the ECONOMY: W just can't figure it out

Good to be back after a few days out of town.

As Bushie and Rove and the boys start spinning up terrorist fear again, Bush's failure to capture bin Laden should be driven into the minds of all voters.

That said, what about the biggest issue out there? The "running as fast as I can" economy where everyone works harder and harder and more and more hours and never gets ahead.

And W the lesser Bush just can't seem to figure it all out!

'Mortgage Moms' May Star in Midterm Vote

With Wages Stagnant and Debt Growing, Democrats See an Opportunity

By Jeffrey H. Birnbaum and Chris Cillizza

Washington Post Staff Writers
Tuesday, September 5, 2006; Page A01

BURLINGTON, Ky. -- Life is cramped at the Condit household. Dale and Sharon Condit and their two young sons need more room but can't seem to sell their current home -- on the market now for three months.

In a year when politics is being roiled by angry debates over the Iraq war and immigration, it might seem odd to imagine the midterm elections being waged over square footage and closet space. But these are parts of a lifestyle that Sharon Condit, a deputy clerk of court, describes as dogged by a sense of limits: "We have dreams of this future, but we can't get it right now."

This gap in expectations, a source of anxiety for the Condits, is a source of opportunity for former representative Ken Lucas, a Democrat who is trying to win back Kentucky's 4th Congressional District from incumbent Republican Geoff Davis. Attitudes about the economy -- "People are being pushed up against a ceiling," said Lucas. "They feel trapped" -- are part of the reason the Democrat is in a neck-and-neck race in a district President Bush won by 27 percentage points in 2004.

At first glance, the economy's role in this year's midterm elections is a puzzle. Economic growth and unemployment are at levels that in past years would have been a clear political asset for the party in power.

But one layer down in the statistics, the answer is more clear. Flat wages and rising debt nationally have converged to leave millions of middle-class households feeling acutely vulnerable to bumps in their financial planning. The most visible of these are rising energy prices and a softening housing market.

A less obvious but powerful variable is the interest paid by people carrying credit card debt or mortgages whose monthly payments vary with interest rates. People buffeted by these trends have given rise to a new and volatile voting block.

"People like this are making a large ripple across the body politic," said Republican pollster Bill McInturff of Public Opinion Strategies. When added to the growing opposition to the war in Iraq, he said, worry about this economic crunch "is creating a political environment that is not that friendly to the party in power."

Every election cycle has its own important set of undecided, or swing, voters. In 2000, it was the "soccer moms," targeted by both parties with appeals based on education and quality-of-life concerns. In 2004, it was the security moms, normally Democratic-trending women whose concerns about terrorism helped give Bush his margin of victory.

This year could mark the emergence of what might be called mortgage moms -- voters whose sense of well-being is freighted with anxiety about their families' financial squeeze. Democrats are betting that this factor is strong enough to trump security or cultural values issues.

Kentucky's 4th District, stretching across nearly 200 miles of the state's northern tier, offers a useful window into whether the strategy can work. It includes coal-mining precincts with an Appalachian character, affluent Cincinnati suburbs along the Ohio River, and rural farmland that looks and feels more like the Midwest than the South. Unemployment in 2005 was 6.9 percent. The current national average is 4.7 percent.

Democrats here typically do not stress liberalism. Lucas, for instance, opposes abortion rights and gun-control measures. But in Kentucky and elsewhere, Democrats have some reason for optimism about the traction they might gain from the economy.

Polls show that swing voters -- the category that candidates most want to attract -- are unhappier than the rest of the population about their economic circumstances. According to a recent survey by Bloomberg News and the Los Angeles Times, six in 10 self-described independents said the economy was doing badly, and seven in 10 said the country was on the wrong track. A Fox News poll, taken at the end of last month, showed that 23 percent of Americans consider the economy the most important factor they will weigh when they cast their ballot in November -- more than those who cited Iraq (14 percent) or terrorism (12 percent).

And a recent poll conducted for the AFL-CIO by the Democratic Garin-Hart-Yang Research Group found that 55 percent of voters said their income was not keeping up with inflation, and that the economy was a more effective campaign theme against Republicans than either the war or corruption. This rings true to many Republican strategists and their allies: Despite the unpopularity of the president's Iraq policies, Bush's approval rating is higher among voters who see the war and national security as the top issues in November than it is among voters who rate the economy as their top issue, according to one veteran GOP pollster worried about his party's prospects this fall.

Republicans have approached the problem partly as a matter of perception. Eager to frame the issue for the fall, Bush recently met with economic advisers at Camp David and later announced that the economy is "solid and strong" and "creating real benefits for American workers and families and entrepreneurs." The gross domestic product, the sum of all goods and services produced, has slowed a bit since the beginning of the year but is still growing at a respectable annual rate of 2.9 percent. And the unemployment rate is near its five-year low.

But the sour mood is not simply a matter of psychology. Since 2003, the inflation-adjusted median hourly wage of most workers has fallen by 2 percent, according to the Labor Department. And this summer marked the first time since 1991 that the annual inflation rate exceeded 4 percent for three consecutive months, driven partly by $3-per-gallon gasoline.

Then there is debt. According to a study by the Federal Reserve Board, the ratio of financial obligations -- primarily mortgage and consumer debt -- to disposable personal income rose to a modern record of 18.7 percent earlier this year. The amount of mortgage debt alone has more than doubled since 2000, to nearly $9 trillion. And in July, for the 16th consecutive month, consumers in the aggregate spent all of their disposable income and dipped into savings or borrowed to finance the things they bought.

