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The political economy of defeat

Regular readers (at least those who believe anything I say) recognize economic performance as a key determinant of electoral outcomes. Instead of rehearsing all the evidence for this proposition again, I will offer one central fact from the 2010 exit polls: Democrats won voters whose family finances improved over the last year by a 23-point margin, while losing those whose economic situation had deteriorated by 26 points. Those detecting no change split almost evenly, giving Democratic House candidates a one-point edge.

Unfortunately, Democrats were in power, facing a midterm, when those who saw themselves worse off outnumbered those who felt better by 26 points. Had the number feeling better been equal, Democrats would almost certainly control the House. If anything, Democrats did a better job holding economically distressed voters in 2010 than Republicans had in either 2006 or 2008, when the GOP lost those whose situations worsened by 57 and 43 points, respectively.

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Of course, there is no denying either the massive loss or the acute recession, which were closely linked. A fine-grained look at the data underlines the sputtering political impact of a stimulus that proved inadequate to the task.

The single most politically salient economic indicator is not inflation, unemployment or the deficit, but rather change in real disposable income — the average amount of inflation-adjusted money each individual has left after paying taxes. It captures the impact of unemployment, inflation, salaries and government transfer payments, as well as taxes. It’s not a statistic people know, or even know about; rather, it’s one they feel every time they decide whether to buy or do without, save or invest.

Per capita real disposable income shrank dramatically at the end of 2008, setting the stage for President Obama’s victory. As stimulus dollars were injected into the economy in the spring of 2009, real disposable income increased. After another fall dip, by the spring of 2009, massive stimulus spending pushed it up again, a trend that continued through June 2010. Indeed, the largest outlays of stimulus funds, both in the form of tax cuts and investments, occurred from January to June, 2010.

However, in the third quarter of 2010, leading into the fall election, real disposable income shrank again, as a result of falling government spending, higher tax payments and falling interest rates. In short, as the stimulus dwindled, Americans’ incomes sagged again, just before Election 2010.

Voters felt the impact. Just in time for Barack Obama’s 2008 election, the largest number ever told the University of Michigan’s consumer confidence survey that their family was worse off financially (61 percent). That number began to decline and, as stimulus outlays reached their peak in about March of 2010, the number saying they were worse off was reduced by 13 points, to 45 percent.

The Pollster.com averages suggest real political impact as well — the generic vote was essentially tied in the spring and early summer. But as noted above, when stimulus outlays shrank, real disposable income fell again, along with Democrats’ political fortunes. As voters suffered in the late summer, Republicans surged to a substantial and durable generic-vote lead.

If the stimulus had kept paying out, and perceptions of the economy continued on the same course they had through June, an admittedly oversimplified set of calculations suggests Democrats would have had a real chance to retain control of the House.

Thus, those who trimmed the stimulus back, leaving less to prop up a weak economy just as voters were casting ballots, played an outsized supporting role in Democrats’ 2010 debacle.

Both economic improvement and its timing mean a great deal — a conclusion directly relevant to this week’s debate, though I leave you to divine that relationship for

Mellman is president of The Mellman Group and has worked for Democratic candidates and causes since 1982. Current clients include the majority leaders of both the House and Senate.

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