With less than 50 days until the election, President Obama maintains a one to three point lead nationally over Republican Mitt Romney. The polling margins vary in the swing states, but with the exception of North Carolina, the President is maintaining a slight lead in the battlegrounds as well.
How is this even remotely possible? Consider:
23 million Americans are under-employed, unemployed or have given up looking for work entirely. 40 percent of the unemployed have been out of work six months or longer. The labor force participation rate is at its lowest level in 31 years.
In addition, unemployment is significantly higher for minorities. Unemployment for Latinos is 20 percent above the national rate. For African Americans, it is 43 percent higher than the national rate.
Median household income has dropped two years in a row and is now down 8.1 percent from 2007.
46 million Americans are in poverty, the highest level in the 53 years that the Census has been keeping records. 16 million of these Americans are children.
46 million Americans are on food stamps, a 34 percent increase since 2008.
8.6 million Americans have lost their homes to foreclosure since 2009.
13.1 million other Americans are “underwater” on their mortgages or have negative equity in their homes. That loan to value gap stands at $700 billion.
Since 2009, the Obama administration has added an additional $5.23 trillion to the national debt, increasing the debt load by 1/3rd in only four years to $15.9 trillion and counting. To finance this debt, the US must pay more than $350 billion a year in interest payments, making it the fourth largest category in the US budget.
Despite this enormous outlay in government resources, in the 14 quarters since January 2009, the economy has only grown an average of 1.5 percent. If you count only the 12 quarters where growth was positive, the economy grew at an average of 2.2 percent; under performing every economic recovery in US history since WWII.
These are the facts, and they are not in dispute.
How then, can President Obama be leading the race for the White House? It is not a stretch to say that a ham sandwich should be leading at this point, considering the President’s record.
The answer actually depends specifically on the question you ask.
Mitt Romney’s question – whether Americans are better off then they were four years ago – would elicit a categorical “no.”
But if that was the question Americans were answering, Romney should be up 10 points at a minimum. The absence of a Romney lead suggests that Americans are answering another question: whether they are better off than they were two years ago.
The data here points to a very interesting conclusion.
Looking only at the battleground states, I examined four data sets compiled for the Obama presidency that could broadly measure economic well being: 1)state unemployment, 2)state economic growth, 3)business/personal bankruptcies (by state), as well as, 4) national foreclosure statistics.
A careful review of the data clearly indicates that while Americans are worse off than they were when President Obama took office, they are generally better off than they were during the more severe economic distress in 2009-10. This could account for the current Obama bump.
Consider unemployment:
| State Unemployment October 2008 | State Unemployment October 2010 | State Unemployment July 2012 | Decrease 2010-2012 | |
| IA | 4.4 | 6.7 | 5.3 | -21% |
| NH | 4.1 | 5.4 | 5.4 | -0- |
| VA | 4.4 | 6.8 | 5.9 | -13% |
| OH | 7.3 | 9.6 | 7.2 | -25% |
| WI | 5.1 | 7.8 | 7.3 | – 7% |
| PA | 5.8 | 8.8 | 7.9 | -10% |
| CO | 5.7 | 8.4 | 8.3 | – 1% |
| FL | 7.0 | 11.9 | 8.8 | -26% |
| MI | 9.3 | 12.8 | 9.0 | -30% |
| NC | 7.0 | 11.4 | 9.6 | -16% |
| NV | 7.6 | 14.2 | 12 | -16% |
With the exception of NH and CO, most of the battleground states have seen a significant drop in unemployment from 2010 highs, even if unemployment remains above the 2008 lows.
Now, consider state economic growth:
| 2008 | 2009 | 2010 | 2011 | |
| IA | -2.5 | -2.9 | 5.1 | 1.9 |
| NH | -0.7 | -1.9 | 4.3 | 1.5 |
| VA | -0.1 | -0.7 | 3.0 | 0.3 |
| OH | -2.4 | -6.2 | 2.7 | 1.1 |
| WI | -2.2 | -3.6 | 4.0 | 1.1 |
| PA | 0.2 | -3.8 | 3.2 | 1.2 |
| CO | 1.3 | -2.8 | 2.4 | 1.9 |
| FL | -3.5 | -5.4 | 0.9 | 0.5 |
| MI | -6.0 | -9.0 | 4.9 | 2.3 |
| NC | -0.2 | -2.4 | 2.5 | 1.8 |
| NV | -3.1 | -7.5 | 0.3 | 1.2 |
With the exception of PA and CO, every state suffered losses, some severe losses, in 2009-10. But importantly, each swing state has had back-to-back positive growth in 2010-11.
