Maybe the Economy Won't Sink Democrats This Year After All

Ready or not, we're heading for two elections this fall that will be interpreted as judgments on President Obama and the Democrats who control Congress. And the economy might not be an unmitigated drag on Democrats running for governor in New Jersey and Virginia.

That's not a sentence I would have written even two weeks ago. But the Dow is at a nine-month high, second-quarter GDP shrinkage of 1 percent is less than expected, and the 9.4 percent unemployment rate in July is a tick below June's figure despite anticipation that it would rise. In addition, federal stimulus money presumably will be flowing faster as the year goes on. If voters feel more secure financially or become convinced that the worst of the Great Recession is behind us, Team Obama could eke out a reprieve.

To be sure, Republicans lead the polls in both states – former U.S. attorney Chris Christie by mostly double digits over Gov. Jon Corzine in New Jersey and former attorney general Bob McDonnell by three to 15 percentage points over state Sen. Creigh Deeds in Virginia -- and Republicans have reason to feel good about their prospects.

That's because at least 14.5 million Americans are unemployed, and it seems unlikely that this grim reality will change dramatically between now and November. The president himself has acknowledged that jobs figures are a lagging economic indicator; he has said publicly that he expects the unemployment rate to top 10 percent before this recession runs its course. "We are far away from anything that would constitute success," Douglas Holtz-Eakin, former director of the nonpartisan Congressional Budget Office and a former adviser to 2008 Republican nominee John McCain, told reporters on Friday. The single most important thing to look at, he said, is job creation – and nothing he sees suggests that will pick up before next year.

Obama does not disagree with Holtz-Eakin's standard of success. "We will not have a true recovery until we are adding jobs," the president said after the job numbers came out Friday. But he also said his administration has "rescued our economy from catastrophe" and "today we're pointed in the right direction." This second contention is a hard sell.

Right now, numerous polls show that about four in 10 Americans think the country is on the right track, while five in 10 believe it is headed in the wrong direction. Will New Jersey and Virginia voters see the glass as half empty or half full? That depends in part on economic trends between now and the Nov. 3 election. Before then, we'll have a third-quarter GDP estimate, two more job reports and a wealth of other data from the government – not to mention a better indication of whether the stock market is on a roller coaster or a steady path upwards.

It will also depend on where voters live. The economy is harsher in New Jersey, with many financial-sector workers and a 9.2 percent unemployment rate that essentially mirrors the nation's. In Virginia, military installations, defense contractors, and the nearby federal government are helping the state keep unemployment at a relatively low 7.3 percent.

Still, McDonnell is accentuating the negative. "Here in Virginia, we face unemployment rates at a 25-year high," he said in the GOP's weekly national address on Saturday, apparently referring to some depressed areas of the state. On Monday -- today -- he's unveiling an economic plan for rural Virginia.

Some unique circumstances are also in play. The Washington suburbs in densely populated Northern Virginia have terrible transportation problems; voters there will be looking closely at the McDonnell and Deeds plans to fix them. Northern Virginia also is heavily moderate to liberal these days -- which is why Deeds, a rural moderate who supports both gun and abortion rights, is in the area today to kick off "Women for Deeds" and highlight McDonnell's anti-abortion views.

McDonnell's campaign manager, Ed Gillespie, sent out an e-mail with this subject line: "Memo: Deeds Desperately Tries to Excite his Complacent Base." I don't know about desperate, but it's true that Democrats are worried about getting all those 2008 Obama voters back to the polls. And if anyone understands that a race can hinge on turnout, it's these two men. McDonnell beat Deeds by 360 votes in the 2005 attorney general's race.

Virginia has a one-term limit on governors, so there is no incumbent. In New Jersey, by contrast, Corzine is defending a term that was interrupted by his severe injuries in a car crash (his driver was speeding and the governor was not wearing a seat belt) and is ending in a recession and a corruption sting that nabbed 44 individuals, including public officials who had been his political allies.

On the campaign trail, Corzine says New Jersey has "outperformed the nation" when it comes to jobs. He got some backup last month from Obama. "He's been tested by the worst recession in half a century -- a recession that was caused by years of recklessness and irresponsibility, and obviously had a disproportionate impact here in New Jersey, given the closeness of the financial sector to the state," Obama said of Corzine at a campaign stop in Holmdel. Later he added: "The fact is, even before this crisis hit, we had an economy that was creating a good deal of wealth for the folks at the very top, but not a lot of good-paying jobs for the rest of America."

Of course, Corzine used to be part of the financial sector -- as CEO of Goldman Sachs -- and his Goldman stock made him fabulously wealthy. That type of background is hardly an advantage on the campaign trail these days. Corzine this month chose longtime state senator Loretta Weinberg as his lieutenant governor candidate. She's a potential antidote on two fronts: an ethics reform crusader who, far from making money on Wall Street, is a victim of one of its most notorious scandals. She lost her life savings in Bernard Madoff's Ponzi scheme.

Christie, a former U.S. attorney, has stellar credentials as a crime-buster, including 130 convictions and guilty pleas he won in public corruption cases. New Jersey voters may go for that given the recent sting, which involved legislators, mayors, rabbis, bribes, international money laundering and even the international black market in human organs. As for the economy, Christie says businesses are overtaxed and rampant corruption doesn't help. He says they are paying a "corruption tax" on top of state taxes.

The most potent thing Christie may have to offer is change. His website features the slogan "Real change starts with changing governors." What Deeds offers is continuity. If he wins, he'd be the third centrist Democratic governor in a row. "Virginians don't want to go back," he said last week at a rally with Obama.

To some extent, the fate of Obama's push for health reform will influence how people feel about his leadership and whether they are willing to give him time and the benefit of the doubt on the economy. By the time Virginia and New Jersey voters are called on to make decisions, health reform will either be dead or enacted. If Obama signs any kind of reform bill into law, public opinion about him likely will be on the upswing.

That's assuming those third-quarter numbers don't tank, and job losses don't start looking more like June (443,000) than July (247,000). An economy that's not losing ground, or as much ground as before, may be as much as Democrats can hope for this year. But it's more than they were expecting – and a potential challenge for Republicans who need to argue that that elusive corner has yet to be turned.