By Peter Baker and Dan Balz
As the presidential campaign got underway a year ago, the candidates faced a volatile political environment dominated by the Iraq war, illegal immigration and terrorism. A year later, the campaigns are rewriting their playbooks as it appears that the race may actually be shaped by the economy.
The virtual halt in job growth, the climb of oil prices above $100 a barrel, the New Year's stock market tumble and the continuing mortgage crisis have fueled fears of recession and crystallized the nation's growing economic anxiety. Nowhere was that clearer this week than in New Hampshire, where exit polls showed that the economy has overtaken all other issues as the top concern for Democrats and Republicans alike.
While the Federal Reserve indicates that it will move to spur growth and President Bush and Congress consider stimulus packages, economic worry has already forced the presidential candidates to retool their messages. Republican Rudolph W. Giuliani proposed a new tax-cut package yesterday as rival Mike Huckabee prepared to take his populist message to economically distressed Michigan with a major address today. Sen. Hillary Rodham Clinton (D-N.Y.), who did best among New Hampshire voters worried about the economy, plans to unveil today what her campaign calls a "plan to jump-start America's ailing economy."
"The economy's number one," said Scott Paul, director of the Alliance for American Manufacturing, a coalition of manufacturers and the United Steelworkers that has found deep apprehension about the economy at town hall meetings in early-primary states. "It's organic. It's not an organized effort. But it's something the voters, Republicans and Democrats, are fretting about."
Austan Goolsbee, a University of Chicago economist advising the campaign of Sen. Barack Obama (D-Ill.), said his travels through Iowa in recent months brought home just how powerful the concern has become. "Everywhere I went, there were people all over the issue, asking a whole lot of economic questions -- as many questions as they were asking about Iraq," he said. "The conditions in the economy have only soured since then."
The poll numbers in New Hampshire were striking. Among Democrats, 38 percent called the economy the biggest issue, compared with 31 percent who named Iraq and 27 percent who said health care. Among Republicans, 31 percent cited the economy, while 24 percent said Iraq and 23 percent chose illegal immigration.
Nationally, the economy began popping to the top of voter concerns before the turn of the year. A Washington Post-ABC News poll in November found that Iraq was the dominant issue by 2 to 1. By last month, the same survey found the economy and Iraq essentially tied as the biggest areas of concern for voters across the country.
But different voters have different anxieties about the economy. For some, it may be jobs, for others housing. Health care and energy costs trouble large swaths of the population. "You'll see candidates spending more time on the economy," said former White House political director Sara M. Taylor, who worked on Bush's campaigns. "But it won't be enough to address the economy as a whole. They'll have to discuss" individual areas of concern.
Clinton managed to tap into that anxiety this week in New Hampshire more successfully than Obama. Although she has sought to address the disaffected middle class since last spring, much as her husband did in his 1992 campaign, her message had often been muffled until she returned to it more intensively in recent days. She repeatedly cited her husband's record of producing 22 million new jobs while promising to make college more affordable and to ensure universal health care.
The National Election Pool exit poll in New Hampshire showed Clinton winning among voters who cited the economy as the biggest issue and among those who said their own families were falling behind financially. Among those who consider the economy in poor shape, she beat Obama 44 percent to 31 percent, a margin 10 percentage points greater than her overall edge. Although Democrat John Edwards's populist message is designed to appeal to those who feel most aggrieved by economic inequality and corporate power, the former senator from North Carolina did only somewhat better in winning their votes than the votes of other constituencies.
Obama has an economic plan centered on tax cuts for the lower and middle classes and has held events built around the subprime mortgage crisis. He has also begun making more direct appeals to the economically disadvantaged. "We understand that the struggles of the textile worker in Spartanburg are not so different than the plight of the dishwasher in Las Vegas," he told a crowd in Charleston, S.C., yesterday, echoing a line from his New Hampshire concession speech.
Republicans are also reorienting their messages to take into account growing concerns about the economy, beginning in Michigan over the next six days. Huckabee, the former Arkansas governor who addresses the Detroit Economic Club today, is the only Republican whose economic message breaks from party orthodoxy with a more populist appeal on the plight of the working class, concern over income inequality and doubt about the effectiveness of free trade.
When he arrived in Michigan on Wednesday, Sen. John McCain (R-Ariz.) spoke directly to those problems with a pledge to help workers whose jobs have disappeared through globalization. Giuliani yesterday proposed to cut corporate and capital gains tax rates and simplify the tax code so Americans can file a one-page return. Mitt Romney yesterday issued a statement boasting of his economic record as Massachusetts governor.
Michigan, which votes Tuesday, may be a proving ground on the issue. "It's huge in Michigan," said William R. Rustem, president of Public Sector Consultants. "We continue to be at or near the bottom in terms of unemployment. We were tied in 2005 with North Dakota for the largest out-migration rate. So the economy is going to be huge. People are looking for answers at both the state and federal level as to what we do in Michigan."
Beyond the primaries, both parties are contemplating what the economy may mean for the general election if Bush and the Federal Reserve cannot head off a recession. As the incumbent party, the Republicans may have a new vulnerability. But Douglas Holtz-Eakin, a senior fellow at the Peterson Institute for International Economics and a former White House economist now advising McCain, said the party will not matter as much as the candidate.
"The American public is looking for leadership," he said. "They want to be convinced the economy's in good hands, and that will be the quality that will be needed in the fall."
Staff writers Peter Slevin in Chicago and Alec MacGillis in Charleston and polling director Jon Cohen in Washington contributed to this report.