By Richard S. Dunham Nearly every day, it seems, a new economic indicator sends a chill or a thrill through the markets. Investors and consumers have been confounded by a confusing array of conflicting statistics. But while the market mavens try to assess what's really going on with the economy, the political pros in Washington are trying to gauge how the economic uncertainties of the moment will affect their own political stock.
Don't buy the spin of the moment. It's in President Bush's interest to accentuate the positive. And it's the Democrats' job to make people worry about the economic stewardship of Bush and the Republican Party. Here, free of partisan and ideological spin, are some of the leading (political) economic indicators to watch between now and November:
Is the country on the right track? Republican pollster William D. McInturff says this "right track, wrong track" index is the most powerful predictor of midterm elections. Until recently, that was great news for Republicans: An Apr. 8-11 Gallup Poll found that Americans were satisfied with the way things were going in the country by 61% to 37%. The peak: 70% in December. But now, for the first time since the Sept. 11 attacks, more voters tell Gallup that they're dissatisfied, 48% to 49%. The steady erosion of recent months must be reversed, or Republicans face two years in the minority on Capitol Hill. Analysis: big edge to the Democrats.
Whither the stock market? This one is a no-brainer. There's a historical correlation between Wall Street's fortunes and the political fortunes of the party in control of the White House. The relationship is even closer in the New Economy, where more than 60% of Americans say they're invested in the market through stocks, mutual funds, IRAs, or 401(k) plans. George W. Bush and the Republicans can only hope for an autumn rally. "I'm worried that the stock market could work against us as the party in power," says a savvy GOP veteran, former Reagan adviser Charles Black.
A key is going to be the third-quarter financial statements that will start arriving in voters' mailboxes in the weeks before the Nov. 5 election. Republicans want those bulls back on Wall Street by the end of September. Analysis: edge to Democrats, though that could change if the market has hit bottom.
How confident is the consumer? This isn't only an important sign of economic activity -- it's a leading indicator of political anxiety (or satisfaction). Right now, the signs are pointing south. The prestigious Conference Board survey and ABC TV's consumer confidence indicators both show buyers more unsure than they've been in months. Confident voters make for confident incumbents. Analysis: edge to Democrats.
Is the sky falling? Consumer confidence is a short-term phenomenon. What really spooks Presidential advisers is when voters think things are bad and will only get worse. That's not happening now. According to a July 26-29 survey by the American Research Group, an independent New Hampshire firm, 77% of adults believe that their household financial situation will be better a year from now. Only 8% think it will be worse. Compare that to just 37% who predicted better times ahead in November, 2000, when President Bush faced off against Al Gore.
What's more, the percentage of Americans who believe the national economy is improving has increased from 10% to 22% in the past month. Not a hardy pat on the back for the Bush economic crew, but a welcome relief nonetheless. Analysis: edge to Republicans.
Who do you trust to clean up corporate crime? Everybody knows that voters believe that Republicans are in Big Business' pockets, while Democrats are more likely to defend the interests of average folks. So don't pay too much attention to poll results that restate the obvious. (People think Republicans are tougher on foreign policy and crime, too.) What's important is whether one party has a major edge in dealing with the issue du jour: crime in the executive suites. Democrats really, really want to make it the top issue in 2002.
"The Republican Party has always been about Big Business," says Democratic media consultant Dane Strother. "They can't fix this. It's who they are. We're going to stick it to them."
So how are the Democrats doing thus far with their new pet issue? The voter response is mixed. Gallup found that 41% of voters approved of the congressional Republicans' handling of corporate corruption, while a nearly identical 42% approved of the Dems' actions. That's good news for fretful Republicans. But keep an eye on this one. It's very important. Analysis: Republicans win if they don't lose big on this issue.
Which party can fix the economy? Though Republicans are relieved that they're not being viewed as softer than the other party on corporate crime, they can't be pleased by voters' views on their handling of the economy. The same Gallup survey found that Americans pick Democrats as the party best able to right the economy. The Dems' 5-point edge isn't huge, but it's a sizable shift from the GOP's 9-point edge in May. Analysis: the White House needs to work overtime to build confidence in its embattled economic team.
Intangibles. George W. Bush is not on the ballot in November, but a President's popularity is often important in mid-term elections. Both Ronald Reagan and Bill Clinton took mediocre job-approval ratings into the first congressional contests of their Presidencies -- with disastrous results. Bush, even with his poll numbers declining in recent months, remains nearly as popular as Reagan and Clinton were at their peaks. Indeed, even 53% of Americans who believe the economy is getting worse still approve of Bush's job performance, according to a July 28 ABC News/Washington Post Poll.
What's more, 70% find him a strong and decisive leader, 69% say he's honest and trustworthy, and 60% say he cares about the needs of people like you, according to Gallup. With the Republicans' big edge in campaign cash and the power of incumbency, these intangibles could save the GOP from the ominous signs that abound. Analysis: advantage Republicans, as long as the President stays popular.
While Democrats are salivating at their potential to use the economy as a wedge issue in the fall, it's too early to say they can pull it off. But keep checking on these leading indicators. They'll give you a pretty good idea who is going to control Congress next year -- even before the first vote is cast. Dunham is White House correspondent for BusinessWeek in the Washington bureau, and he writes BW Online's White House Watch column on Mondays