Conventional wisdom, as well as a slew of polls, has the U.S. election in November riding mainly on the economy. Mitt Romney’s campaign certainly believes that to be true. Romney and his surrogates rarely talk about anything else.
When Barack Obama has tried to change the subject to almost anything else – gay marriage, contraception, and immigration being the latest subject changes – Romney has parried the attempts and stuck to the gloomy jobs situation and economic malaise. His efforts to dodge the immigration question and keep focus on the economy raised eyebrows even among conservatives; Byron York referred to Romney’s “timidity” in addressing the issue. “Perhaps Romney was just exercising his legendary caution,” York wrote. “But if Scalia and Sotomayor can agree on something, what would be the risk in Romney agreeing with it, too?”
Of course, Obama would love nothing more than an extended debate on immigration reform. In fact, he’d love to have an extended debate on anything else other than the economy. Obama has tried mightily to provoke Romney and Republicans into a debate on social issues like contraception, where polling suggests his strength lies. His efforts, however, to change the subject and move the election to other issues tacitly acknowledges that Team Obama also believes that the economy is a losing issue for the president.
Media reports have Team Obama eyeing a 2004 strategy from George W. Bush, in which they use social issues like contraception and immigration as opportunities to drive base turnout for an election win, much the same way Republicans used referendums on traditional-marriage laws in that election to help boost Republican turnout and score a narrow victory for Bush over John Kerry. But that strategy would fail on at least two grounds in 2012.
First, the progressive base in the U.S. electorate is smaller than the conservative base; a Gallup poll in January had conservatives outnumbering liberals 2-1. Second, the economy began roaring in late 2003 and early 2004, which made economic and jobs-related policy much less acute, leaving room for social issues to take center stage. That is very much not the case in 2012.
With that being said, just how vulnerable will Obama be on the economy? Conflicting economic indicators make that a difficult question to answer for the moment, and it may depend on just when voters start to pay attention.
Not all of the news has been bad. The manufacturing sector, which had been a bright spot in an otherwise stagnant recovery, had recently suffered big reversals and job losses. In May, though, activity picked up significantly, with durable goods orders rising 1.1 percent after two months of declines. This week brought good news on the housing front, which has been dismal for several years. Numbers jumped up significantly in the existing home market in May, rising over 6 percent to hit a two-year high. New-home sales rose even faster at 7.6 percent, also a two-year high.
The future numbers on jobs may not be all bad, either – at least not the numbers that attract the most media attention. The Gallup survey on jobs and employment, which parallels that of the Department of Labor, predicted a decline in the unemployment rate in the upcoming June jobs report to 7.8 percent, which would finally cross the 8 percent barrier that Obama promised to avoid with his $800 stimulus plan more than three years ago.
Even with the decline in civilian participation in the workforce, which hit a 30-year low in May at 63.6 percent before rebounding slightly to 63.8 percent, a drop in the topline unemployment rate below that 8 percent marker will have a positive psychological impact – and the Obama campaign will be certain to trumpet them.
That topline number, however, has been drifting downward for months, mainly due to the exodus of workers from the workforce rather than the addition of massive numbers of new jobs. Despite that, pessimism has returned with a vengeance in consumer sentiment. Both Gallup and Rasmussen show consumer confidence eroding fast in June. Retail sales fell in May even while manufacturing appears to have picked up, and readjusted numbers show that retail sales fell in April, too.
It’s not just consumers who believe worse yet will come, either. Reuters reported on Tuesday that S&P has raised its estimation of recession risk to 20 percent. Their upside projection is for continued “slow recovery” of the kind seen over the last three years, while S&P warns that the US has similar issues to Japan in the 1990s, which produced a so-called “lost decade” economy for the Far East powerhouse. That kind of outlook will have Obama continuing to try to change the subject, and Romney refusing to talk much about anything else.
Still, Romney has to take care not to overshoot the message. John Kerry tried running against the economy in 2004 by painting it as a “jobless recovery,” only to have the rug pulled out from under him as jobs returned in massive numbers throughout the year. The fundamentals of that recovery were much stronger than today’s, so it’s unlikely at this point that a turnaround could arrive in time to transform the economy from a liability to an asset for Obama as happened to Bush in his re-election effort.
Romney also has to take care to avoid being painted as cheering for misery. In order to do so, he needs to point out the overall direction of economic indicators and explain how his policies would produce better results, a skill which Romney has displayed consistently this year.
While we may not know what the economy will look like exactly on Election Day, most voters will have made up their mind about it by Labor Day. Obama has that much time to hope for a miracle, while Romney has that much time to explain why it won’t come until after voters change America’s political leadership, starting at the top.