Among the most exposed are those who bought into one of the great fads in mortgage lending in recent years -- adjustable rates. Next year, $1 trillion worth of adjustable-rate mortgages -- about 11 percent of all outstanding mortgage debt -- is scheduled to readjust to a higher interest rate for the first time, according to LoanPerformance, a research company. This will come after more than $400 billion of readjustments this year. That means millions of homeowners will either have to refinance or shoulder an increase of perhaps 25 percent in their monthly payments.

The political implications of these trends are obvious. "A large number of voters have a definite foreboding about the economy, and that isn't good news for incumbents," said Gregory S. Casey, chief executive of the Business Industry Political Action Committee, a nonpartisan electoral analysis organization. "They feel disappointed in government institutions that they think have let them down."

"Republicans are worried," added R. Bruce Josten, an executive vice president of the U.S. Chamber of Commerce, a significant backer of pro-business -- and therefore predominantly Republican -- congressional candidates. "You have a portion of the middle class that doesn't believe it's benefiting from good economic news, and, in fact, it's not. . . . All the blame doesn't go to Congress, but voters are going to take it out on Congress anyway."

Republicans in Congress have tried to show sympathy for hard-pressed workers by pushing to pass an increase in the minimum wage. That effort foundered in the Senate because it was tied to a cut in the estate tax, which would have benefited wealthy individuals. But GOP leaders say they want to take another stab at raising the minimum wage this month, before Congress adjourns.

Democrats want to prevent Republicans from claiming that success and are advancing ballot initiatives in half a dozen states -- including key Senate battlegrounds such as Missouri, Montana and Ohio -- that would mandate boosts in the minimum amount that employers pay their workers. They also intend to talk about the need to cut taxes for the middle class, roll back tax cuts for upper-income people and extend a soon-to-expire provision that permits some middle-income families to write off college tuition payments.

Among the key places the debate is playing out is New York, where Republican Reps. John E. Sweeney, James T. Walsh and John R. "Randy" Kuhl Jr. are facing tougher-than-expected challenges because of the state's economy.

In the Upstate district of retiring Rep. Sherwood L. Boehlert (R), the House Democratic Campaign Committee is running a TV ad that lashes the Republican nominee, state Sen. Ray Meier, for opposing a minimum-wage increase in the New York legislature while his own pay went up by $22,000. The ad promises that Democratic nominee Michael Arcuri will not vote to increase his own salary in Congress until a minimum wage boost is passed.

Even Rep. Thomas M. Reynolds (N.Y.), who chairs the House Republicans' campaign arm, is being challenged -- by Jack Davis, who runs the Save American Jobs Association, an organization contending that free trade is causing U.S. job losses.

The economy will also figure throughout the industrial Midwest, especially in Michigan, where layoffs by the auto industry have political repercussions. Rep. Thaddeus McCotter (R-Mich.) has called the economy the No. 1 issue in his region.

But the fact that the economy is on people's minds does not necessarily mean it will drive votes, as was clear in numerous voter interviews here in Kentucky. Dale Condit, a truck driver, said, like his wife, that he is concerned about the economy and unhappy with the direction of things in Washington. But, like her, he is not sure whether he will vote for Ken Lucas or Geoff Davis.

The owner of the diner where they were eating, the Little Place Restaurant, has had less trouble making up her mind. Estelle Nunn and her husband, Henry Nunn, recently bought a smaller car to save on gasoline. Estelle Nunn, who has operated the restaurant for 36 years, said they are making ends meet but her dollars are not going as far as they once did. She is saving for a new stove at the eatery but doesn't have nearly enough money yet. She is even hesitating to visit her grandsons in Florida because of the cost of travel, something she deeply regrets. "There is uneasiness," said Nunn, noting that she will be supporting Lucas in the fall.

At another table sat Mike Collins, a local judge who said he sometimes indulges his love for singing Michael Bublé songs at karaoke lounges. He said he sees evidence of the economic crush every day in traffic court. Things have gotten so tough, he said, more people are unable to pay the standard $138 in court costs plus the traffic fine.

For all this, traditional class-based appeals to economic grievance would probably not play well in Kentucky's 4th. At lunch at a Panera Bread restaurant in Crestview Hills, a Cincinnati suburb, Angela McNickle was enjoying a "girls' day" with her daughter, Hope, 4. McNickle, a former flight attendant who is married to a salesman, has concerns -- a 7-year-old son has Down syndrome and high medical bills -- but she said her financial situation does not affect her vote. "We're comfortable," she said. "If I was in a different economic class or a single mom, it might be different."

Indeed, Davis, the Republican incumbent, has some formidable advantages. He is well financed, with $1.5 million in the bank. And he is navigating economic concerns by playing down his party affiliation and focusing on his ability to deliver federal aid to the district.

In late August, Davis made two stops in Carroll County. At the first, he announced that he had secured $500,000 in funding for a rural medical center. He then joined Assistant Secretary of Commerce David M. Spooner at North American Stainless, a steel mill, to present an "Export Achievement Certificate" to honor its focus on trade with foreign countries. Asked about the national climate facing Republicans, Davis said, "This is a local race that will be decided on local issues."

It is Lucas who is more ready to talk about national trends. Braving blistering heat at a seniors' picnic along the banks of the Ohio River, he shook hands and tried to call Republicans to account for a "a system where the rich are getting richer." In an interview, he said enough people agree with him to make the difference on Nov. 7.