rate among African Americans was 12.6 percent the month President Obama was sworn into office but now stands at 15.6 percent. Among Hispanics, it was 9.7 percent when President Obama took over; it's 12.1 percent now. Among job seekers ages 16 to 19, unemployment has gone from 20.8 percent to 26.1 percent (unfortunately, there is no broader breakdown in unemployment numbers for young people). These are the groups that Democrats need to turn out in big numbers; little wonder that polling shows them with substantially lower interest levels than they had in November 2008. When Democrats lost their majorities in November 1994, the unemployment rate was 5.6 percent. When Republicans lost theirs in November 2006, unemployment was 4.5 percent. The latest Blue Chip Economic Indicators survey of 51 top economists reports a consensus unemployment forecast of the last quarter of this year to be 9.5 percent -- the most optimistic of the individual forecasters projected a 9.2 percent rate, the most pessimistic 9.9 percent. The consensus forecast for economic growth in the third quarter was that it would remain the same as has been reported for the second quarter, 2.4 percent, with the fourth quarter little better, 2.7 percent -- simply not enough to generate meaningful job growth.

In 1982, President Reagan's first midterm election and the only post-World War II midterm or presidential election year with October or November unemployment of even 8 percent or higher, Republicans lost 26 House seats. It's important to note that this was an election with divided government -- the GOP held the White House and the Senate, Democrats controlled the House, so the responsibility or blame for governing was not focused exclusively on Republicans. More importantly, Democrats had been in open retreat just months before, still recoiling from the Reagan landslide; it wasn't apparent to Democrats or anyone else that they would suddenly be playing offense rather than defense, and they were left in many districts with no candidates or candidates with minimalist campaigns, limiting their potential for gains.

Democratic pollster Stan Greenberg has written frequently and passionately about the potential political consequences for Democrats of these economic woes. His polling for Democracy Corps and Citizen Opinion is a clarion call to Democrats that they are in a potentially perilous situation, with much of their plight directly related to the economy. One can argue how many of Democrats' problems are of their own making and how many would befall any party in control of the White House, Senate and House under these economic conditions, but the net result is not good at all for a ruling party.

Democrats can offer a multitude of arguments for what they have done or tried to do to reduce these numbers, but the simple fact is that when one party is in control of the entire federal apparatus, or at least theoretically in control, it is a referendum on that party, on whether people are happy with the status quo or not. Democrats are trying hard to change the venue of this election, from a referendum on the party in power to a choice between economic policies under President Obama and those under President Bush (Obama wins those matchups), but it is highly unlikely that they can refocus the public attention enough to make the difference. Polls show it is the best argument Democrats have, but is it the silver bullet that Democrats need? Doubtful.

 

With just 84 days to go before Election Day, things can obviously change. While the economy is unlikely to change much and public attitudes towards the new health care reform law aren't likely to improve much by then, some huge, unpredictable, external "Black Swan" event could shake things up. In the world of normal politics, the only plausible thing that could significantly alter the trajectory is a potential game of chicken this fall over extension of the Bush tax cuts of 2001 and 2003. Many Democrats are pushing for an extension of only the tax cuts for individuals making $200,000 or less or families making $250,000 or less, while Republicans are holding out for extending all of them. One question is whether a Democratic argument of "should we really borrow $700 billion over 10 years to pay for tax cuts for those making more than the $200,000/$250,000 level" would really work.

It's not at all clear that Democrats can turn these tax cuts for the more affluent into a borrowing (read "bad") rather than a tax-cutting (read "good") argument. On paper it is a plausible argument, but when one considers that Democrats haven't really won an important messaging fight since, say, November 2008, it leads to some skepticism over whether they will start winning a big one now.

So this cake isn't completely baked, but it sure is firming up without much longer to go.

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