Cook’s Tour of American Politics and Economics

Published February 13, 2013Updated August 26, 2015

National Journal Presentation Credits

Contributors: Charlie Cook, Cook Political Report EditorProducer: Katharine Conlon, Alexander PerryDirector: Jessica Guzik, Afzal Bari

The following slides were updated:Slides 4, 5, 6, 7, 8, 9, 10, 11, 12 13, 14, 15, 18, 19, 20, 23, 24, 25, 26, and 28.

When you think economics, think elections;When you think elections, think economics.

- Edward Tufte, Political Control of the Economy (1978)

2

Roadmap for the Presentation

3

Economic Vital Signs

American Politics

Economic Growth Just Now Returning to Normal Levels

Real GDPPercent Change from Prior Quarter at Annual Rate

Source: St. Louis Federal Reserve, July 30, 2015 4

Current level: 2.3%

2007-2014 Average: 1.3%

1976-2006 Average: 3.1%

Pessimistic Forecast

ConsensusForecast

OptimisticForecast

ReportedFigure

Estimated Quarterly Change in GDPfrom Blue Chip Economic Indicators

Nearly Average Growth Projected for Foreseeable Future

Source: 5Source: Bureau of Economic Analysis, 2015; Blue Chip Economic Indicators, July 10, 2015.

1972-2002

Average:

3.2%

Real Median Household Income Returning to Normal Levels

Source: St. Louis Federal Reserve, September 30, 2014. 6

2013 Level: 0.3%

1985-2013 Average: 0.28%

past 4 yearsof data

Ultimate Sign of Pessimism: Birth Rate DownPeople Deciding to Defer Starting or Expanding a Family

Source: CDC, National Vital Statistics Report, June 17, 2015 7

Birthsper 1000 women aged 15-44 years

62.9 births

U.S. General Fertility Rate(Births to Women Aged 15-44 Years)

Interest Rates at Historic LowsSavers Punished and Borrowers Rewarded with Low Returns

Source: St. Louis Federal Reserve, August 25, 2015. 8

Interest RateQuarterly Percent

3-Month Treasury Bills Interest Rate

10-Year Treasury Constant Maturity Rate

Interest RateQuarterly Percent

3-Month Treasury Bills Interest Rate

10-Year Treasury Constant Maturity Rate

6.0%3-Month T-Bills Interest Rate

0.74%

10-Year Treasury Constant Maturity Rate

7.7% 3.0%

1976-2006 Average

2007-2015 Average

Higher Expectations for Interest Rates Reflect Improved Growth Expectations

Source: Blue Chip Economic Indicators, July10, 2015. 9

Estimated Quarterly Interest of Three-Month Treasury BillsFrom Blue Chip Economic Indicators

Pessimistic Forecast

ConsensusForecast

OptimisticForecast

ReportedFigure

1972-2002 Average:

6.4%

Higher Expectations for Interest Rates

Source: Blue Chip Economic Indicators, July 10, 2015. 10

Estimated10-Year Treasury Constant Maturity RateFrom Blue Chip Economic Indicators

Pessimistic Forecast

ConsensusForecast

OptimisticForecast

ReportedFigure

1972-2002 Average:

8.1%

So Far Inflation Stays Very Low

Source: St. Louis Federal Reserve, August 19, 2015. 11

Quarterly Percent Change in Consumer Price Index (CPI) for All Urban Consumers

Current level:-3.1%

2007-2015 Average: 2.2%

1976-2006 Average: 4.2%

Inflation Projected to Stay LowNo Signs of Reaching Higher Levels

Source: Blue Chip Economic Indicators, July10, 2015. 12

Estimated Quarterly CPI for All Urban ConsumersFrom Blue Chip Economic Indicators

