The words of Ronald Reagan are echoing through polling booths across the nation Tuesday, as voters ask themselves: "Am I better off than I was four years ago?"
While there are a slew of factors that will determine this election, the state of the economy is likely to be a key consideration for many people. And at first blush, that would seem to be a net negative for President Bush.
The job market, in particular, has been unusually weak over the president's term, with unemployment rising, nonfarm payrolls declining and the labor participation rate dropping to 65.9% from 67.3% in January 2001. As a result, real average hourly earnings have climbed over the last 45 months at an anemic pace of just 0.6% annualized.
Other statistics are troubling, too. Personal bankruptcies have risen to record levels under Bush's tenure, and another 4.8 million people are now living below the bread line, sending the poverty rate up more than a full percentage point, according to the most recent report from the Census Bureau, which covers the period from the end of 2000 through the end of 2003.
The finances of the nation in aggregate aren't much better. The government budget has gone from a $236 billion surplus at the end of 2000 to a projected $415 billion deficit in 2004. Meanwhile, the current account deficit has surged to $166.2 billion from $115.3 billion in the fourth quarter of 2000.
"It's not a very good economic record," said Ethan Harris, senior economist at Lehman Brothers. "When people ask the question, are they better off economically, I think the average American feels they lost a little ground."
Still, Harris said that Bush can't be fully blamed for the downturn and sluggish recovery that followed, noting that the economy was already sliding into recession when the president took office after one of the biggest investment and stock market bubbles on record. The magnitude of the bubble's influence can be seen in stock returns: Since Bush took office, the
has fallen 4.4% while the
has swooned 27% -- even with respective 28% and 50% gains in each since March 2003.
In addition, he said, voters tend to base decisions on the performance of the economy in the year of the election rather than over the course of four years. "On that criteria, you've done a little bit better," Harris said.
Since the start of the year, nonfarm payrolls have increased by 1.5 million, and the unemployment rate has fallen to 5.4% from 5.7%. In a sign that conditions remain challenging, however, real average hourly earnings are down year over year.
Brian Wesbury, chief economist at Griffin, Kubik, Stephens & Thompson, and a noted Bush supporter, thinks voters are better off than they were four years ago. He points out that home ownership has hit record highs under the current administration, and as a result, household net worth is 9.4% higher than it was in 2000. It's important to note, however, that household debt is also up 36% to more than $10 trillion.
Wesbury also noted that disposable personal income, or the portion of income that is left after taxes, has increased, thanks in part to three tax cuts. Still, rapid gains in the cost of gasoline, health care and education have eaten into that income. In the third quarter, real disposable personal income grew just 1.9% from the same quarter a year ago.
David Gitlitz, a conservative economist at Trend Macrolytics, also believes that Americans are wealthier today. He said the job market has been better over the last four years than the payroll data suggest. According to the smaller household survey, more than 3 million jobs have been created since Bush took office.
A report from the Labor Department in October, which was prepared by employment and training administrative staff for the assistant secretary, said several economic models point to a Bush victory. Specifically, it cited the work of Yale professor Ray Fair, whose formula predicts that Bush will win 57.5% of the popular vote.
Fair's model takes into account the growth rate of real per-capita GDP in the first three quarters of the election year and the growth rate of inflation in the last 15 quarters, as measured by the GDP deflator. But Fair's formula includes several noneconomic variables, too, and he said it would take "a fairly poor economy for the equation to predict a Bush loss." Even if inflation were 5% and the growth rate in the year of the election were negative 4%, the predicted vote share still would be 49.8%, he said.
Charles Tien, a political science professor at the City University of New York's Hunter College, has another model that suggests the race is too close to call, but he said the economic variables in his formula work against Bush. Economic growth over the first six months of this election year and job growth over the last four years, as measured by the household survey, are both below average for a president looking to be re-elected, he said. The race is tight because Bush is given an advantage for being the incumbent.
In the end, of course, what really matters is not what pundits say about the economy but how voters feel about it. If we're lucky, those sentiments will be revealed later tonight.