The economy is far and away the voters’ No. 1 concern this year, and what happens to it in the next five months will significantly influence the presidential election.
With the economy barely growing at 0.9 percent; the unemployment rate jumping from 5 percent to 5.5 percent in May, the fifth straight month of job losses; a gallon of regular gasoline hitting $4; and the housing market in a prolonged slump, Democrats say their chances of retaking the White House haven’t looked better in years.
A CNN/Opinion Research poll reported Friday that when pollsters asked 1,035 Americans last week what was their most important issue in deciding how they will vote for president, 42 percent said the economy, with the war in Iraq lagging well behind in second place at 24 percent. A Gallup poll found 87 percent of Americans saying the economy is getting worse, reflecting a gloomy political environment that makes Republican prospects problematic at best.
But other surveys say voters harbor significant doubts about whether either Sen. John McCain or Sen. Barack Obama has the answers, strongly suggesting that they remain open-minded about who has the most credible agenda for restoring the economy’s health.
Exit poll interviews with about 44,000 voters in 33 primaries over the past five months showed that each candidate got less than half the votes of his party’s voters who said the economy was their chief concern.
Democrats, sensing the economy is their best issue, are stepping up their attacks on Mr. McCain and the Bush administration, pointing to the jobless numbers, which were higher than economic forecasters expected.
“It was the latest in a string of reports showing that too many Americans are losing their jobs, paying more for basic goods and services, earning less and struggling to keep their homes,” the Democratic National Committee said in a campaign broadside last week.
“This is a reminder that working families continue to bear the brunt of the failed Bush economic policies that John McCain wants to continue for another four years,” Mr. Obama said Friday.
Mr. McCain and Mr. Obama are proposing sharply different policy prescriptions to deal with the economy’s present troubles that the voters will be hearing more about in the coming months.
The Arizona Republican’s agenda calls for making President Bush’s income tax cuts permanent, repealing the alternative-minimum tax on the middle class and cutting the corporate tax rate to inject additional long-term incentives for capital investment and business expansion. He also would push for trade expansion to open new markets for U.S. products.
“The global economy exists and is not going away. We either compete in it or we lose more jobs, more businesses, more dreams,” Mr. McCain said in an address June 3 in New Orleans.
The Illinois Democrat, on the other hand, would cut income taxes by up to $1,000 for middle-income working-class taxpayers, in addition to providing a $500 per-person tax credit for working families.
But he would raise the capital gains tax on investors and would raise the top income tax rate on wealthier taxpayers, who include the owners of small businesses that create more than 66 percent of the net new jobs in the country annually.
Blaming “unfair” free-trade agreements for U.S. job losses, Mr. Obama says he is against trade pacts like the Central American Free Trade Agreement and would seek to renegotiate the North American Free Trade Agreement with Canada and Mexico, which he says was “oversold to the American people.”
Mr. Obama’s jobs agenda contains no tax incentives for broad-scale business investment, but it does call for increased federal spending for basic research, “clean technologies” and renewable energy “to create high-paying jobs.”
Mr. McCain said Friday that his opponent’s economic agenda was “based upon the policies of the past that advocate higher taxes, bigger government…and greater isolation” from global trade.
Despite the subprime mortgage and credit debacles, skyrocketing oil and gas prices and the Democrats’ characterization of an economy in recession, the 5.5 percent unemployment rate remained low by historical comparisons.
The nation’s jobless rate rose to 10.8 during the two-year recession under President Reagan in the early 1980s and was still at 7.4 percent when Mr. Reagan was running for re-election in 1984 on an optimistic “morning in America” campaign heralding the economy’s turnaround. He carried 49 states.
Many economists, including Federal Reserve Board Chairman Ben Bernanke, say they think the economy will begin turning upward in the middle of the year and there are some faint signs that already has begun to happen.
“Right now I think the economy is in neutral. Half of the indicators are looking positive and half are looking negative. There’s a heck of a lot of economic stimulus kicking around, so it’s possible the economy might rebound by the fall,” said Kevin Hassett, a senior economic adviser to the McCain campaign.
“If we are in a recession, it will be one of the shallowest ever,” Mr. Hassett said last week.
Economic growth rose ever so slightly from an anemic 0.6 percent in the fourth quarter last year to 0.9 percent in the first three months of this year, despite widespread forecasts of zero growth. Many economists expect growth to rise to around 1 percent in the second quarter and move higher in the second half of the year as the Fed’s interest rate cuts and tax rebates to 130 million Americans fully kick in this summer.
Meantime, the Commerce Department reported that new home sales rose 3.8 percent and pending sales of existing homes rose more than 6 percent in April, durable goods orders for electrical equipment and appliances increased by 27.8 percent, and U.S. exports grew by nearly 3 percent in the first three months of the year.
By Elaine Donnelly
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