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August 31, 2011

More On The Michigan Consumer Sentiment Index

I mentioned this yesterday. Public Opinion Strategies posted some analysis of the debt-ceiling debate and how that impacted the political and economic mood of the country, as well as what the Michigan Index of Consumer Sentiment (usually called "consumer confidence") presages for 2012.

The full pdf slide show is available at the link at the top of their blog post.

Basic points: The public well and truly hated the debt ceiling debate. Not just the outcome -- the debate. They didn't like the process.

I don't know what to say about this, except partisans on both sides didn't like the debt deal because it resulted in a punt, and those in the middle -- who don't like politics in the first place -- tend to resent having to choose sides in a partisan spat.

Thus, those in the middle tend to just take a position of "These are children, squabbling; why can't they come to a solution, without bugging me about it?"

Well, that may be possible in a status quo political situation, where both parties are arguing over very small deviations from the current status quo, but it's not possible when Obama wants to transform the nation, and then the Tea Party and the right-leaning Republicans want to transform it back (or transform it still further into a more limited-government situation).

Some of the cries of "this is so stupid and childish!" are, then, rather stupid and childish themselves. I don't know what you can do about that.

Now, the net effect of this debate was to severely weaken consumer confidence. The public seems convinced that no actual progress can occur in the current situation, and that's probably because, um, no actual progress can occur in the current situation. Obama claims his mandate from 2008 is still in effect, while Republicans have a fresher mandate from 2010 -- and neither side is budging much.

The public is right -- our politics are paralyzed and we cannot have actual solutions until the whole of the government has the same mandate.

By the way, consumer sentiment has rarely plunged as much in has in the last two months. It dropped only 8.8 points after 9/11, for example. It's dropped 15.8 points in the past 60 days.

Finally, there are the slides near the end about the impact of consumer sentiment on the incumbent president seeking reelection. I've mentioned the main points -- no president has been reelected when the Index was at 75 or below; and the index currently stands at 55.7.

While liberals want to keep citing Reagan -- "Reagan dropped to 40% in the third quarter in the year before his reelection!" -- they fail to look at the numbers undergiriding all of this.

While Reagan's approval had dropped, in Q3 of 1983 GDP was suringing, and consumer confidence was likewise rising -- it was over 90 in Q3 1983, and would rise still further by November 1984.

A more telling comparison is, of course, with Jimmy Carter.

And how is Obama doing compared to Carter?

Only slightly better.

See, I lied again. He's doing worse. The consumer sentiment is now lower than it was in the equivalent quarter of Carter's term. And further, the index rose near the end of Carter's term to a lame but not awful 75. Carter still lost .

Below, one of the slides tracking consumer confidence in Reagan's and Carter's last two years of their reelection-term, and Obama's, for the portion of the next two years we actually know.

Now, as they always say, "a lot can happen between now and election day" -- and it probably will.

If this is the worst period for Obama, and the economy begins improving, then this trough will be relatively well-timed for him. Better to have it now than later.

But note the old saying that the public's opinions about the state of the economy are formed 6-9 months before the election. Carter's late rise did not help him.

I'm pretty sure, based on general bad news, that there will be no growth this quarter. So when does it finally start?

GDP is a leading indicator, while consumer sentiment is a here-and-now indicator. It will take the public months and months to feel the effects of improving GDP... even if it does improve, and I'm not at all confident it will.

Obama needs good news and fast.

digg this
posted by Ace at 02:57 PM

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