The indespensible pollkatz graph detects a slight uptick in Bush's numbers. The Reid-Ipsos poll has spiked upwards, and that usually heralds a bounce back in popularity for Bush.
What's going on here? It's about cashflow.
[Stirling Newberry is Chief Economist for Langner and Company the opinions expressed here are his own.]
Americans are cash flow sensitive. In fact, they are very cashflow sensitive. As far as Americans are concerned, if you are cash flow positive, you are ok. When explaining financial concepts to small groups of people, you would be amazed, or perhaps not, about how hard it is to explain to people that a business merely being cash flow positive isn't necessarily in good shape.
They say "well if you are taking in more than you are spending, that's all you need right?" Well, no, which leads into a discussion of capital and why letting your capital run down isn't really profit, it is borrowing from the future.
As the recent inflation spike is easing, this means that marginal voters are starting to filter back to supporting Bush and the Republicans. It still isn't a wave, nor is it much of a crowd even. But it is a sign that what is on middle America's mind right now is discretionary income. People judge how they are doing by a simple metric: how much month do they have left at the end of their money? If there is more than they like, they cut back on going to the movies, for example.
And what is pinching that right now is inflation, but not yet interest rates. Inflation is hated by Americans now because they have no pricing power in terms of labor - the best way to make people conservatives is by taking away their ability to raise wages. I don't need to tell people how the Republicans have pressed this by raising the fear quotient. And it has worked, Americans hate inflation witha passion, rates of inflation that would be rather unexceptional historically speaking, are now causing Bush tremendous political pain.
And that is what is amusing about this entire situation: Bush and Greenspan are inflationists, they want a lot of money loose in the economic system, just so long as very little of it settles down to the bottom. Or more exactly, they want a "vacuum up" economy, where ordinary consumers go into deeper and deeper debt. In fact here is the next chairman of the Federal Reserve whinging (prounced "wenching" but it means something different) about why won't the rest of the world implement join vacuum up economy.
In the present that means Bush and the Republicans are going to get a little bit of political relief. In the long term, it means they have problems, simply because while interest rates should slow consumer inflation, they bring with it something else: payment inflation. People with adjustable rate mortgages will have to pay more for money, as much as 3% more for money. And this too will take a bite out of peole. And the irony is that the later you bought, the more likely you bought using an ARM or interest only mortgage. The people who benefited the leaas, the "marginal home buyers" will get hit the hardest.
So while you should expect Bush to make a modest comeback - perhaps even having a "Gold Old Bush Index" of over 50 again, the upside on Bush is very poor. Why is this, because Greenspan isn't really fighting inflation, he's just throwing the occasional rock at it, and it is very likely that what we are going to get, given energy price trends, is inflation, low growth, and higher interest rates.
The same thing happened last spring, when a round of inflation hit, real discretionary income fell, and the electorate started to turn away from Bush. This is why the Bushconomy can't put together a sustained recovery, all of its jobs growth is form inflation, either housing inflation, helath inflation, or what little general pricing power is out there. That means in order to ge back jobs, the Bush executive has to allow inflation, which pushes popularity down. No economic leadership means no non-inflationary growth. And that is the problem with the Bush energy program - like "homeland security", it is pure cost, pure "spend more to keep what we have now". It will produce no economic growth, because there is no place to shift the money from.
This means that while, short term, Bush may bounce back, there will be another inflationary slog.
And that is going to make the electorate very grouchy.