The Booming Economy

A lot of Republican talking heads are evincing frustration that the improving economy has not translated into better polling for Bush. Their belief is that the bad news (or perceived bad news) on Iraq is crowding out the positive economic news. They hope that by the end of the year, this situation will change.

Don't hold your breath.

There are a number of reasons why people don't think the economy is as good as the media or Republicans do. One statistic after another has gradually moved into the positive column, and each of them has not has the political advantage that Bush expected. First it was GDP growth, but this doesn't mean much for average people. Then it was (finally) a falling unemployment rate. But this says nothing at very slow job growth. But even if there are a lot of jobs, are wages and income going up? This is the walmartization/off-sourcing problem. Income gains in the first 3 years of the Bush administration were being concentrated for the rich and corporate profits (but I repeat myself), and lost jobs were good and new jobs were bad. Those rdi numbers are finally (maybe) improving, but there is still no apparent improvement in Bush's popularity. Why?

Two reasons. First, the numbers have gotten better, but they are still way below where people expect them to be. For an incumbent, slow income growth is better than income decline, but it still won't get you re-elected. Just ask Al Gore, who was confronted with slowing income gains at the end of 2000. Second, economic voting is not just based on current evaluations of economic growth. They are also tied to retrospective evaluations of how well the incumbent has managed the economy. Six months of not so bad news does not cancel out 3 years of bad news. And the prospective element of voting is even more intriguing: voters really don't believe in this recovery, so they are discounting any current growth. They don't think it's going to last.

Given the falling dollar, rising oil prices, growing trade and budget deficits, and continued outsourcing, maybe the voters have reason to fear for our economic future. Which makes the voters a lot smarter than the Bush Administration. No surprise.