How voters respond to the question "Are we better off than four years ago?" could have a very significant impact on the 2012 elections.
There are a myriad of statistics which can be used to measure America's economic performance during Obama's tenure. Some are important to all voters, but many are esoteric and not likely to be mentioned at the dinner tables of average Americans. A handful of economic measurements will have the greatest influence on all classes of Americans when they are in the voting booth.
The statistics which concern most Americans, and which are most well-known, include the following:
1. The unemployment rate.
The voter who is out of a job and cannot feed his family or pay the bills is among the unhappiest voters in America today. Unemployment is one of the most widely discussed statistics by newspapers, pundits and economists. For this reason, the average American's concern about his job (or lack of one) weighs heavily upon him.
The unemployment rate is now over 8%, and it has not improved markedly in the past several months. The number of people employed in the country dropped from 61% to 58% during the past four years. Job creation in August was less than 100,000, which falls short of the number of people entering the work force (this bodes poorly for unemployment prospectively). The overall rate last month declined from 8.3 to 8.1 percent because the number of unemployed looking for jobs decreased out of frustration, which impacted the denominator of the unemployment calculation.
2. Food stamps.
The number of people on food stamps increased dramatically over the last four years from 26 million to 46 million people. This single statistic should create a huge amount of dissatisfaction among lower class Americans.
Ironically, the impact on the election will likely be minimal because most people in this socioeconomic group relate to Obama and will either support him or not vote at all.
3. Housing prices.
These prices are an inconclusive statistic because there are so many other contributing factors to the overall housing problem. The current prices of houses, the number of houses for sale, houses in foreclosure, the ratio of mortgages to equity values, etc. are all important to homeowners, but when taken out of context can lead to imprecise conclusions about the housing market.
The fact is that the most important asset of the average American is the value of his home, and that value is down anywhere between 20 to 50% (my estimate). This has a great impact on middle and upper class Americans, and will influence their choice in November
4. Gas prices.
The vast majority of Americans drive cars. Every week, or more often, the car needs to be refilled. The price of gasoline at the pumps is always on the minds of Americans and, in total, it is a sizeable annual expenditure.
The dependence we have on foreign oil and our vulnerability to OPEC are issues that many Americans understand and resent. During the past four years, gasoline prices have fluctuated, but, they are close to historical high points at just under $3.80/ gallon. This compares to $3.20 four years ago, and much lower before then.
5. Government deficits.
Many Americans know about the federal deficit. That does not mean the majority truly understands the significance of the statistic. What they do know is that our government is spending more than it receives in taxes and from other sources.
The upper class says that government waste and entitlement programs are bankrupting our country; the lower class says taxes on the wealthy are too low.
This ongoing debate is very significant, because the Obama administration uses class warfare and the demonization of the affluent as a political weapon. Whether this tactic is legitimate is a separate question; it has been an effective talking piece for populists.
Annual federal deficits are now much greater than four years earlier, and creating a difficult problem for future generations. At some point in the near future, America will have to make sacrifices to rein in this problem. The question is, do we want Democrats or Republicans to lead this effort?
Students of economics know that many other statistics are important, and that they give insight into the direction of the economy. An unhappy American can be allayed if he can be convinced that things are “getting better” or “on the right track.” This is what the Obama administration is foisting on the electorate. Obama uses selective statistics to try to make his point.
For instance, the Gross Domestic Product (GDP) is slightly better than four years ago, but it is growing slowly. Jobs are increasing as compared to the latter years of the Bush administration, but growth is relatively anemic. Inflation is seemingly under control, but cheap money and monetary policies being used to encourage economic growth could become inflationary later. The stock market is up to pre-recession levels, but investors have nowhere else to turn, as bond prices are unsatisfyingly low.
The economic situation as a whole is not very good, but it is improving slowly.
Obama will say he turned the economy around and deserves more time. Romney will say Obama is a failed president whose policies have not been successful. Voters will have to choose between these two camps in November.