If "The Economy" Is So Bad, Why Isn't Obama Doing Better?

The near-miss of Gustav and the laughable (but effective) spin of the Republicans to foreswear politics and put on their "American hats" means that we can now resume watching our regularly scheduled show of politics. Obama's acceptance speech last week was long on pocketbook issues, and short on foreign policy, and McCain will need to do the same. Indeed, his pick of Palin -- who has zero foreign policy experience -- highlights that this election is revolving around economic issues.

Difficult economic times are supposed to benefit the party not in office, and in theory, that should be a significant advantage for Obama. But by emphasizing the plight of many Americans, Obama has not gotten quite the bounce that one would think. Why?

Part of the challenge is that no matter how bad the economy is for some people, it isn't so bad for everyone. The national statistics bear this out, with revised second quarter GDP up 3.3% -- which is not a recession signal. Then there is oil. If sustained, today's drop in oil prices and the sharp retreat back to $100 a barrel after Gustav didn't do the expected damage will act as a mini-tax cut or stimulus to strapped consumers. Manufacturing activity as measured by the monthly Institute of Supply Management survey (ISM) and durable goods sales are all at decent levels -- not great, but hardly catastrophic. Yes, GDP was up in part because inventories were not down as much as initially thought -- an arcane aspect of the statistics that says nothing about how individuals are faring. But Democrats have to be careful in the face of data that simply doesn't support the level of negative sentiment that so many in the country feel.

Many people -- especially in the blogosphere -- will no doubt object to the statements above. I can hear the chorus "Give me a break! Corporations are getting the lion's share of the gains; the average worker is squeezed between plunging home prices, soaring energy costs, and no growth in wages. The economy stinks, and anyone who says it doesn't is a corporate shill, a stooge or an idiot."

Fair enough, but a significant portion of the country isn't buying that line, and it isn't just because of Tom Frank's "what's the trouble with Kansas" argument. It isn't just because some voters chose values over economic interests. It's because "the economy" isn't unified, and experiences vary widely. It's because the economic system is stable even if it is only benefiting a few at the expense of the many.

At any other point in the past, the massive losses in housing and in the financial system would have triggered much more severe economic downturn, but today, because capital is global and so is labor, the effects are more diffuse. There are no massive layoffs, no plunge in spending, largely because most work forces are already lean and wages are already tight. And we have exported trillions of dollars in the past few years, either to oil producing nations such as Russia and the Gulf States, or to China, which has been lending us money to buy their goods. They then use that capital, in part to bail out the very financial institutions that are suffering. The result is fewer bank collapses, and in turn less intense shocks in the domestic economy of the United States.

These issues are not well understood even by people who think they do. The global economic landscape has changed so much so fast that neither experts nor politicians have caught up. Intense feelings of gloom and massive pressures on the daily lives of tens of millions of people don't easily translate into electoral success, however. For every story of a struggling worker, there are counter stories, or ones that don't quite fit the simple story of "the economy stinks." That is why the polls remain stubbornly tight.

Maybe the floodgates will burst and Obama will get over the hump. He's ahead by most measures, yes, but not by the expected margin. There is a lesson in current polls: a substantial portion of the country feels uneasy and insecure -- there can be no doubt of that. But precisely why different people feel that way, that is a more elusive question. Articulating a coherent explanation of that uneasiness and offering a path forward will be the key, but the answer won't come from numbers and data and stats. Relying on those is a losing proposition.