Slumping personal income and the 2010 midterms
[Posted by Karl]
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.
–Karl
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
Hey, it’s almost like the so-called “stimulus bill” was actually a Democratic Party re-election slush fund. If the New Yorker employed reporters instead of (Democrat) White House press officers there might be a good story there.
Subotai (01feca) — 4/14/2010 @ 8:25 amI blame Bush’s deficits. And Bush, in general. That is all.
Racists
JD (0f9c01) — 4/14/2010 @ 8:29 amUm, where have you folks been for the last 20 years? Incomes have been level or going down for a hell of a long time.
JEA (dffa7e) — 4/14/2010 @ 8:52 amA pox on all your houses. Let us not be partisan and crucify Republicans. It is the JEA way.
JD (0f9c01) — 4/14/2010 @ 8:57 amJEA, which is it? Oh, you don’t actually know? You’ve just once again parroted some vague Democratic talking point that you didn’t really remember very well?
Got it.
SPQR (8475fc) — 4/14/2010 @ 9:03 amLevel and going down are ostensibly the same things, SPQR. I also suspect that the 20 year figure is chosen quite intentionally.
JD (0f9c01) — 4/14/2010 @ 9:10 amWe still have two quarters of the msm beating the upturn and improved economy drum to change perception by November.
Of course that means in December, we’ll find the truth.
Jim (582155) — 4/14/2010 @ 9:19 amThe MSM couldn’t find the truth if it were a wart on the tip of its’ nose.
AD - RtR/OS! (4a0d27) — 4/14/2010 @ 9:37 amGiven high unemployment and flat wages ..
Wait, there is high unemployment? The MSM has done a great job of downplaying the bad economy.
Subotai (01feca) — 4/14/2010 @ 10:22 amGeorge Bush had a “jobless” recovery that wasn’t.
Now Barack Obama can have a jobless “recovery” that isn’t.
skwiself (63b7ff) — 4/14/2010 @ 10:22 amJD, you are seeing “intent” where I see vagueness and sloppy BS.
SPQR (8475fc) — 4/14/2010 @ 10:55 amNot that JEA would actually read the linked material, so here’s more of the WT story:
Karl (f07e38) — 4/14/2010 @ 10:59 amExactly, Karl, JEA was pulling claims out of the south end of his alimentary canal.
SPQR (8475fc) — 4/14/2010 @ 11:03 amDue to the Davis-Bacon Act the stimulus bill will only benefit construction unions. Lotta public works with high priced labor.
Hazy (996c34) — 4/14/2010 @ 11:07 amInstead of a genuine improvement in the economy the administation is counting on a temporary high from Porkulus. Putting the economy on a sugar rush in the lead-up to the election might indeed mitigate Democrat losses, and the administration might think of that as a political victory, but the hangover from the rush will be ugly though, since most economists, including the Presidents own staff, think 2011 and 2012 will be really difficult years. We can expect to see high unemployment, exploding Federal debt and declining personal incomes. The increases in federal tax rates won’t bring higher revenues, so our debts will increase even as the economic damage of high rates makes the underlying problems worse. Thanks for nothing Democrats.
MTF (17058c) — 4/14/2010 @ 11:13 amSPQR – Actually I was shooting for sarcasm and mockery, but you understand.
JD (18e145) — 4/14/2010 @ 11:28 amThis chart from the census bureau (warning: excel spreadsheet) says that per capita income (in constant 2007 dollars) rose until 2000, when it hit 26,905, and then rluctuated a bit but fundamentally remained within $800 of that number until 2007, when the chart ends.
aphrael (e0cdc9) — 4/14/2010 @ 11:32 amsomeone should remind the Times that 80K of those “j*bs” were either with temp agencies or the Senseless…. IOW, not j*bs in the permanent sense.
redc1c4 (fb8750) — 4/14/2010 @ 12:07 pmKarl, I’ve been away for Patterico for awhile and i was wondering id your prediction that the Dems would never pass healthcare bear fruit?
Just curious
PS too soon?
timb (449046) — 4/14/2010 @ 2:27 pmAbsence DID not make the heart grow fonder.
AD - RtR/OS! (4a0d27) — 4/14/2010 @ 2:31 pmIs “been away” some racist codeword for being banned for aggressively lying?
JD (18e145) — 4/14/2010 @ 2:37 pmThe MSM has done a great job of downplaying the bad economy.
You mean like their go – to stories about how awesome “funemployment” is? Funny, don’t see those too much anymore.
Just curious
You were just leaving, yes? And as soon as the evil Rethuglicans and the wacist Teabaggers get into power again, they’ll repeal all of it. Enjoy your seven months of paradise, timmah.
Dmac (21311c) — 4/14/2010 @ 3:49 pmtimb,
I’m sure you have a link to my prediction that Dems would never pass healthcare. Because otherwise, I’m inclined to think that’s something the voices in your head told you, as opposed to something I wrote.
Karl (e1a6ae) — 4/14/2010 @ 7:38 pmApparently being banned for being dishonest did not teach him very much, Karl.
JD (18e145) — 4/14/2010 @ 7:49 pm