GOP ends Dems' longtime advantage on economy amid anxiety over jobs, recession

WASHINGTON  Notch one more victim of the recession: With crucial midterm elections nearing, Democrats have lost the advantage they’ve held for years as the party the public trusts to steer the economy.The timing could be fortunate for the Republicans. With jobs and the economy dominating voters’ concerns, the GOP will wield the issue as a cudgel in the battle to grab control of at least one chamber of Congress this November and weaken President Barack Obama.”The number one question on voters’ minds is, ‘Where are the jobs?'” said Ken Spain, spokesman for the House Republican campaign organization. “Republican candidates on the campaign trail will ask one very simple question: ‘Are you better off today that you were two years ago?'”

Misty McMahon, 30, a teacher from Vancleave, Miss., knows her answer. “I feel like it’s so bad right now that it will be hard to climb out,” said McMahon, who voted for Obama but now trusts Republicans more on the economy. “I’m kind of disappointed in the stuff he’s done.”

Each party now has the confidence of 44 percent of people for handling the economy, according to an Associated Press-GfK Poll conducted this month. The Democrats had a nine-point advantage just four months ago, and have held an edge since AP polls began asking about the issue in 2006. In longer-running polling by the nonpartisan Pew Research Center, the last time the two parties were even on the economy was 2002.

Pollsters, analysts and politicians across party lines agree the Democrats have lost their grip on the issue chiefly due to unemployment rates that have stuck near 10 percent since last summer, an ongoing foreclosure crisis and the recession that began in December 2007. Despite signals the economy has begun to heal – such as last week’s reports of growing new home sales and rising orders for manufactured products – the improvements have been too subtle for many people to notice.While the November elections are a long way off, most economists believe unemployment will still be high by Election Day, and improvements in the economy are likely to be modest.

Aware that the party in power is commonly punished for a weak economy, Democrats hope to persuade voters to view the elections as a choice between their party’s recovery efforts and what they call the GOP’s preferences to reward corporations and wealthy taxpayers.

“It will be the job of members of Congress and the president and our candidates to make it clear that these elections are not just a referendum on the state of the economy; it will be a choice between two different paths,” said Rep. Chris Van Hollen, D-Md., who heads the House Democratic campaign operation.The Democrats also may have hurt their image as effective custodians of the economy by spending more than a year pushing Obama’s near $1 trillion health care overhaul through Congress. It was enacted last month to mixed public reviews and after many people – including Democrats – complained that stronger congressional efforts on jobs were overdue.

“It created the impression that Democrats were not focusing enough on jobs and getting people back to work,” said Geoffrey Garin, a Democratic pollster and strategist, adding, “But health care is now behind us.”Some of Obama’s top economic initiatives have also failed to deliver political dividends because, economists say, they have largely prevented the recession from worsening rather than sparking immediate improvements.

As a result, many people have come to view those measures as symbols of excessive federal spending. They include the $787 billion stimulus package and the $80 billion rescue of automakers General Motors and Chrysler, to which the public often adds the $700 billion financial industry bailout enacted in late 2008 under President George W. Bush.

“Politically, it’s often hard to show a negative, a what-if-we-hadn’t-stepped-in,” said Mark Penn, a Democratic pollster and strategist.

Details from the AP-GfK poll show perils and opportunities for both parties.Three-quarters of those surveyed said the economy is still in poor condition. Of that group, fewer than four in 10 said they trust Democrats to do a better job on the economy, and about the same number said they want Democrats to win control of Congress in November.In contrast, among the people who say the economy is doing well, two-thirds trust Democrats to handle the issue and nearly as many want them to control Congress.Supporters of a party in power tend to view the economy more positively than members of the party out of power.

Two other groups in the poll could be pivotal in November.Among people who say the economy is bad, those who believe things improved in the past month are far likelier to support Democrats than those who’ve not seen recent gains. Growth in optimism could help Democrats retain their congressional majorities.

On the other hand, nearly two-thirds in the poll say they know a non-relative who has recently lost a job. This group, whose size has remained steady for more than a year, is likelier to back Republicans.

