Tuesday's midterm elections have been framed as a referendum on President Obama's first 21 months in office, with the economy dominating the issues Americans will consider as they pick congressional and local officials.
A recent Gallup Poll illustrated how powerfully the national debate favors Republican issues as economic conditions (43 percent), health care (23 percent), and the size and power of the federal government (18 percent) loom as the top concerns of likely voters.
Mark DiCamillo, director of the state's authoritative Field Poll, said Californians also are gloomy about the economy and more upset about their personal circumstances and the state's direction than at any time since 1992, with one critical difference - independents in California favor the Obama health plan in contrast with swing voters nationwide, who are more likely to see the legislation through the Republican lens of a government power grab.
"Californians are still holding out hope for Obama," said Mark Baldassare, president of the Public Policy Institute of California. "That's very different from the national polls.
In this politically charged environment, it's difficult to get a consensus view of the U.S. economic outlook or which policies, parties or candidates are most likely to push America forward.
On Friday, the Commerce Department estimated that the nation's output of goods and services grew 2 percent in the third quarter of 2010, aided by the strongest three-month growth in consumer spending since the end of 2006.
Such anemic growth makes it unlikely that the economy will have the oomph to put more than 14 million jobless Americans back to work anytime soon, but the upward growth trend allays, without completely dispelling, fears that the country might slip back into recession.
Economist Gus Faucher with Moody's Analytics credited the Obama stimulus plan with getting the economy this far out of the cavernous hole created by the 2008 financial crisis, but even so the nonpartisan consulting firm puts the risks of a so-called double-dip recession uncomfortably high at 1 in 3.
"Businesses have been through a scary period and they're going to try to hold off hiring as long as they can," he said.
But employment appears poised for a recovery, the questions being how strongly and how soon. Faucher noted that corporate profits have rebounded to 11 percent of the nation's gross domestic product, up from 7 percent in the pit of the recession and approaching the 12 percent level of 2006.
Job growth coming
Faucher said profit recovery has typically been about three quarters ahead of employment growth coming out of a recession, suggesting that help wanted should be on the rise.
But what may happen next year won't affect what voters decide Tuesday, and today they confront an economic sluggishness that Douglas Holtz-Eakin, a Republican economist with the moderate American Action Forum, attributed in part to what he characterized as Obama's anti-business rhetoric combined with expensive new mandates like the health plan.
"The business community has received nothing but denigration and abuse," Holtz-Eakin said.
Diana Furchtgott-Roth, economic adviser to House Republican leader John Boehner, attacked Obama's "European-style socialism" and warned that the nation could be in "a big fiscal contraction" unless lawmakers return in a post-election session and extend Bush-era tax cuts now due to expire in January.
Dean Baker, with the liberal Center for Economic and Policy Research, said he thinks that when lawmakers convene in a lame-duck session after the election they will probably extend all the tax cuts rather than leaving in place the levy on the top 2 percent of wage earners, as Obama had suggested.
At a time of soaring federal deficits, extending all of the tax cuts could cost the nation $258 billion in 2012, according to Joshua Gordon, policy director with the Concord Coalition, a nonpartisan budget watchdog in Washington. If Congress let the cuts expire for the top 2 percent of filers, the 2012 revenue loss would be $217 billion - $41 billion less - he said.
House Republicans, who want all the tax cuts extended but have also railed against Obama's $1.3 trillion budget deficit for fiscal year 2010, have proposed rolling non-defense, discretionary spending back to 2008 levels, saving about $100 billion a year, Gordon said.
Tuesday's election results will tell lawmakers how voters apportion blame or credit for the economy before Congress convenes a lame duck session the week of Nov. 15 to deal with the tax cuts and a few other issues, including whether to authorize states to continue sending unemployment checks to more than 400,000 Californians (800,000 Americans) who will otherwise lose extended benefits currently due to expire Nov. 30.
The nonpartisan Congressional Budget Office has said extending unemployment benefits provides the best stimulus; that a temporary payroll tax reduction shared by employers and employees would offer the best bang-per-buck in job creation; and that a two-year tax cut extension could help stimulate the economy out of its rut, but leaving them in effect longer would so complicate the deficit as to become a long-term drag on growth.
Of course, such advice can only represent the best guesses of economists whose failure as a profession to predict or deter the current crisis was discussed at a UC Berkeley event Thursday attended by former Obama economic adviser Christina Romer.
Romer has been ridiculed by Republicans for wrongly predicting that the Obama stimulus plan would hold unemployment to 8 percent.
At a professional soul-searching session with fellow Berkeley economists, Romer said the scary thing about making policy during the financial crisis was the scarcity of commonly accepted and provable truths about the potential effects of different alternatives.
"We were flying largely blind," Romer told graduate students - a self-assessment that might describe everyone from her critics to the voters who will head to the polls Tuesday.