CNBC's Steve Liesman reported the news first thing this morning, the CNBC Fed Survey shows the respondents believe the chances of a recession are the highest they've been in almost three years. Now to be clear, the economists, fund managers and analysts we surveyed only see a 22% chance of recession in the next 12 months. But that is up from just 13% at the beginning of this year and we are certainly seeing more than just a little anecdotal evidence of a slowing economy.
The economic outlook seems a lot gloomier if you listen to the presidential candidates these days. Contenders in both parties are describing the last six years as a failed recovery with great dangers lying just ahead. You read that right, candidates from both parties are saying this including the Democrats who have controlled the White House for going on seven years and were responsible for the economic stimulus programs and Obamacare that were supposed to bring us a recovery and job-preserving health care cost savings to boot. And yet Senator Bernie Sanders and even Hillary Clinton often talk as if a Democrat hasn't been in the White House since FDR, let alone 15 of the last 23 years. But there's a method to that madness, and the GOP candidates should think carefully before they also jump on the economy bashing bandwagon at tomorrow night's CNBC debate in Colorado.
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History is presenting both parties with a bit of a problem. When the economy is weak, or the voters perceive it to be weak, it's always bad news for the party that's in control of the White House. The 2008 financial crisis destroyed any chance for John McCain and the Republicans to hold on to the White House. Even though the recession was mostly over by the time the 1992 election rolled around, the economic mood in the country was still sour and that doomed George H.W. Bush's re-election hopes. Persistent economic woes in 1980 ended Jimmy Carter's presidency. And even a limited economic hiccup like the 2000 dot com bomb undermined Al Gore's chances to help the Democrats hold on to the White House. There are many other examples proving this rule.
So if a weaker economy helps the "challenger" party, why are Sanders and Clinton bashing it so much? Shouldn't they only spend time talking about how Democrat and liberal policies have made the economy a lot better? But they're not and there's a good reason for it. Of course, Sanders is a bit of a different case because he's not officially a Democrat and he is admittedly trying to promote a very different path than President Obama's on the economy. Clinton not only is a Democrat, but she served in the Obama administration! So what gives?
The answer also has a lot to do with history. Ever since 1968, the Democrats have traditionally won elections when the economy was the #1 voter concern and lost elections where foreign policy and external threats were the top focus. The only mild exception to that rule is 1980, but while the economy was the top issue enough voters were concerned enough about the Iranian hostage crisis to make a foreign policy hawk like Ronald Reagan's message on every issue more popular. Still, almost 50 years of polling shows that the voters, right or wrong, trust the Democrats more on domestic issues like the economy. So keeping the economy in focus as opposed to the growing threats from Russia, China, ISIS, etc. is probably a better bet for Clinton and the Democrats. The only trouble is it's hard to keep the economy in focus if all you do is talk about how good it is. That's boring and won't get media attention. So for Secretary Clinton the tough task is to talk the economy down, but not so far down that the voters take it to mean that she and her fellow Democrats have been failing at it for seven years. Like I said, not easy.
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It's no easy street for the Republican candidates either. The more the GOP presidential hopefuls talk down the economy, the more voters are likely to be convinced that domestic issues are the top priority for them in this election. Even if they're not happy with President Obama and the Democrats' handling of the economy, it's going to take a lot to get those voters to buck 50 years of history and go with the Republican candidate to solve a serious real or perceived domestic problem. That's why you're likely to see and hear the candidates at tomorrow night's debate try to mix in their concerns about the economy and foreign policy in almost every answer. Look for many of them to use phrases that meld President Obama's and Secretary Clinton's record as "managers of the economy and foreign affairs," in hopes of marrying those issues together like Reagan often did in 1980.
But again, this is dangerous territory. Talking down the economy too much leads to general resentment against the rich and the Republicans aren't likely to shed the image of being a party for the rich no matter how much Hillary Clinton raises more money than they do from rich donors, (and so far this year, she is). Donald Trump is trying to sound populist, but the focus always comes back to the fact that he's a billionaire. Getting specific about just how they'd improve the economy is a smarter move for the GOP candidates, and so is mixing in some comments that start with explaining how their policies would help the poor. Like it or not, many swing voters need to see some sign of economic empathy from the Republicans before they even consider choosing them. And the Democrats have had a stranglehold on the domestic issue polls for more than two generations because, other than Ronald Reagan, the GOP doesn't really do the empathy thing very well.
We're definitely proud at CNBC to present a debate where we'll be focusing on our expertise that includes the economy, the markets, and finance. And that will definitely be a challenge to the GOP candidates who haven't really been grilled on these pocketbook issues in their previous debates. And like all good debates, it's not just about the questions and answers but also about how the candidates find a way to play to their strengths.