I know the housing market is booming. My Daughter and her Husband just bought a new place in Poway, in San Diego Country. They sold the old one in Rancho Panesquitos there, which they paid 275K for 10 years ago, for 675K. Incredible!
Economy May Work in Bush's Favor
Housing Boom, Tax Cuts Buoy Many Voters, Despite Job Losses
By Jonathan Weisman
Washington Post Staff Writer
Tuesday, February 17, 2004; Page A01
By all rights, the Wisconsin job market of the past three years could have left Greg and Mary Beardmore embittered. Greg lost his job in 2001 when his dot-com venture went bust, found new work in office-furniture sales, only to be downsized back to the unemployment lines. Employed again after 14 long months, the former sales manager from Green Bay earns half his previous salary.
With her husband struggling, Mary lost her job in June as a facilities manager at Green Bay-based retailer ShopKo Stores, and was thrown into a job market she described as "a wasteland."
Now living on an income that is 30 percent of their cash flow three years ago, the Beardmores have kept their heads above water, Mary said, refinancing their mortgage, lowering monthly payments and taking heart in the swelling equity in a home that has gained $100,000 in value since they moved in eight years ago.
"My economic circumstances are still right in the middle," she marveled. "I don't feel I'm losing ground, because I have the security of my home. If we had to sell our house to stay afloat, we'd do it very quickly. So you know, I think it's okay."
As the presidential election hits its stride, candidates seeking to unseat the president have fixated on the still-sluggish labor market, hammering their contention that as long as jobs remain scarce, voters are not about to salute the economic recovery that Bush has been hailing.
But other facets of the economy may prove far better indicators of the sense of well-being that voters will bring to the ballot box in November, economic forecasters say. The booming housing market has given even struggling workers the ability to latch onto a tangible talisman of personal progress. Wage growth has been nearly stagnant, but thanks to Bush's tax cuts, disposable income has risen. And after nine quarters of slow but steady growth, the economy as a whole is poised to take off, giving some shaky households a sense of optimism about the coming year.
"The economy is really going to help the president this time around," said Joel Prakken, an economist with Macroeconomic Advisers LLC, whose political forecasting model predicts Bush will win in a romp in November. "I'm not saying [the Democrats] can't find pockets where they can play the economy card, but it's going to be tough."
Even Mary Beardmore -- a Bush voter in 2000 and still unemployed -- said she is willing to give the president a pass.
"You know, George Bush does not control the economy that much," she said.
To be sure, this election may not revolve around individual economic well-being, even economic forecasters concede. The U.S. military is mired in Iraq. Record budget surpluses have turned into record budget deficits. The electorate is divided and polarized.
"Assuming the electoral structures of the past are going to continue into the future, Bush is almost for sure going to win," said Ray C. Fair, an economist at the Yale University School of Management who has been projecting election outcomes for decades. But, he added, "If there's any time the equation goes bonkers, it's probably times like this."
On their bread-and-butter economic issues, Democrats still believe there is plenty of uncertainty to play on in the coming campaign. And recent polls appear to bear that out, for now. A Washington Post-ABC News poll this week found that 54 percent of voters disapprove of Bush's handling of the economy, up from 47 percent a month ago. Disapproval nudges up to 57 percent when voters were asked specifically about Bush's handling of job creation. Asked who they trusted to handle the economy more, voters sided with the Democratic presidential front-runner, Sen. John F. Kerry (Mass.) over Bush, 49 percent to 41 percent. Kerry was trusted over Bush to create jobs, 51 percent to 37 percent.
Last week, the Democratic polling firm Lake Snell Perry & Associates Inc. sent clients a memo saying voter anxieties over layoffs have actually receded. But concern is rising over health care and education costs, job quality and employee benefits, and the long-term implications of job movement overseas.
"Indeed, middle-class voters express a degree of financial anxiety and pessimism that is more consistent with a recession than recovery," the memo stated.
But in reality, the economic picture is decidedly mixed. And for Bush, as it has been for the economy as a whole these past three years, the housing market may prove to be a salvation. The homeownership rate -- at 68.6 percent of U.S. households -- hit an all-time high in the last three months of 2003. New and existing home sales set records last year, while construction of new homes in December hit its highest pace in 25 years.
The appreciation of housing values, on the coasts but also in heartland cities like Green Bay, has given owners an expanded sense of self-worth.
In the past four years, Sherise Patterson has suffered two layoffs, months of unemployment, discouraging job hunts and missed bill payments, all as the young widow prepared to put three children through college.
But a year ago January, Patterson, a dental-insurance customer service representative, locked onto a low interest rate, left behind her 1950s-era, 1,277-square-foot house on Milwaukee's northwest side and moved into a new, 2,000-square-foot home near downtown. The dining room she had always wanted was hers. So was the fireplace, the family room, the two-car garage -- luxuries that for years had been just out of reach.
Patterson did not vote for Bush in 2000, nor is she about to this year, she said. But her anger at the president revolves around undiscovered weapons of mass destruction in Iraq and a perceived tilt to the rich, she added, not her own economic fortunes.
"Matter of fact, I guess I'm doing well," said Patterson, 42. "There was a time when you picked up the Sunday want ads and there were two thick pages of jobs. Now there's barely a section. But as for my home, I'm making it."
That positive outlook is no surprise to Prakken, whose election forecasting model leans heavily on housing starts. As a barometer for economic well-being, housing catches people's sense of risk and optimism, Prakken said. If voters are willing to take out large, long-term loans to move into new and larger houses, they must be feeling upbeat.
Global Insight Inc., another forecasting firm, does look at unemployment rates, but the more important factor is income growth, said Nariman Behravesh, the firm's chief economist.
"In the end, it is disposable-income growth that really drives things," he said. "It's a pocketbook issue: How fast is my income growing?"
And there, Bush has himself to thank for Global Insight's prediction of his 6.5-percentage point victory.
Weekly wage growth has been sluggish since 2001, rising 8.2 percent since Bush came to office, 4.1 percent if adjusted for inflation, Labor Department statistics show. But three successive tax cuts -- coupled with the slowing economy -- have helped bring personal tax payments down by 19 percent since 2001, according to the Commerce Department. Disposable income in that time has risen 11 percent, in large part because of falling tax payments.
"In the end, if they've got money in their pockets, it doesn't matter if it came by hard-earned work or tax cuts. That's where the president may have played his cards very well," Behravesh said.
Of course, for unemployed -- even recently unemployed -- voters, the labor market matters. Tim Hackett, a Republican and Bush supporter in 2000, lost his job as director of employee relations in November when Mercury Marine in Fond du Lac, Wis., began cutting costs. The plant will soon ship as many as 400 jobs to China when the company moves its assembly line for small outboard motors overseas, and Hackett holds the president responsible, to some extent. Bush, he said, will not get his vote in November.
"With all the attention paid to war and security, there's an essential disconnect between the Washington people and what people are really worried about," Hackett said. "They're taking security to an ideological extreme."
Celinda Lake, a Democratic pollster and president of Lake Snell Perry, said the electorate is dividing sharply into two groups. Voters with individual stocks, usually college-educated, are feeling optimistic and leaning Republican. Voters who say they personally know someone who is unemployed -- especially young voters and blue-collar workers -- are pessimistic and leaning Democratic.
But no matter how bad the labor market is, the vast majority of voters have jobs, and for them, incomes are rising, stocks are recovering and interest rates remain low, said Fair of Yale. For the president, the traditional signs lead to reelection.
"I'm not saying he can't lose," Global Insight's Behravesh said, "but it's his for the losing."
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