By Doug Pinkham
Public Affairs Council President

April 13, 2010

It's an understatement to say the economy will be a huge issue in the mid-term elections this fall. Fifty-seven percent of registered voters say the economy will be "extremely important" in their vote for Congress and 36 percent say it will be "very important," according to a new poll by USA Today/Gallup.

OK, that much we agree on. But when you look at voter opinions about the state of the economy, Democrats, Republicans and independents are living in three different universes.

Gallup tracks an Economic Confidence Index summarizing the public's ratings of the economy. In the most recent summary (March 29 - April 4), 60 percent of Democrats say the economy is "getting better" - a major improvement from 47 percent only a month ago. The Democrats' index score, which combines views on current and future economic conditions, rose from -17 on March 14 to +2 on April 4.

Independents, meanwhile, are considerably less bullish, with only 36 percent saying the economy's on the mend. Nevertheless, their "Confidence Index" improved from -37 to -30 during the last four weeks. Not fabulous news for Democratic leaders worried about taking a beating in the elections, but clearly a move in the right direction.

So what about Republicans? During the same period, the index for GOP respondents actually dropped from -41 to -47. Only 21 percent say economic conditions are getting better. While Democrats see a light at the end of the tunnel, Republicans see more darkness ahead.

When results are combined, here's how the nation's economic outlook has shifted in the last 18 months. What's really interesting, as the Gallup chart illustrates, is that improvement in consumer confidence hit a wall 11 months ago - and it hasn't budged since.

During the period May 9-11, 2009, 41 percent of Americans said the economy was getting better and 53 percent said it was getting worse. Those are almost exactly the same numbers recorded April 3-6, 2010.

If the economy hadn't improved since last spring, those opinions would make sense. But let's look at the data.

A recent article in BusinessWeek sums up the nation's economic performance this way:

What's more, notes reporter Mike Dorning, it's clear the economy is growing:

Sounds like pretty good news across the board. So why the disconnect? Concern about job security is surely one reason. While productivity grew at a 6.9 percent annual rate in the fourth quarter and corporate profits were up 8 percent, the average American is still nervous about future job prospects.

There's also the inevitable gap between the end of a recession and the public's perception that times are getting better. George H.W. Bush had an approval rating of 89 percent in February 1991, but saw it drop 60 points by July 1992 - chiefly because of economic concerns. Though the eight-month-long recession during Bush's term ended by April 1991, the perception lag cost him an election the following year.

President Obama and the Democrats are facing the same problem - only this time the downturn has been much worse, which may lengthen the lag. (For those keeping score at home, Federal Reserve Chairman Ben Bernanke called the recession officially over seven months ago, and some economists say it ended nine months ago.)

And yet, it feels as though something else is restraining optimism. Why did economic confidence improve and then stall? Why are Republicans becoming even less bullish about recovery? And why, as BusinessWeek points out, do only three out of 10 Americans say the value of their investment portfolios has grown over the past year - "a near-impossibility given the size and breadth of the market gains"?

Perhaps this recession, together with contentious debates over the stimulus package, healthcare reform and budget deficits, have made Americans feel they can't "trust" the recovery any more than they can trust politicians. And perhaps, as a result, it's going to take longer before people feel the country is headed toward a sustainable recovery.

It's also possible that Republicans have been successful - so far -- in persuading loyalists and independents that the good news out of Washington isn't really good at all. Six months before an election, the party out of power can't afford to hand those in power any credit for an improved economy. But that message is going to become less convincing as spring turns into summer.

With each passing month, it seems likely that Democrats will have more and more positive economic data on their side: GDP growth, stock prices, job statistics, manufacturing levels, earnings, consumer spending. How well they do in the fall will depend largely on Obama's ability to weave these numbers into a compelling economic story.

"He can make great strides in short order," Steven Jarding of Harvard's Kennedy School of Government told BusinessWeek. "Any indicator he can build on is a good thing. He'll be able to focus all his energy and attention to say, ‘Here's what happened this year in the economy.'"

Is the public ready to listen?  The answer to that question will determine the outcome of the elections, the makeup of the next Congress and the nation's policy agenda for the next two years.

Comments? Email me at http://pac.org/contact/blog.