Is it the Economy?

If you think rising GDP defangs the economy as an election issue, keep in mind: So did George H.W. Bush.

Bush touted rising GDP on his path to re-election defeat. GDP rose not only in the second quarter of 1992, he pointed out, but in the four previous quarters as well. The economy was better than people thought; they’d simply been deluded by negative news.

Didn’t work. It was the economy, as James Carville famously declared, and Bush’s seeming disconnect with the pain the public felt, that cost him a second term.

Fast forward 16 years. The Commerce Department reported today that GDP’s up by 3.3 percent over a year ago, raising the question of whether that growth may weaken the clout of economic concerns in the upcoming election.

With 1992 as a guide, don’t count on it. The lesson from that year is that what matters in political terms is Americans’ perceptions of their and the country’s economic well-being, not a data point much farther removed from the kitchen table. GDP in 1992 did not capture the deep economic unhappiness Americans were still feeling in the long hangover from the 1990-91 recession. And it may not in 2008.

Our business producer Dan Arnall notes that the current GDP figure is most influenced by increased exports given the weak dollar, and the one-time effect of the government’s economic stimulus checks. Compare those with other factors: Inflation at a 17-year high, home resale prices down by a record high in 20 years of data, unemployment at a nearly five-year high, credit tight, job market tight, gasoline averaging $3.69 a gallon - down lately, but still up 34 percent from a year ago, with possible production impacts from Tropical Storm Gustav looming.

People don’t come home and say, “Hey honey, GDP’s up, let’s party.” They look at incomes, inflation, unemployment, home values, credit and debt, future prospects. And now, as in 1992, they don’t like what they see.

Our weekly Consumer Comfort Index at this time in 1992 was a dismal -46 on its scale of +100 to -100. Today it’s an equally dismal -50, a point from its record low. In the 1992 exit poll 42 percent of voters called the economy one of their top two issues, more than any other by a wide margin. Fifty-two percent of them voted for Bill Clinton, 24 percent for Ross Perot, just 25 percent for Bush. Today, when we ask registered voters the most important issue in their choice, 43 percent say it’s the economy – again No. 1 by a wide margin.

There are differences from 1992. Then voters had a seemingly out-of-touch incumbent president on whom to vent their economic discontent. This year there’s no incumbent; that’s why Democrats are trying at every turn to tie John McCain to George W. Bush’s economic record.

To some extent it’s working. Voters who call the economy their top issue favor Barack Obama over McCain by a margin of 56-35 percent. Among all registered voters, Obama leads McCain by 11 points, 50-39 percent, in trust to handle the economy. And Obama leads by 49-36 percent as the candidate who “better understands the problems of people like you.”

McCain has room to push back on economic stewardship in a way Bush in 1992 could not. Comments like those recently from former Sen. Phil Gramm, echoing Bush’s in 1992, won’t help. Neither would an assumption that the public’s economic woes are over.

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