Weak US Economy Could Derail GOP Hopes—Again

[EV_Ares]

It’s the economy, again.

With the US economy likely to straddle the line between growth and contraction in the months before the presidential election, the issue may be the Republican ticket’s Achilles heel as in the 1992 contest.

Even if Sen. John McCain gives a strong speech Thursday night in accepting the GOP presidential nomination, investors will be nervously watching Friday's employment report for August, which comes out at 8:30 ET.

The forecast is for a loss of 75,000 more jobs, with an unemployment rate remaining at 5.7%. If the numbers come out worse than that, it could provoke more worries about the economy, giving Democratic presidential candiate Barack Obama even more ammunition against the GOP.

In picking Alaska Gov. Sarah Palin over successful businessman and former governor Mitt Romney, McCain passed on an easy opportunity to offset his admitted weakness in economics and shore up the credentials of the GOP ticket.

“He isn't comfortable handling these issues himself,” says William A. Niskanen, a McCain supporter, who is chairman of the Cato Institute and headed President Reagan’s Council of Economic Advisers. “It would be valuable if he had a credible, respected economic spokesman.”

“It appears from the convention that they are trying to avoid the economy and I guess that's not surprising given the track record of the Bush administration and McCain's unwillingness to distance himself on policies,” quips economist Larry Michel, president of the Economic Policy Institute, a liberal Washington think tank.

Though a good part of such election handicapping depends on partisan analysis and opinion, economic data and history offer some insights.

Niskanen’s study of presidential elections between 1896 and 2004 shows three keys to victory for the incumbent party—good economic growth, fiscal restraint and a candidate seeking re-election. “None of these apply to McCain,” says Niskanen.

Arguably, none of those qualifiers applied to George H.W. Bush in 1992. All three clearly did in 1996, when Bill Clinton easily won re-election. In 2004, a case could be made either way.

Economic Comparisons

During the Bush administration, job creation and economic growth have been historically weak. More recently, consumers have been squeezed by the surging price of petroleum products and other commodities that affect food prices, while the housing-mortgage meltdown has left millions facing home foreclosure or negative equity.

The economy grew at an average rate of 2.31 percent between 2001 and 2007 and is averaging just 1.46 percent over the past three quarters. The best year was 3.60 percent in 2004, just above the 3.42 percent average of the Reagan years. During the Clinton administration, growth averaged 3.76 a year, peaking at 4.5 percent.

The GOP may be most vulnerable on the jobs front. Nonfarm payrolls are up about 5.1 million between the inauguration of Pres. Bush and July 2008, vs. million during the Clinton presidency and 16 million in the Reagan era.

In addition, the unemployment rate has been climbing, touching 5.7 percent in July, a four-year high; economists expect the jobless rate to easily surpass 6 percent in the year ahead.

Link to entire CNBC article: http://www.cnbc.com/id/26544338

[nadinbrzezinski]

1. The dow dropped 3% today

and I take that as a sigh of where the economy is going

[DJ13]

2. When the fiscal conservative Bush lovers at CNBC say its over, its really over

:rofl: