GDP Under the Tree: The Christmas Gift the Democrats Needed on Halloween
Democrats must wish it was still October
President Barack Obama and his party got an early Christmas gift Tuesday in the form of exceedingly good GDP numbers that signal growing optimism about the U.S. economy. Given the timing, the new numbers won't save Democrats control of the Senate, but they might vindicate a president who had been drowning in bad poll numbers as he tries to fight off second-term irrelevance. The figures will also almost certainly will help Hillary Clinton.
Gross domestic product grew 5 percent in the third quarter, not just better than the 3.9 percent estimate but the best pace in more than a decade. Then the Dow broke 18,000 for a new record. Another measure, GDI, or gross domestic income, gained 4.7 percent for the quarter. Consumer spending and business investment were up. This comes as gas prices have fallen for three months, down to $2.38 a gallon on Monday.
The data "just reinforces that sticking with the president's policies have helped lift the economy from a state of freefall," said Representative Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee.
It serves as "an enormous proof-point" for Obama's approach, from the stimulus, to backing the General Motors bailout and pushing Obamacare, said Democratic strategist Paul Begala. He said the economic numbers can help Democrats "a lot" in the long term by boosting the eventual 2016 presidential nominee's prospects and building the party's brand with younger voters.
Remember how Republican Mitt Romney promised in 2012 that he'd get the U.S. unemployment rate down below 6 percent by the end of his first term if voters dumped Obama? Turns out they didn't need Romney for that. Unemployment's been holding at 5.8 percent.
Jason Furman, the chairman of Obama's Council of Economic Advisers, said 2014 has been a "breakthrough year," writing in a White House blog post that "the steps that we took early on to rescue our economy and rebuild it on a new foundation helped make 2014 already the strongest year for job growth since the 1990s."
But the Christmas giddiness is tempered by thoughts about what might have been.
Could this combination of GDP, stock performance and gas prices have preserved Democrats' Senate majority in last month's midterm elections if it had happened sooner? And would imperiled Democratic incumbents have done better if they had summoned the courage to tie themselves to Obama on the economy if it also meant taking the heat for Obamacare, immigration, child border crossings and the Ebola response?
The looming question is whether these robust numbers translate into actual changes in wages and incomes that the vast majority of middle class Americans feel. Americans didn't perceive the economy's earlier improvements enough to translate to votes. Will this be different? Meanwhile, Republicans will control both chambers of Congress come January, and with his executive moves on immigration, climate change and Cuba, Obama has pretty much thrown down the gauntlet. Even if Americans do give Obama credit for this turn of fortune and stop blaming him for a slow recovery, are Republicans suddenly going to yield to the president they've spent six years fighting after he's stuck his fingers in their eyes?
"Do people actually feel it and believe it, which has been the problem all along?" said Amy Walter, national editor of the Cook Political Report. "How much of this is driven by gas prices and how much is driven by real structural improvements? We're not necessarily going to know that for a while. And there's still not an economic message from Democrats that has been consistent."
"What we'll be looking at is to what extent this boosts middle class wages," Van Hollen said. That, he said, will be "the number one focus of Democratic efforts."
Walter and Campbell both say if the GDP and other trends hold, it should boost Obama's approval ratings (they've already been rising, likely as a result as his activist weeks since the election in November), though it's not clear how that will translate legislatively. It may improve fellow Democrats' willingness to work with Obama, but his party is still likely to split if he and Republicans push for trade deals.
Begala said he's doubtful these numbers would have changed the outcome of the midterms, and that "in terms of legislation, I'm very doubtful that much changes" in 2015 and 2016 with Republican resistance to Obama's policies. "Beyond the GDP numbers, which are great, I think what the president and Democrats should do is take it to a larger philosophical debate. We've saved the world economy and now we're ready to take off. It's a much longer game I think we ought to be playing."
"The biggest beneficiary is Hillary Clinton," Walter said. The presumptive Democratic frontrunner for the next presidential election "has to be able to go into 2016 with a strongly improved economy and perceptions of the economy. She is the most responsible for the Obama economic legacy going forward. It's now less and less about him and more and more about her."