While it is true that this growth was uneven, with every state but NV losing steam in 2011, seven states (IA, NH, VA, PA, CO, MI & NC) experienced growth in ’10-’11 that exceeded the previous two years’ contraction. Four states, OH, WI, FL and NV have yet to make up for lost growth.
This emerging trend continues when you review personal and business bankruptcies in the swing states from 2008-2011:
| 2008 | 2009 | 2010 | 2011 | |
| IA | 8,125 | 10,171 | 9,829 | 7,965 |
| NH | 3,931 | 5,233 | 5,658 | 4,940 |
| VA | 28,553 | 36,531 | 37,331 | 33,592 |
| OH | 58,309 | 70,787 | 70,641 | 58,754 |
| WI | 21,488 | 27,802 | 30,423 | 27,308 |
| PA | 33,150 | 36,923 | 39,262 | 33,572 |
| CO | 21,136 | 28,304 | 32,776 | 30,409 |
| FL | 67,649 | 97,087 | 113,066 | 94,815 |
| MI | 55,340 | 69,346 | 69,596 | 57,836 |
| NC | 22,755 | 27,740 | 26,674 | 23,535 |
| NV | 18,716 | 29,808 | 30,143 | 24,519 |
While every state (save IA) has a significantly increased numbers of bankruptcies compared to 2008, every state has has seen a decrease in bankruptcies since 2010. IA and WI have seen decreases year over year since 2010.
And finally foreclosures. Apples to apples data is harder to find here, but two facts stand out.
According to Realty Trac, four states (FL, NV, MI & OH) continue to have foreclosure rates greater than the national median of 1 in every 686 homes for the period of July 2012. This has broader implications for state jobs and growth, making it noteworthy.
But nationally, foreclosures have been dropping since 2010:
| Year | Foreclosures | Notes |
| 2009 | 2,824,674 | 21% increase from 2008 |
| 2010 | 2,871,891 | 2% increase from 2009 |
| 2011 | 1,887,777 | 34% lower than 2009/19% lower than 2008 |
| 2012 | 1,045,801 (through June ’12) |
So while there is no doubt that there is a housing crisis in America, or that it is hitting hard in certain politically key states, by trajectory, the trend line is going in the right direction.
Collectively, the different data sets explain why Mitt Romney and the GOP are having an up-hill climb in closing the deal on what should be an easy sell.
Simply stated, Americans have been traumatized since 2008, both economically and socially. The statistics provided at the beginning of the post are a stark reminder of the terrible economic and social pain that was exacted by the recession.
While there is little if any empirical evidence to suggest that Obama policies stabilized the economic rabbit hole that sucked in jobs, businesses, homes and growth (the business cycle is a better indicator, post-TARP), there is no doubt that the economic situation, at least in these states, is not as bad as it was.
Applying this construct to the presidential race, President Obama becomes the “devil we know.” Americans are fully aware of Obama’s flaws and shortcomings. The President’s approval numbers on any of several economic indicators bears this out. But having made a bold change in 2008, and suffered additional social and economic calamity in the intervening years before slowly recovering, POTUS is suddenly framed as a safer bet for skittish voters who cannot bear additional economic chaos after the last tumultuous five years.
This is the central challenge for Mitt Romney and his communications team over the next 40 days.
Because things have gotten marginally better, an economic indictment of the President alone is simply not going to be enough. Voters already know that Obama has been middling at best. They are prepared to take middling over an uncertain unknown.
To change the dynamics of the election, Romney must lay out not only what he will do if elected, but crucially, why what he will do will bring genuine, organic, sustainable and robust economic growth in contrast to the President’s policies.
In 2008, frustration and anger were enough for Americans to change parties, in no small part because candidate Obama offered a seemingly cost-free unity that was not only personally affirming, but also seemed to offer a constructive economic path forward. Any illusions Americans had about that path have long since been dispelled.
However, change now requires voters to overcome fear and doubt even as the citizenry remains angry and frustrated. To seal that deal, Romney has to make it safe to vote for him.
That is a higher bar and a more difficult problem.
But it is the key to the election.