“That’s the circle that becomes problematic for any incumbent administration,” said GOP pollster David Winston.The AP-GfK Poll was conducted April 7-12 by GfK Roper Public Affairs and Media and involved interviews with 1,001 adults nationwide on landline and cellular telephones. It had a margin of sampling error of plus or minus 4.3 percentage points.(AP)

World markets fell Friday after the U.S. Federal Reserve unexpectedly raised interest rates for emergency bank loans

LONDON  World markets fell Friday after the U.S. Federal Reserve unexpectedly raised interest rates for emergency bank loans, triggering fears that regular borrowing costs could also move higher soon, slowing the recovery in the world’s largest economy.The central bank said Thursday it will bump up the “discount” lending rate by one-quarter point to 0.75 percent effective Friday, part of a pullback of the extraordinary aid it provided to fight the financial crisis.Although the Fed said the step should not be seen as a signal that it will soon boost interest rates for consumers and businesses, markets were spooked.After sharp drops in Asia, Germany’s DAX stock index was down 0.2 percent at 5,671.28 and Britain’s FTSE 100 was flat at 5,326.84. France’s CAC-40 fell 0.2 percent to 3,742.09.Wall Street was also expected to fall on the open. Dow Jones industrials futures were down 50 points at 10,325.00 and Standard & Poor’s 500 futures were 8.2 points lower at 1,097.40.

Growing optimism about the strength of the U.S. economy had helped boost the Dow Jones industrial average rise by 3 percent over the past three days. But the surprise Fed announcement after Wall Street trading closed left traders wondering whether the so-called “exit strategy” from a loose monetary policy could come faster than expected and stifle U.S. consumer demand.”It begs the questions of why this was not done, or at least signaled at a regular Federal Open Market Committee meeting,” said Marc Ostwald, strategist at Monument Securities in London.”It certainly is the case that the Fed wants to see how money markets function without so much of the liquidity life support that the Fed has been providing, and as such one can term this a form of ‘kite flying’,” said Ostwald.The Fed move, which doesn’t change consumer borrowing rates, also helped boost the U.S. dollar and push the euro below nine-month lows – a sign traders may be turning away from higher-risk investments, analysts said.The euro fell to $1.3504 from $1.3529 late Thursday after trading at nine-month lows below $1.3400. After rising against the Japanese yen, the dollar was flat at 91.75 yen.

The euro has been under pressure in recent months over worries about the debt problems of Greece and other countries in Europe, such as Portugal and Spain. Although the EU said it was committed to helping Greece in case of a default, it did not provide any concrete plans for a bailout but limited itself to demand more spending cuts.Economic data in Europe, meanwhile, failed to shore up investor sentiment. The purchasing managers’ survey of the eurozone, an economic indicator published by Markit research group, was stable in February, suggesting the recovery from recession has stagnated somewhat.A rise in the manufacturing reading offset a drop in the services sector, providing “little hope that the much-needed domestic recovery is beginning to materialize,” said Ben May, European economist at Capital Economics in London.Markets in China and Taiwan are closed this week for the Lunar New Year holiday.Earlier in Asia, Hong Kong’s Hang Seng stock index led decliners, diving 528.13, or 2.6 percent, to 19,894.02 while Japan’s Nikkei 225 stock average dropped 212.11, or 2.1 percent, to 10,123.58.”As the dollar strengthens, we see less appetite for riskier assets such as Asian stocks.” said Jit Soon Lim, head of equity research for Southeast Asia for Nomura in Singapore. “We’re bullish on the region’s economic growth, but bearish on risk.”

South Korea’s Kospi declined 27.29, or 1.7 percent, to 1,593.90. India fell 1 percent and Indonesia dropped 0.5 percent.Singapore’s stock measure retreated 0.9 percent despite an increase of the government’s 2010 economic growth forecast to between 4.5 percent and 6.5 percent from 3 percent to 5 percent.In the U.S. on Thursday, the Dow rose 83.66, or 0.8 percent, to 10,392.90 while the broader Standard & Poor’s 500 index rose 7.24, or 0.7 percent, to 1,106.75. The Nasdaq composite index rose 15.42, or 0.7 percent, to 2,241.71, its fifth straight advance.Oil prices slid to near $78 a barrel after the Fed’s rate hike sent the U.S. dollar higher.Benchmark crude for March delivery was down 90 cents at $78.16 in electronic trading on the New York Mercantile Exchange. The contract added $1.73 to settle at $79.06 on Thursday.(AP)