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Friday, Oct. 31, 2003

The toll has been high: 3 million lost jobs, skyrocketing health-care costs, record deficits and a costly and dangerous Iraqi reconstruction.

But surprisingly robust U.S. growth figures reported on Thursday lifted GOP expectations and raised fresh questions among Democrats as to whether the economy will be as good an issue for them in 2004 races as they once assumed.

Though next week's employment report could temper optimism for a full recovery, analysts suggest there is a growing public perception that the economy is on the mend.

Some even suggest Iraq and the size of the budget deficit won't matter politically if the economy recovers significantly by Election Day. Thursday's report that the gross domestic product grew at a sizzling 7.2 percent rate in the July-September quarter fueled such expectations.

'We Show Bush Getting 56 Percent'

"Given our current forecast for the economy, we show Bush getting 56 percent of the vote," said David Wyss, chief economist at Standard and Poors in New York. "Iraq doesn't figure in except as it affects the economy."

That might be getting a little ahead of events. But Wyss is part of a school of economists who believe presidential elections can be predicted largely based on economic data.

In Wyss' economic model, being the incumbent is worth a few points, but the main factors are the employment rate and income growth.

Yale economist Ray C. Fair, author of the book "Predicting Presidential Elections and Other Things," also forecasts a comfortable victory for Bush if economic trends continue.

His model, which tracks presidential races back to 1916, emphasizes inflation and growth rates with extra points for spurts of higher-than-usual growth such as Thursday's numbers.

The formula recognizes a slight historical edge for Republicans, gives points for incumbency and deducts them if the president's party has held the White House for two terms or longer.

As a one-term GOP incumbent, with low inflation and rising growth, "Bush has the best of possible worlds," Fair said.

There is wide agreement in both parties that a recovering economy, particularly if it includes job growth, would benefit Bush and other Republicans running for re-election.

"Give me a strong growth number any day over job approval. It will carry an election," said GOP consultant Scott Reed. "A recovering economy reminds people how important pocketbook issues are."

Prosperity Makes Democrats Unhappy

A senior adviser to one of the nine Democrat presidential candidates said that public perceptions about the economy were almost as important as the numbers themselves, and that a few more quarters of strong growth and stock market advances would reinforce the notion of a rebound.

Allan J. Lichtman, a political scientist at American University, said the economy wasn't the only factor. "But if the economy recovers and jobs come back, then barring any terrible catastrophe abroad, George Bush is going to be re-elected," he said.

Democrats continue to cite the erosion of jobs and suggest Bush has the worst record since Herbert Hoover in the Great Depression.

"A big uptick in the third quarter is better than the alternative," said Gene Sperling, a former chief economic adviser to Bill Clinton. "Regardless of whether the economy turns up, the Democratic nominee is going to have to make a powerful case that this president has made very damaging long-term damage to our economic future."

Earlier this month, the Labor Department reported the first gain in nonfarm jobs in the last nine months. Some analysts suggested that may have marked a turning point in the employment cycle.

The first President Bush lost re-election in 1992 amid stubborn unemployment figures and declining housing values, even though history now shows that the recession ended well ahead of the presidential election.

While warning against complacency, the current president asserted this week that "our economy is showing signs of a broad and gathering strength." And the Federal Reserve helped by keeping short-term interest rates at 1 percent, the lowest level in 45 years, while expressing terse optimism about jobs. "The labor market appears to be stabilizing," it said.

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© 2003 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.

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