Articles and Analysis


Obama's Shrinking Advantage on the Economy

Give a political scientist a recent economic report and he or she is likely to state with a lot of confidence that Democrats will win this presidential election. Simply put, when the American economy is in bad shape, the out-party tends to have a great deal of success in presidential elections. Yet, less than two months from election day, the out-party's nominee finds himself in a tight race with John McCain. What gives?

Is it simply a matter of the public being distracted? Perhaps the news about Sarah Palin has such weight that it is causing people to forget about the economy? Not likely. Even if the economy isn't affecting everyone personally, the poor unemployment figures released last week coupled with the news of the Fannie and Freddie Mac takeover are likely keeping the economy on peoples' minds. Indeed, in the latest ABC News/Washington Post poll, 37% name the economy as the most important issue, roughly the same percentage as have done so all year. To compare, only 10% named Iraq as the most important issue.

This race isn't close because people have forgotten about the economy, it is close because the public is now largely split on who is better able to handle economic issues. The most recent ABC News/Washington Post poll shows that only a narrow plurality of the public actually thinks that Obama would be better able to handle the economy than McCain (47%-42%). The out-party usually performs well when the economy is doing poorly due to the public's belief that the out-party will do a better job with the economy than the party that was in control while economic conditions worsened. Indeed, in April, the ABC News/Washington Post poll posed the same question, but asked about generic presidential candidates rather than Obama and McCain specifically. The chart below compares these responses.


As the chart indicates, Obama is performing worse on the economy than a generic Democratic candidate while McCain is faring better than the generic Republican. In April, the generic Democratic candidate held a 21% edge on the economy, the kind of dominance on the key issue that most assumed would lead either Obama or Clinton to the White House. Yet, Obama now finds himself holding just a 5% advantage on economic issues and, accordingly, the race between he and McCain is very close.

But Obama's advantage on the economy hasn't always been so narrow, it has been narrowing.The chart below plots the percentage of registered voters saying that Obama or McCain is better able to handle the economy in six ABC News/Washington Post surveys conducted since March.


Note that through July, Obama held a fairly strong (and consistent) lead over McCain on the economy. It is during the past month that his lead has narrowed significantly--from a 17% advantage in July to an 11% lead in August and a 5% edge in the most recent poll. And this narrowing gap is not simply the result of McCain catching up, Obama has lost support on the issue while McCain has been gaining.

What does all this mean for the ultimate outcome? Well, if the economy is as important as political scientists think it is, then vote preferences should track pretty closely with who people think will do a better job on economic issues. The chart below indicates that this is clearly the case.


In March, Obama's lead over McCain on the presidential preference question (13%) was exactly the same as his advantage over McCain on economic issues. Ever since that point, his support has lagged somewhat behind his performance on the economy, but the two have usually moved in the same direction (the one exception is on June 15th, when Obama's economic advantage increased while his overall edge over McCain narrowed). The problem for Obama (and the good news for McCain) is that both have been tracking downward recently.

The McCain campaign has succeeded during the past month in separating evaluations of Bush's handling of the economy from McCain's economic competence. As a result, nearly as many Americans think McCain will do a better job on the economy as think Obama will. It is because they have narrowed the gap on this issue that the McCain campaign is now in a tight race with the Democratic nominee. For its part, the Obama campaign continues to emphasize the economy, recognizing the received wisdom that the out-party should be able to take advantage of poor economic conditions. Yet, this analysis suggests that it is not enough for Democrats to simply direct attention to economic issues--after all, voters are about as likely to pick McCain to handle this issue as they are Obama. If Democrats are going to confirm conventional wisdom, Obama will also need to re-assert the advantage that he held on economic issues when this campaign began.


Gary Kilbride:

My first choice was Mark Warner, the map changer. But once it settled to Obama vs. Hillary, I preferred Hillary largely due to strength on the economy. I wonder what type of gap Hillary would enjoy over McCain on the economy? I'd have to bet higher than Obama's current advantage.

It's a massive roll of the dice to nominate someone with lean credentials in an open race. I like Obama's chances to win narrowly in this climate but Democrats need to learn that charisma is more vital against an incumbent, and during an open race with the course of the nation at stake, and no direction comparison to an incumbent, you need unquestioned credentials. In other words, Democrats nominated Kerry when an Obama-type would have been preferable, then identified Obama when a Kerry-like resume would have made us all but invulnerable. If Obama loses it will be due to voter concern about his foundation, and that's an absurd unforced error in an open race.



