The government Bureau of Economic Analysis reported Friday that U.S. GDP grew at a 3.2 percent per-year pace in the first quarter. It’s the third-straight quarter of strong growth, weaker than the 5.6 percent pace set in the fourth quarter of 2009 and right in line with economist expectations. It’s a good sign for incumbent Democrats, according to University of Denver Political Scientist Seth Masket.
The Bureau cites growth in personal consumption (consumer spending), private inventory investment (stores restocking their shelves), exports and nonresidential fixed investment (business purchases of things like wells, hotels, computer systems and plumbing) as the major factors accounting for the rising numbers. Consumer spending increased at a 3.6 percent pace, the strongest in more than three years.
GDP is just one factor that analysts are watching to gauge recovery. The slowdown in the pace of growth suggests serious headwinds remain. Unemployment remains high, for example, which drags on GDP growth, because all those unemployed people are neither producing or consuming much.
Although politicians focus on unemployment in taking the temperature of the country’s economic health and voter attitudes, as Prof. Masket told the New Yorker last week, GDP matters more. Masket has found that in midterm elections since 1950, “there’s been no correlation between unemployment rate and election outcomes.”
The key economic variable for voters, other studies show, has been income growth, or, more specifically, how fast per-capita G.D.P. is rising. In other words, if income growth is brisk enough, Democrats should benefit at the polls even if unemployment stays high. And Democrats do have an ace in the hole when it comes to keeping the economy moving: last year’s stimulus bill was backloaded, which means that close to five hundred billion dollars in stimulus money is still to be spent.
That backloading of the bill was good economics: with the Federal Reserve doing less to pump up the economy, an extra half-trillion dollars in fiscal stimulus will help pick up the slack. It was also good politics, since much of that money will be flooding into the economy during the key second and third quarters. Republicans in Congress would presumably block any Democratic attempt to pass another major stimulus, both for ideological reasons and because they have no political incentive to see the economy improve. (While you might expect all incumbents to pay the price for a poor economy… “It’s really only the President’s party that suffers when the economy’s bad.”) Pushing much of the stimulus spending off until this year made that less of a problem.
It didn’t guarantee that the economy would be healthy by November, though. So it’s still possible that we may see a replay of the 1982-84 election cycle, when Republicans lost twenty-six seats in the midterm elections, thanks to a weak economy, but Ronald Reagan won reëlection in a landslide two years later. Likewise this time around, the recovery could come too late to save Democrats in November but still be in time to set Barack Obama up well for reëlection in 2012. The economy’s recent signs of life, coupled with all the stimulus money, give the Democrats a better chance of avoiding that fate.
Hat tip to Annie Lowery.