The Economy and the Elections: What You Need to Know

The Basics
- Even though officials have declared the recession officially over, the unemployment rate remains high. It was 9.6 percent in August.
- The federal debt is $13.5 trillion and growing. The deficit has risen to more than 90 percent of annual gross domestic product, the highest since World War II.
- The U.S. trade imbalance is still way out of whack, although the gap between how much the nation imports and how much it exports started to shrink this summer.
- Health care costs are starting to creep higher.

The Background
Economic conditions have always been relevant on Election Day. It is a truism recognized long before 1992, when irreverent Bill Clinton adviser James Carville summed it up in a four-word slogan: "It's the economy, stupid."

Incumbents of both parties often feel the wrath of this adage, but it's necessarily a bigger problem for the party in power. In 2010, Democrats control the House, the Senate and the White House. Despite efforts to remind voters that President Barack Obama inherited a nasty recession, this economy is now the Democrats' burden.

A sluggish economy is a dragon that can singe the most popular of presidents. Dissatisfaction with Ronald Reagan's policies cost the Republicans 26 House seats in 1982. If that's the magnitude of the Democrats' losses in 2010, they will retain control of Congress. Or will this midterm election season more closely resemble 1994? That year, a tepid economic recovery helped feed voter frustration, leading to a net loss of 54 Democratic seats in the House and another eight in the Senate. Along with them went control of both houses of Congress.

Those who are skeptical that such a tsunami will engulf the Democrats this year cite two factors. First, the recession is technically over, so Americans who vote on Nov. 2 will do so in a more positive economic environment. Second, the stimulus money that the president repeatedly has credited with staving off a second Great Depression is finally flowing through the system -- contributing to everything from visible roadside construction jobs to a more positive national atmosphere.

Skeptics of this view say that there simply isn't time between now and Election Day for enough dissatisfied Americans to alter their perceptions of their own economic prospects or of the nation's, not to mention any perception that the party in power isn't up to the job. Either way, here are the factors that are driving some of the voters' angst:

- The recovery, such as it is, has been a jobless one. An unemployment rate of 9.6 percent is bad enough, but the closer one looks, the worse it is. Some 14 million Americans are officially out of work, a number that has remained pretty constant for 16 straight months. Millions more have simply stopped looking for jobs, and the "underemployment rate" -- those who are working part-time, but want full-time work -- is hovering around 9 percent. All told, some 20 percent of Americans can't find full-time work.

- The unprecedented level of government debt. In the eight years George W. Bush was president, the federal debt nearly doubled, reaching $10.7 trillion, or 70 percent of annual GDP (gross domestic product). With annual federal budget deficits running in the vicinity of $1 trillion per year, the nation is now in problematic territory: With a federal debt of $13.5 trillion and rising, the deficit is now more than 90 percent of GDP, the highest since World War II. Voters have started to notice. The federal budget deficit is the issue on which Americans have the least confidence in Obama's policies.

- A rising trade deficit. The nation's trade imbalance has long been a problem. Earlier this summer we were importing $50 billion a month more than we were exporting. This was one of the numbers that improved in July, however, giving Obama administration economists hope that the U.S. has turned the corner.

- Meanwhile, health care costs are starting to creep up. This is a function more of the overall economic picture -- those who are healthy are gambling that this is an expense they can trim -- than any policy change. But with health reform so much a part of the national political conversation, this is another issue that burdens Democrats.

The result is an agitated electorate that wants to send a message to Washington, a fact of political life that no less prominent a politician than Barack Obama understands.