Thursday, December 6, 2007

Economy is Top Priority for Voters in 2008

This Wall Street Journal article focuses on economic turbulence as the big election issue of 2008:

For months, Dale Albright, a 30-year-old Tampa, Fla., bankruptcy lawyer, has watched as his clients buckle under mortgage and credit-card debts. After an expensive recent hospital stay, he's worried that a run of bad luck could leave him in financial straits, too.

"I care about bringing our troops home...and for the most part, I believe as far as domestic terrorism goes, I think we've got that pretty much under control," Mr. Albright says. "But the economy really scares me." A longtime Republican, this election he says he's voting Democrat.

With the parties just weeks away from the first presidential nominating contests, economic concerns are seizing a top spot in many voters' minds. Falling housing prices, rising gasoline prices and health-insurance worries are supplanting the war in Iraq and concern over terrorism....

While the Bush administration has reduced its 2008 growth forecast slightly -- to 2.7% from 3.1% -- officials maintain the country is in generally good shape. "I believe we're going to continue to grow," Treasury Secretary Henry Paulson said in an interview. "I've always said these credit-market problems weren't going to work themselves out quickly. And the housing-credit market, the price of oil -- these are the risks. But we have a very diverse, healthy economy."

Fifty-two percent of Americans say the economy and health care are most important to them in choosing a president, compared with 34% who cite terrorism and social and moral issues, according to the latest Wall Street Journal/NBC News poll. That is the reverse of the percentages recorded just before the 2004 election. The poll also shows that voters see health care eclipsing the Iraq war for the first time as the issue most urgently requiring a new approach.

The figures partly reflect the better news from Iraq, where security has improved since the U.S. added troops and cut deals with Sunni Muslim tribal leaders. Some voters link the issues of the economy and Iraq. Richard Scown, a 61-year-old equipment-lease broker in Las Vegas, frets about "all the money we're spending there, and all the issues we have here."

Mr. Scown, a lifelong Republican, says he and his wife probably will vote for the Democratic nominee. "The Republicans haven't shown anything yet to suggest they've got a clue about the direction we're going with the economy," he says.

Irma Lipscomb, a 79-year-old Republican-leaning voter from New Market, Va., says she and her husband were just billed $300 for their first month's delivery of home-heating oil, nearly twice what they paid monthly last winter. And while her Social Security checks will have a small cost-of-living increase in the new year, she says, "they'll take it all back for health care" -- now her top concern.

Overall inflation measured 3.5% over the past year, but energy costs jumped 14%. "If you look at a market basket of middle-income goods -- college tuition, gas, child care, health care, food -- you will find inflation growing twice as quickly as the overall measure," says Jared Bernstein, senior economist at the Economic Policy Institute, a liberal think tank. While wages have kept slightly ahead of inflation in recent years, many workers have seen their hours cut and their take-home pay stagnate, he says....

In hard times, as voters look to government for relief, Democrats traditionally have the edge. That is especially true when the incumbent president is a Republican, and, as in Mr. Bush's case, has low marks in polls for fiscal stewardship. In a Journal/NBC poll in July, respondents by double-digit margins preferred the Democratic Party over the Republican Party to deal with the economy, health care, gas prices and the federal deficit.

Until lately, Republicans have been fairly quiet on economic issues. Last week's CNN-YouTube Republican debate focused on the hot-button social issues important to the social conservatives dominant in the party today -- abortion, gay rights, illegal immigration and gun control.

Timing may play against the Republicans, because the current slowdown could accelerate next year, just as voters are making up their minds. "The house-price decline in particular is likely to depress confidence and spending a great deal further," says Ian Shepherdson, chief U.S. economist at High Frequency Economics, a research firm based in Valhalla, N.Y.

The pessimism, moreover, isn't momentary but reflects voters' worries beyond the current business cycle. Early last month, a sobering consensus emerged from a focus group of a dozen Republican-leaning voters in the Richmond, Va., area, sponsored by the nonpartisan Annenberg Public Policy Center at the University of Pennsylvania. The participants unanimously agreed that they didn't think their children's generation would be better off than their own -- breaking with traditional American optimism -- largely due to the debt future taxpayers will inherit.

"Who's buying our loans?" said former secretary June Beninghove, 67. "Who's going to own us? We are going to give ourselves to another country because of debt."

To one Democratic strategist this all sounds familiar. Sixteen years ago, Bill Clinton's campaign manager, James Carville, had the words "The Economy, Stupid" written on a Marks-a-Lot board at campaign headquarters in Little Rock, Ark. He says the point of the message was "to keep everybody focused. It was a change election -- change versus more of the same."

Says Mr. Carville, "If anything, the anxiety is bigger now."

Carville's claim is not well substantiated. The recession of 1991 saw high unemployment and a slow job recovery. People in some parts of the country were calling the downturn a second Great Depression. The United States was just beginning defense conversion following the end of the Cold War, and the shift to the entertainment, technology-centered economy of today was still half a decade in the making.

We have economic volatility today, certainly; and there's going to be further shakeout from the housing collapse. But as long as job growth stays steady and exports continue at their robust levels, I doubt we'll have as dire a situation as during the first Bush administration.

Continued progress in Iraq will take the big Democratic election-winner off the table, so look for further economic demonization of the administration by Democrats who'll do anything for a return to power.