Green Room

Slumping personal income and the 2010 midterms

posted at 11:02 am on April 14, 2010 by

This Washington Times item was picked up by the Drudge Report, but deserves some extra context:

Real personal income for Americans – excluding government payouts such as Social Security – has fallen by 3.2 percent since President Obama took office in January 2009, according to the Commerce Department’s Bureau of Economic Analysis.

The context is that personal income has become the Democrats’ favorite statisitic for wishful thinking about the 2010 midterm elections. The latest version of this story comes from The New Yorker’s James Surowiecki:

Given high unemployment and flat wages, no one is going to be singing “Happy Days Are Here Again” any time soon (even if the tune was F.D.R.’s theme song). But we’ve now had three straight quarters of growth, and last month saw the creation of more than a hundred and fifty thousand jobs. That prompted the Harvard economist Jeff Frankel, a member of the committee that officially declares when recessions begin and end, to declare the downturn over. So, with the midterm elections just seven months away, people are starting to wonder how a rebound might shape results in November.

***

A tough November for Democrats therefore looks like a foregone conclusion. And yet if the economy really starts to recover this summer a lot could change. For one thing, voters have short memories: when they cast their ballots, their decisions are shaped primarily by recent events. [Princeton political scientist Larry] Bartels, in his book “Unequal Democracy,” points out a strong correlation between voting in Presidential elections and income growth during election years, rather than income growth over the full length of a Presidency. Indeed, he narrows it down further: the second and third quarters of the election year seem to matter most. Since the second quarter started just last week, there’s time for moods to brighten substantially by Election Day. Some have argued that an economic rebound won’t matter this year, because things have been so awful that normal growth won’t feel like progress. But, as [GWU political scientist John] Sides says, “it doesn’t seem that economic growth matters less when you’re digging out of a crisis. What voters look at is whether things are getting better or worse.”

***

Even the high unemployment rate may be less important politically than you’d think. Seth Masket, a political scientist at the University of Denver, has found that, in midterm elections since 1950, there’s been no correlation between the unemployment rate and election outcomes. The key economic variable for voters, other studies show, has been income growth, or, more specifically, how fast per-capita G.D.P. is rising. In other words, if income growth is brisk enough, Democrats should benefit at the polls even if unemployment stays high. And Democrats do have an ace in the hole when it comes to keeping the economy moving: last year’s stimulus bill was backloaded, which means that close to five hundred billion dollars in stimulus money is still to be spent.

First, on the economy in general, the new Associated Press economists’ survey and pundits from Megan McArdle to Kevin Drum are not confident about the strength of any ongoing recovery. I hope that people like Larry Kudlow and Mark J. Perry are right in predicting a strong short-term recovery, even if Obamanomics may do longer-term damage if uncorrected. Righties don’t need to root for bad economic news. If the economy turned around before the backloaded stimulus kicks in, it merely proves how ineffectual and politically motivated Obama’s stimulus program really was and is.

Second, while many of Bartels’s larger hypotheses (on US economic performance under GOP and Democratic administrations, or the voting behavior of the white working class, to name two) are questionable, his theory about personal income is reasonable enough (it’s also a big part of Hibbs’s “Bread and Peace” model for predicting presidential elections). But what is the probability that personal income growth is going to significantly improve over the next two quarters? Surowiecki can cite Masket downplaying unemployment as a factor, but there seems to be no consideration of the effect that a large, persistent pool of unemployed (and beyond that, “discouraged” workers) has on the ability of the employed to demand higher wages.

Nor is that omission the only problem with Masket’s analysis. As Sean Trende pointed out last November, 1982 is about the only modern example of a midterm where unemployment was in the range we see today. He further noted that, historically, bad recessions are followed by rough midterm elections for the party in power.

The common denominator in these analyses is the truism that in politics, perception is often more important than reality. Voters’ opinion of the economy is likely driven by their immediate perception. Income growth is something voters notice — if it translates into higher wages, which hasn’t happened yet in this cycle. Like unemployment, it may be a lagging indicator. (Voters will also notice things like fuel prices, which are likely to increase during the summer, due to environmental regs, vacation demand, etc.) Democrats hoping these stats will turn in just a few months are likely to end up disappointed.

Recently in the Green Room:

Blowback

Trackbacks/Pings

Trackback URL

Comments

It’s better to look good, than to feel good?

Or is it better to look like it feels good than to actually feel good?

True enough that elections are shaped more by sentiment and perception, than actual conditions.

And you are correct that good economic news (or any good news benefiting the country) needs to be cheered and embraced. That said, it’s also important to remind everyone of what lies ahead, if we maintain the current course.

It’s a delicate balance of optimism and caution, and one that Conservatives need to come to honestly.

juanito on April 14, 2010 at 12:41 PM

If I’m not mistaken, every one of those 150K new jobs can be attributed to the Census. Virtually all of those jobs are temporary, and none of them generates net revenue, investment, or purchasing power. Taking a census is a cost of government, not an economic accelerator.

J.E. Dyer on April 14, 2010 at 2:02 PM


HotAir — Politics, Culture, Media, 2017, Breaking News from a conservative viewpoint
Top Pick

“It would be catastrophic if the President were to fire the special counsel.”

“The blockade breached institutional values of freedom of expression and assembly.”

“I hope to encourage them to take personal responsibility…”

“I ain’t serving no police”

“I think a lot of Trump’s voters have as one of their primary objectives just stopping the cultural corruption that’s taking place.”

“Don’t take away my health care or you die.”

“We must all do our best to get rid of this tyrant.”

Rosenstein: Comey broke with DoJ norms on memo leak.

“Nobody has ever accused me of pulling any weapon on them.”

“Fourteen people had stab wounds, cuts and bruises, with two of the injured surviving critical stab wounds.”

Okay… you first.

“We should repeal it and replace, and we shouldn’t leave town until this is complete.”

“He feels like he is being thrown under the bus …”

“McCain has always been a fighter”

Ed Morrissey Jul 20, 2017 8:41 AM

“Cancer doesn’t know what it’s up against.”

They may be on to something

How capitalism averted the bee-pocalypse

John Sexton Jul 19, 2017 9:31 PM

“there are more honeybee colonies in the country today than in nearly 25 years.”

CBO releases estimate on Obamacare repeal

John Sexton Jul 19, 2017 8:31 PM

“The number of people who are uninsured would increase by 17 million in 2018, compared with the number under current law.”

Kasich: Fix Obamacare with more spending

Jason Hart Jul 19, 2017 8:01 PM

Ohio Gov. John Kasich wants Congress to “fix” Obamacare’s insurance exchanges with more federal spending

“This is a momentous decision.”

“One was told that she—her skin was too light and that she needed to listen to people of darker colored skin…”

Disruptor?

Time off without pay for play

The new DOJ guidelines on asset forfeiture are obscene

Taylor Millard Jul 19, 2017 5:01 PM

Guilty until proven innocent.

“We’re just wondering what happened there.”

“This is an attempt at a political intervention.”

The blame game

“Inaction is not an option.”

“You have no feelings. You Christians are all racists.”