Ordinarily, this would be great news for Barack Obama, as conventional wisdom holds that when the economy slumps, so do the fortunes of the incumbent party. In fact, there is an entire cottage industry built around the concept. Recently, Reuters reported on three academic models that sought to forecast the election based on present macroeconomic conditions. Those models evaluated the tepid economy, and projected a Democratic victory by margins of 10 points, 4.4 points, and 3.6 points, respectively. As of August 11, however, my forecasting model at FiveThirtyEight.com (which looks at state and national polling trends, but not macroeconomic factors) projected an Obama victory by 2.0 points, lagging the economic models by several points.
I have been critical of the notion that Obama is “underachieving”--the Democrats have lost five of the last seven elections; a victory by any margin would be a significant event. But it would seem that Barack Obama is not leveraging the issue of the economy as effectively as he might.
The “economy,” of course, is an abstraction, a catch-all for a whole series of interrelated concerns ranging from jobs to taxes to commodities prices to equity markets to entitlement programs. But in the summer of 2008, the “economy” has come to signify something unusually specific: high gas prices.
As a matter of the overall economy, the impact of high gas prices has been exaggerated. According to the Bureau of Labor Statistics, motor fuel represents between five and six percent of Americans’ annual spending. Gas prices have increased by an average of 33 percent from this time a year ago, which translates to no more than a one or two percent hit in the pocketbook. Americans spend about the same amount on medical expenses as they do on gas, more than twice as much on food, and between six and seven times as much on shelter. For that matter, they spend more on the purchase of vehicles than they do on gas--and new car prices have actually gotten cheaper over the course of the past year.
Nevertheless, the impact of higher gas prices is quite literally more visible than that of other commodities--gas stations bellow their prices from every street corner. In the Pew poll, 38 percent of Americans voters identified energy prices as the most important economic problem facing the country. That was far and away the plurality response--unemployment was cited by only 11 percent of the sample, and the housing crisis by 10 percent.
The economy is the election. And gas prices have become the economy. John McCain has been smart to champion the issue. The policies that McCain has advocated--a suspension in the federal gas tax and expanded offshore drilling--are both fairly popular, with the latter being favored by around a 70/30 majority.
Barack Obama's job, then, is to broaden the scope of the economic discussion into areas that are more safely in Democratic turf, such as health care, jobs, and Social Security. In a recent Rasmussen Reports survey, Obama held just a five-point lead over McCain on his ability to handle the health care issue, territory that traditionally favors Democrats by margins of about 20 points. Obama was also underperforming typical Democratic numbers on bread-and-butter issues like education and Social Security.
But when was the last time Americans heard Obama mention something about Social Security--or universal health care? Health care polls just as well as offshore drilling does, with roughly two out of every three Americans favoring some kind of universality. But the last time the Obama campaign highlighted universal health care in one of its press releases was in April. On the issue of the economy, Americans don't want a boxer but a puncher--someone who can dictate the agenda. Obama has not provided much of that so far.
The key will be framing policies in terms of the current economic funk. For instance: Since we have an employer-based health care system, more Americans out of work means more Americans without access to insurance. Since both equity markets and real estate have recently produced negative returns, that ought to increase the desirability of a guaranteed retirement income, and demerit McCain's proposals for privatizing Social Security. Since manufacturing jobs are being lost, that makes education to prepare our workforce for white-collar jobs even more important.
Obama will need an answer to the specific issue of gas prices, too. It is probably too late, after weeks of consistent messaging on the issue by McCain, for Obama to refute McCain’s economically questionable assertion that expanded offshore drilling will reduce the burden on drivers. But Obama can enter the debate on his own terms by fully embracing the bipartisan Gang of Ten compromise position in the Senate, which he’s supported but hardly emphasized. It would expand drilling off the Atlantic Coast, but only in exchange for committing $20 billion to alternative fuels R&D and closing a tax loophole for the oil companies. McCain, who objects to tax increases on the petroleum firms, hasn’t spoken out on the measure--and Obama can use that to portray him as an old, Larry Kudlow–style Republican who is more interested in industry’s profit margins than in the consumer.
The economy is Obama’s issue to lose--and lately, he has come perilously close to losing it. Obama needn’t have to channel Bill Clinton and feel people’s pain to win on the issue of the economy. But he does need to begin playing offense.
Nate Silver is the founder of FiveThirtyEight.com, a political website, and a contributor to The New Republic.