What If We Threw an Economic Boom and Nobody Noticed?

Let’s imagine a conversation between two political experts that might have taken place three months ago. One is a strong conservative, the other an equally strong liberal. All of the statistics and other facts mentioned below are, in fact, real.

Liberal: Look, we both know that the economy isn’t working for you guys right now. After all, a gallon of gas costs $3 and is likely to stay in the stratosphere for awhile. That hits Americans right where it hurts the most—in their pocketbooks. And have you seen that daily update on the price of gas on the front pages? Every morning voters see the price inch up and get angry all over again. Politically, that’s like watching your heartbeat flatline.

Conservative: Yes, the high price of energy is killing us. That’s for sure. And it certainly doesn’t help that you liberals move heaven and earth to prevent us from increasing our domestic energy supply. But what would the political reaction to be if the price of oil were to plummet between now and Election Day? What if light, sweet crude were to fall from where it is today—$78.40 per barrel—to, say, $57.50? And what if the price of gasoline were to fall so that by late October the cost of filling up a Chevy Suburban was $29 less than it is today? For fun, let’s even imagine that CBS News Anchor Katie Couric highlighted this trend one night on the evening news, saying:

“The way things are going at the gas pump there’s no point in topping off your tank today. Chances are, the price will be even lower tomorrow. As of tonight, gas is the lowest it’s been all year. A nationwide average of $2.23 a gallon. It hasn’t been that low since last Christmas.”

Do you think the current political dynamic would change?

Liberal: Yes, I expect that if the oil companies were to conspire to lower prices just before the election, you guys would know how to broadcast the good news far and wide and reap political gain. USA Today would be forced to cover the daily price drops on the front page. And the president’s favorability rating would surge.

But you have other problems. The budget deficit is still a political liability. Not long ago it was setting new land-speed records at over $400 billion, and the official estimate for this year is still well in excess of $300 billion. Thanks to your ill-advised tax cuts, we have a jobless recovery. Besides, that great measure of our overall prosperity—the Dow Jones Industrial Average—has been stuck around 11,000 for five long years. You can’t overestimate the psychological toll that takes on your so-called investor class.

Conservative: Just give us a little time. But imagine if, in addition to all that good news on the energy front, the Dow Jones were to rally suddenly, hit seven new all-time highs in October, and break through the 12,000 mark. Let’s say that those tax cuts really did work so well that the economy generated 6.6 million new jobs since they took effect and that total household net worth was $14.4 trillion higher in 2006 than it was three years earlier. And suppose in its traditional September employment update the Labor Department were to discover that an unprecedented 810,000 new jobs had actually been created during the year ending in March. Finally, imagine what might happen were the White House to announce in early October that the budget situation had improved beyond everyone’s expectations, and that the deficit has fallen below $250 billion.

Where would the political dogs hunt if those things were to happen?

Liberal: Now you’re really delusional. $14.4 trillion in new wealth? Playing along, my guess is that even negative news from Iraq wouldn’t be enough to blunt the positive political effect of all that good news. After all, under your scenario, voters would feel the good news at the pump and in their pocketbooks, and their third quarter statements for their IRAs and 401(k) would cause dancing in the streets. Conservative candidates would be running triumphal “morning in America” campaigns and soaring in the polls.

But why speculate? We know that will never happen!