- The Washington Times - Monday, October 11, 2010

The Dow Jones Industrial Average is back over 11,000, corporations are flush with $2 trillion in cash, growth has held up for more than a year, and interest rates are at record lows — to cite a few promising signs for the economic recovery.

But none of that does much to cheer the average voter, who remains fixated on the high jobless rate of 9.6 percent and on the struggle many families are having maintaining their lifestyles or even just surviving after the hit from the recession.

The overwhelming importance of the job market — polls show that most Americans see the unemployment rate as the single best measure of the economy’s health — is bad news for President Obama and incumbent legislators in his party. Voters are expected to target them next month in venting their anger and frustration at the languid economic recovery.

Democrats are in a pickle, if only because unemployment is particularly high among traditional Democratic constituencies. Joblessness among blacks and Hispanics is much higher than average, at 16 percent and 12.4 percent, respectively, according to the U.S. Labor Department.

And among the Millennial generation that voted overwhelmingly for Mr. Obama in 2008, the difficulty of finding jobs is acute: Recent college graduates go begging for jobs, while nearly one in four teenagers reports being out of work.

Even news of a steady trickle of job openings created by businesses since the beginning of the year has failed to inspire hope or impress most voters.

“They won’t help the administration as the midterm elections approach,” said Nigel Gault, chief U.S. economist at IHS Global Insight, predicting that high joblessness and the weak economic recovery have sealed the Democrats’ fate.

“It’s too late for any policies enacted now to make the economy look better by Election Day,” he said. Voters have made up their minds that the economy looks bad, and Washington is at least partly to blame.

Ironically, the parts of the economy that are doing well are those that benefit corporations, business executives and investors — higher-income groups that generally are viewed as Republican constituencies.

Corporate America is knee-deep in profits and mountains of cash. But rather than deploying that money to create jobs or expand operations, many companies have been using it to issue dividends and purchase their stock, driving up the value not only of company shares, but the stock market in general.

That has been a blessing for investors and helped the stock market edge back into positive territory for the year recently, despite lingering doubts about the strength of the economic recovery.

Stock-repurchase programs already have more than tripled from last year’s levels to nearly $150 billion, according to Thomson Reuters, and some analysts expect corporations to put as much as $400 billion in extra cash into investors’ pockets by the end of the year.

But while that is adding to income and spending power of the highest earners, it hasn’t garnered applause from the public at large. Only 7 percent of Americans cited the stock market’s performance as the best indicator of the economy’s health in a Heartland Monitor Poll a month ago.

Still fewer — 4 percent — rated the profitability of major corporations as a good barometer of the economy. And voters seem to by and large dismiss reports that the economy has been growing steadily for more than a year.

Voters are focused not only on the unemployment rate, but also on family incomes, which have taken a beating as a result of job losses and cuts in wages and benefits during the recession. About a quarter of the public cites incomes as the best measure of the recovery.

That trend doesn’t look too promising for the Democrats, either, although last year’s $814 billion economic stimulus measure has played an important role in propping up incomes with beefed-up government assistance for the unemployed.

Moreover, frustration with skimpy raises and shriveling incomes has been building for a long time, as recent census figures show that middle-class households have been losing ground for much of the past decade.

“Frustration has overwhelmed any sense of progress on the economy,” said Robert J. Shapiro, a former Clinton economic adviser and political commentator. “These remain deeply frustrating and even desperate times for millions of Americans.”

The vast majority of the 8.3 million job losses during the recession occurred in the waning days of the Bush administration and first six months of the Obama administration, before the president had a chance to try to change anything, he said. But that distinction is lost on voters.

If the trend toward lower incomes is not reversed, it poses a threat not only to Democrats in the current election, but also to Mr. Obama in his likely re-election bid in 2012, Mr. Shapiro said.

“Even if they end up losing 35 to 45 seats in the House and seven to nine in the Senate, Mr. Obama and the country still need a serious plan to restore people’s incomes,” he said. “Without it, the president in 2012 could find himself in the same position as [President] George Herbert Walker Bush in 1992.”

“Democrats face a harsh reality,” said Peter Morici, business professor at the University of Maryland. “No president since Franklin Roosevelt inherited a bigger mess than Barack Obama.”

But Mr. Obama fumbled in his first year by passing ineffective job-stimulus measures and reforms of health care and banking — and now he’s paying the price, he said.

“Ordinary citizens beyond the confines of Lower Manhattan don’t sense an economic recovery,” Mr. Morici said. “And Democrats seeking re-election to Congress are likely to get a shellacking for facilitating his agenda.”

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