Decision ‘08

It’s Not The Economy, Stupid?

Brendan Murray of Bloomberg tries to throw cold water on my preferred message for 2006:

Karl Rove, President George W. Bush’s top political adviser, laid out a plan to win the 2002 congressional elections by stressing national security. For 2006, Rove is framing a strategy for Republicans to sell the U.S. economy.

In a recent speech, Rove argued that Bush’s policies of tax cuts and trade agreements had pulled the nation out of recession, created millions of jobs, boosted productivity and increased disposable income. That record can help lead Republicans to victory in November, Rove said in the May 15 speech at the American Enterprise Institute in Washington.

Political experts say it may be a tough sell: Voters don’t feel optimistic, polls show, and growth rates are expected to slow as the housing market cools and gasoline prices remain near all-time highs.

“The administration needs to change the electorate’s overall psychology,” says Stuart Rothenberg, who publishes a nonpartisan Washington political report. “It would be a huge asset for the Republican Party if people could start to focus on the economy, appreciate it and see it as something that has worked, but I see no evidence that that’s going to happen.”

Seventy percent of 1,002 respondents in a May 8-11 Gallup poll said the economy was in fair to poor condition, up from 63 percent in an April poll.

Yes, it’s true that people now, as always, live in relative economic ignorance. That just means we have more of a sales job ahead of us. The numbers are there:

By most major indicators — from a historically low 4.7 percent unemployment rate to strong corporate profits to the stock market — the economy is moving forward. “We are like marathon runners winning the race,” Edward Lazear, chairman of the White House Council of Economic Advisers, said in a May 23 interview.

The next day, Al Hubbard, director of the policy- coordinating White House National Economic Council, said Bush may spend more time in coming weeks to “highlight all the economic success.”

In his AEI speech, Rove, 55, emphasized the creation of 5 million jobs in recent years. He also said Bush’s tax cuts have stimulated growth, making up for revenue lost with lower rates. A tax reduction on stock dividends to 15 percent from 40 percent prompted the biggest companies in the Standard & Poor’s 500 Index to raise dividend payments on 725 occasions, he said. That money is “going into retirement funds and individual retirement accounts and people’s pocketbooks,” he said.

And he described “core inflation,” which strips out food and energy, as low, citing a U.S. Labor Department report showing a 2.1 percent gain in the 12-month period ended in March.

“The president’s tax cuts, trade liberalization and spending restraint helped strengthen the economy’s foundation and added fuel to our economic recovery,” Rove said. “Not a bad record.”

Why aren’t people more aware of the economic successes of this administration? Murray fingers two laggards: job and wage growth.

Since the last recession ended in November 2001, the U.S. has added a net 4.35 million jobs, or an average of 82,000 a month, according to the Labor Department. That’s less than half the 9.57 million jobs, or 181,000 a month on average, created in the same period of time after the previous recession ended in April 1991.

“Almost all the benefits of productivity growth have gone to firms, and very little to workers,” says Harvard University economist Jeffrey Frankel, a member of the Council of Economic Advisers under President Bill Clinton, whose adviser James [Carville - sic] used the slogan, “It’s the economy, stupid,” to stress the importance of the issue in the 1992 election.

What’s the problem here? The problem is that Murray is cooking his stats with arbitrary start times to emphasize the anti-Bush case. The remedy is that we challenge such only-half-the-story facts with our wild card - the trend in all these areas is going the right direction.

For example, we’ve added 5.2 million jobs since August of ‘03 (138,000 last month alone) and worker wages grew at a 5.7% rate in the first quarter of this year. You can make both pro- and con- cases for the Bush economy based on your starting points, and it’s true that both cases involve considerable spin. Yet the undeniable fact is that the economy is good, if not great - and we would be fools not to run on this historically solid territory…

11 Responses to “It’s Not The Economy, Stupid?”

1 dmac Says:
May 31st, 2006 at 8:09 am
The MSM will never give Bush credit for any economic success - numbers be damned. Just as they never gave Bush 1 any credit for laying the economic resurgence for Bill Clinton - although Clinton does deserve credit for what happened on his watch as well.
2 The Ugly American Says:
May 31st, 2006 at 8:25 am
most people judge the economy on their personal experience. If they are making more money. If their company’s sales are up then they think the economy is good.

