If it feels like the 1990’s are back, you are not alone. After O.J. Simpson’s return to the headlines – and cable TV – and the resurrection of Hillarycare, I wouldn’t be surprised to see a sudden dirty plaid flannel shirts as Grunge makes a comeback.
And when it comes to politics, there’s a 1990’s catch phrase that may once again define the 2008 Presidential contest: “It’s the economy, stupid!”
Conventional wisdom says that the 2008 election will be determined by one issue: the war in Iraq. Will Americans withdraw into a protectionist cocoon or will we choose to stick things out and clean up the mess that was made? But conventional wisdom this far out from an actual election can often be wrong.
More often than not Americans vote on what they perceive to be their best interest. As the 21st Century opened, housing prices soared, liquidity sloshed through the economy and incomes rose with relatively no inflation and we could care about things like Iraq and what our troops were doing over there.
By and large, the war in Iraq has little effect on the day to day lives of most Americans. If you are not in the military or do you have a family member serving, the Iraq is little more than a philosophical or partisan discussion to be had mostly among people you know agree with you. If you are serving or know someone who has, your view is not filtered by the media and you likely know why we’re there, what we’re doing and the costs of failure.
But what will matter to most Americans when they go to the ballot box in 400 days is what affects their day-to-day lives. All signs are indicating that we’ll be feeling an economic pinch by then.
In Stockton, California, home foreclosures have increased ten-fold in the last year as rising interest rates sting homeowners tricked to believe that the housing bubble would not burst.
Consumers are staying away from retail stores in droves leading to lowered expectations from Lowe’s, Target and other retailers, many of them catering to the middle class.
The trucking industry is seeing declining tonnage month-to-month, signaling a decline in economic activity across the nation.
Perhaps all of these signals were telling the Federal Reserve that the U.S. risked slipping into a recession if they did not act before cutting interest rates by a surprise half-a-point. Wall Street liked the Fed’s move at first, but investors have since wondered if they were being proactive in addressing an economic slowdown that the markets were not seeing or rather, choosing not to see.
If the economy is in recession, or heading there, Americans will be faced with two clear choices in Decision 2008: cut taxes or raise them. All of the major Democratic Candidates have promised to repeal the Bush tax cuts and will require even more revenue to pay for the programs they’re proposing. Meanwhile, likely Republican nominee Rudy Giuliani can run on a record of cutting taxes 22 times while Mayor of liberal New York City.
Most Americans I know seem smart enough to know that if you want to inject liquidity into the markets, you do not take money away from investors and if you want to increase consumer confidence, you do not do so by taking money away from the working class. Americans understand, instinctively, that the money they earn is theirs–not the Government–and are loathe to hand it over to Washington in tight economic conditions.
If Americans are feeling an economic pinch in their pocketbook, raising taxes will be as popular as invading Iran, leaving Americans with a choice between voting on a war halfway around the world or voting with their pocketbooks. This is why, or rather how, contrary to today’s Conventional Wisdom, the GOP has a shot at keeping the White House in 2008. After all, it’s the economy, stupid!