Pessimistic Forecast

ConsensusForecast

OptimisticForecast

ReportedFigure

1972-2002 Average: 4.8%

past 5 years

Long-Term Unemployment Rate Gradually Declines

Almost Half of Unemployed Endure 15+ Weeks Out of Job

Source: St. Louis Federal Reserve, August 7, 2015. 13

Percentage of Unemployed Population by Duration of Unemployment

10%

20%

30%

40%

0%

50%

26.9% Unemployed 27+ weeks14.6% Unemployed 15-26 weeks

past 5 yearsof data

Unemployment DroppingUnemployment Direction is Positive

Source: St. Louis Federal Reserve, August 7, 2015. 14

Actual Year-to-Date Unemployment Rates

Current level: 5.3%

Forecasts Predict Continual Decrease in Unemployment

Forecasted Quarterly Rate Nearing 5%

Source: Blue Chip Economic Indicators, July 10, 2015. 15

Pessimistic Forecast

ConsensusForecast

OptimisticForecast

ReportedFigure

Estimated Quarterly UnemploymentFrom Blue Chip Economic Indicators

1972-2002 Average: 4.8%

Deficit Problem Stems from BothIncreased Spending and Decreased Taxing

Source: White House Office of Management and Budget, Historical Tables, 2015. 16

Current Spending at 20.3% of GDP

Current Taxes at 17.5% of GDP

Taxes and Spending as Percentage of GDP

Average Spending

:20%

Average Taxation:

17%

Source: White House Office of Management and Budget, Historical Tables, 2015. 17

Gap Between Taxing and Spending Creates Deficit or Surplus

U.S. Taxing and Spending as Percentage of GDP

U.S. Deficit and Surplus

*Estimate

*

*

28%

65%

Public Still Skeptical On National Outlook

Source: NBC/WSJ Poll, July 26-30, 2015. 18

Percentage Responding to Question:“All in all, do you think things in the nation are generally headedin the right direction, or do you feel things are off on the wrong

track?”

Public Outlook for Economy Gradually Improving

*N.B.: Prior to April 2001, the question was phrased, “Over the past year…”Source: NBC/WSJ Poll, July 26-30, 2015. 19

Percentage Responding to Question: “During the next twelve months, do you think that the nation’s economy will get

better or worse?”*

24%

25%% Better/Worse

Better Worse

past 5 years

Source: Conference Board, August 2015; Thomson Reuters/University of Michigan Surveys of Consumers, August 2015. 20

Consumers Optimism Improving But Still Low by Historical Measure

Consumer Confidence = 101.5

Conference Board’s Consumer Confidence Index®

Michigan/Reuters Consumer Sentiment

Consumer Confidence Index ® and Consumer Sentiment

Consumer Sentiment = 92.9

Roadmap for the Presentation

21

Economic Vital Signs

American Politics

Congressional Partisanship Frames Fiscal Fights

Source: Senate.gov, 2014; Office of the Clerk of the House of Representatives, 2014; CNN, 2014.

22

past 5 years

Congressional Approval Hovers Near Three-Decade Low

Source: Gallup.com, Aug 5-9, 2015. 23

Congressional Approval Rating

14%

82%

Public Opinion Split on Democratic Party

Source: NBC/WSJ Poll, July 26-30, 2015. 24

NBC/WSJ Thermometer: Democratic Party

38%

38%

Public Holds Negative Opinion of GOP

Source: NBC/WSJ Poll, July 26-30, 2015. 25

NBC/WSJ Thermometer: Republican Party

28%

44%

Share of Self-Described Independents Grows at Expense of Both Parties

Source: Gallup.com, 2015. 26

Gallup’s Party Affiliation SurveyResponding to question: “In politics, as of today, do you consider yourself a Republican, a Democrat, or

an independent?”

41% Independents

31%Democrats

27%Republicans

Cook Political Report Rates the Districts

Source: Cook Political Report, 2015. 27

Analysis•According to the Cook Partisan Vote Index, the number of swing seats in the House has dropped 45%, from 164 in 1998 to 90 in 2014•Fewer swing seats means more polarization in Congress•As district populations grow increasingly liberal or conservative, incumbents fear radical primary challengers

House Makeup by Cook Partisan Vote Index

In House, Fewer “Swing” Seats, More Polarization

Numberof Seats

50%

45%

Public Nearly Split on Obama’s Job Approval

Source: NBC/WSJ Poll, July 26-29, 2015; Gallup.com, Aug 17-23, 2015. 28

NBC/WSJ’s Presidential Job Approval

Gallup’s Presidential Job Approval

51%

44%