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.