Most people I know are making more money, most companies I do business with say their sales are up.

I can come up with 3 reasons why people don’t translate that into “feeling good” about the economy as they normally do.

1. Gas prices. This effects everyone directly. If it costs you $50 to $100 a week more to fill up your car that hurts.

2. The media is still to this day talking about the economy as “uncertain” or “shaky”. There is no doubt in my mind the way the media portrays the economy has an effect.

3. War. This is always a negative factor and is a cause for unease. Nothing is going to change Americans “war mindset” until this war is over and I am afraid it won’t be over for a very very long time. I am not speaking about the war in Iraq but the greater war on terror / Islamofascism.
3 peter Says:
May 31st, 2006 at 8:56 am
I would add job security (or lack of it) as equally important. I think most employed people feel less certain that their job is stable than before. The reasons for this have little to do with Bush and the Republicans: industries have been realigned, jobs have been outsourced, companies have gone bankrupt, labor contracts are much less protective of job security, and some skills have become obsolete. (Anecdotally: my brother-in-law has a background with mainframe computers — the number of jobs there has dwindled severely, and most of them are now in India). If you are fearful of losing your job, you’re unlikely to be optimistic about the economy, regardless of what the statistics say.
4 dmac Says:
May 31st, 2006 at 10:04 am
Good point, Peter. An individual’s personal situation will always trump the macro economic picture (I quote this stunning insight from my upcoming book on economic theories, tentatively titled “Duh!”).

As in politics, most economics are local.
5 peter Says:
May 31st, 2006 at 10:08 am
As Reagan said: when the guy next door loses his job, it’s a recession — when you lose your job, it’s a depression.
6 fatman Says:
May 31st, 2006 at 10:47 am
peter:

Why, whenever you quote Reagan, am I reminded of that old saw about the Devil quoting Scripture to suit his purposes?
7 peter Says:
May 31st, 2006 at 11:49 am
I think Reagan was a great American – the fact that I disagree with him on most things doesn’t take away from my admiration for him – I have similar respect for Bob Dole, John McCain, Antonin Scalia, and Orren Hatch – reasonable people may disagree about things, but nobody could dispute their patriotism and service to this country –
8 fatman Says:
May 31st, 2006 at 3:27 pm
peter, I was pulling your leg—and I think it came off in my hand.

Seriously, I would agree with you about Reagan and most of the others you named. It’s just that given the level of RDS (Reagan Derangement Syndrome) still prevalent among those who really remember his administration (and even some who don’t), it is a bit surprising to hear a liberal quote and/or praise him.
9 peter Says:
May 31st, 2006 at 3:56 pm
Well, I think he was an American original, sort of like Levi’s, Duke Ellington, or Coke in bottles selling for a dime. I also have a lot of respect for anyone who sincerely believes in a vision and tries to achieve it, even if I might prefer a different vision. Far better to have someone like Sam Brownback or Orren Hatch than a craven politician like Bill Frist. Maybe that is why Mark is warming up to Barney Frank (OK, bad choice of words).

An aside: if Reagan’s family life was scrutinized to the same extent as the Clintons, he may never have been elected. He seemed to have been awful to his kids, and not much better to Jane Wyman. Say what you will about the Clintons, but they seem to be great parents. I don’t think that family life is a relevant criterion for electing a President – but since this might be the sword which Hillary falls on, it’s useful to remember that the 1980’s were more forgiving, and Reagan had a free pass here.
10 peter Says:
May 31st, 2006 at 4:05 pm
To go a little further on a tangent: I think that in many ways America has turned into a country of flabby people driving oversized SUV’s to the mall to buy oversized flat screen television sets to spend endless hours watching beer commercials and football games. (Have I offended everybody yet?). Put more charitably: the qualities which made America great – Tom Sawyer’s ingenuity, a drive to succeed, can-do spirit – seem to be vanishing. I work with a lot of immigrants (most of the people in the company I work for are software engineers from Asia) and I see in them the qualities which made us the country we are.

I like Reagan because he always reminds me of the way we used to be.
11 Mark Says:
May 31st, 2006 at 7:01 pm
Hear, hear - a man from a different (and dare I say better?) era…