The perception that McCain-Palin will do better on the economy is growing because people are realizing that with Obama come tax increases. It's common sense that you can't tax your way into a growing economy, silly. The dems are still bad-mouthing the Bush tax cuts that resulted in economic growth and prevented a serious recession. They accurately claim that Bush has spent too much money, but continue to push for more government checks to send to the people.

Sounds a lot like those credit card companies that keep sending us blank checks in the mail. Some of us, at least, know we'll have to pay it back sometime--and with interest. Why don't the dems just hook up with Capital One and send everyone pre-approved Visa cards? That way they'll get more people hooked and get their taxes every month.



This race ... is close because the public is now largely split on who is better able to handle economic issues.

Its possible though that you are conflating cause and effect. Its possible voters are tipping toward McCain for other reasons or even just general unspecified reasons, and then when answering the economy issue, they simply respond with the name of the candidate they are leaning toward.



I think the economy will get some real examination b

I saw this on the blog of Craig’s List founder, Craig Newmark, yesterday and thought it was a great idea and worth sharing:

"Hey, this is a good example of genuine grassroots democracy:

ObamaTravel.org is a platform that connects volunteers who want to travel to a swing state with financial sponsors and swing state host families. It’s sort of a political hybrid of craigslist and Team-in-Training - volunteers post profiles and solicit sponsorship from their family and friends. Sponsors can see their donations in action by following the activities of their volunteers.

... and let's remember that "community organizing" is pure grassroots democracy."



Obama makes no sense on his economic policies. He laid out a host of new programs in his speech. These programs cost money; especially the health care one. We are in a slow down. We have to cut the budget deficit. We can only do that by cutting fiscal spending and reducing taxes. McCain has the best plan. He would reduce the top corporate rate tax from 35 to 25. This keeps the economy going with companies being better able to keep employees. He would leave capital gains the way it is. Obama would have to raise capital gains because he isn't going to cut fiscal spending. Private investment money will flow to other countries in response. Besides all else, the military will have to have new equipment. Its just too much to ask for a weak economy.



@ Player:

Obama has stated repeatedly of how he is going to pay for his plans by closing tax corporate tax loop holes, eliminating tax havens, stop wasting money in Iraq. So I think he gave a plausible way of paying for his programs. Under Obama most Americans will indeed get a tax cut, but the tax increase overall is only 0.1% of the economy. This is even more modest than Bill Clinton's 0.5% increase. The numbers might be a little off, but I think it is still a plausible alternative to McCain's plan of only cutting taxes without any tangible plans for reducing the deficit besides "promising" cutting spending. I have little faith in these "promises" since history has shown that but even the great Ronald Reagan couldn't help but increase our national debt.Therefore I categorically reject the notion that one candidate's plan is "obviously" better than the other.

There are other parts of the Obama plan that I think is crucial to economic growth and stability in the long term that I think is missing from McCain's plan. Between both candidate I think Obama has a better plan of investing and expanding the alternative energy industry as well as revamping the auto-industry. The effects of such investment may not be immediately noticeable but it is this kind of investment back in the 50s that made the US a leader in the Aerospace industry today.



Nevermet an honestlib: No recession? What do you think we are in now? Those tax cuts you talk about haven't had any effect on job creation. 6.1 % unemployment isn't a healthy economy. And that rebate you got. Guess who you borrowed it from..China. We now have the largest deficit in history. This whole mythology about tax and spend liberals was made up during the Reagan years. Yet,look at who has handled the economy in the past 16 yrs.
It certainly hasn't been GWB. Under Clinton this nation thrived. So please don't start this urban legend about Democrats taxing and spending. GW never met an earmark he didn't like,until the Dems took over in 2006. Then suddenly the earmarks were taboo.



My sense is that McCain and Palin have been successful in (falsely) stating that Obama will "raise your taxes".

The truth is that McCain's plan will cost the middle quintile of taxpayers over $700 per year compared to Obama's plan. In other words, it will cost you $700 *per year* to vote for McCain.

And McCain's plan will cost roughly $1,300,000,000,000 more than Obama's plan, which is money added to the national debt to be paid by our kids and grandkids, with interest. It's not too good for the strength of the dollar, either...

Obama needs to focus on a simple, clear economic message:

"Pull for McCain and pull out your wallet!"



Obama will raise your taxes. This is just the tip of the socialism iceberg. If you listened to the o'Reilly interview you heard him defend socialism.
under socialism the government takes it all and gives you back what it thinks you need.

"The United States Senate may vote any day on the stealth imposition of what could amount to an $845 BILLION United Nations style global tax on American citizens? It’s called the Global Poverty Act (S.2433), and it is being sponsored by none other than Senator Barack Obama. "


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