Common Sense: For Americans, Wealth Isn’t a Clear Indicator of Voting Behavior

“This president cannot tell us that you are better off today than when he took office,” Mitt Romney said as he accepted the Republican presidential nomination. Since then, “Are you better off?” has become a central theme of the campaign, and is likely to surface next week at the first presidential debate.

Are Americans better off? By one important measure, that depends on who you are. Unfortunately for Mr. Romney, the group most likely to answer with a resounding “no” — those who should be most receptive to his message — appear to be the least likely to vote for him.

In raising the issue to such prominence, Mr. Romney is echoing Ronald Reagan’s famous closing during his 1980 debate with Jimmy Carter, which is widely credited with swinging the election in Mr. Reagan’s favor. Exactly what he and other politicians have meant by the phrase “better off” is vague, but many commentators have looked to the unemployment rate, gross domestic product, household income, and inflation rate as relevant statistics for comparison.

By these measures, the answer is mixed. The unemployment rate in August was 8.1 percent, down from 10 percent reached in October 2009 but higher than the 7.8 percent in January when President Obama took office. Gross domestic product increased an estimated 2 percent rate in the first quarter and 1.3 percent in the second. While slow, that was a substantial improvement from the 3.8 percent contraction reported in January 2009, which was the worst drop in 27 years. Inflation was 1.7 percent in August, well within the Federal Reserve’s target range, and much better than the modest but worrisome deflation of early 2009. Median household income for 2011 was an estimated $50,054, compared with $50,112 for 2008, according to the Census Bureau. About the best the Obama administration has been able to say is that trends show slow but steady improvement.

This ambiguity shows up in the latest polls. In a Quinnipiac University/New York Times/CBS poll released this week, likely voters in Florida split 40 percent to 43 percent on the question of whether the United States is better off today than it was four years ago, with 40 percent saying the country is better off. In Ohio, it was tied at 39 percent, and in Pennsylvania it was 35 percent to 41 percent. Remaining voters thought the country was about the same or were undecided. But disaffection with the economy didn’t translate into support for Mr. Romney, who trailed Mr. Obama by widening margins in all three states.

There’s another measure that may help explain why Mr. Romney seems to be getting so little traction from the “are you better off” issue. It’s the wealth effect, which occurs when rising asset prices make people feel more secure. And in that respect, the answer is clear. As Mark Zandi, chief economist for Moody’s Analytics, told me this week, “From the perspective of the aggregate household balance sheet, we’re unambiguously better off than four years ago and are almost all the way back” to the pre-financial crisis peak.

That’s because of a combination of rising asset prices, especially American stocks and real estate, and lower household debt. Total household net worth, which is assets minus liabilities, was $50.4 trillion in the first quarter of 2009 when Mr. Obama took office. It was $62.7 trillion in the second quarter 2012, which ended June 30. Mr. Zandi and other economists predict that it will be significantly higher for the third quarter ending this month thanks to this summer’s stock market rally and recent strong gains in housing prices. It might soon hit the peak of $67.4 trillion, reached in the third quarter of 2007.

A healthy household balance sheet is a crucial measure of financial security, and it affects a majority of the population. According to a Gallup poll this year, 54 percent of Americans said they own stock either directly or indirectly through mutual funds, exchange traded funds and retirement plans. In that regard, they are much better off now than when Mr. Obama took office. From January 2009 until this week, the Standard & Poor’s 500-stock index had gained over 55 percent. The Nasdaq composite index has surpassed levels last reached in 2007. There has been a stream of headlines and news reports about stocks hitting new highs.

Even more Americans own real estate. Sixty-two percent reported owning homes in April, according to Gallup. Housing prices are still far below their 2006 peak, but most of the collapse took place before Mr. Obama took office. The Case-Shiller index of 20 cities stood at 146.34 in January 2009 and hit a low of 134.10 in March of this year, according to Standard & Poor’s, which compiles the index. This week it was 144.61, a steep 1.6 percent monthly rise from August. Even the hardest-hit low end of the market showed strong gains, and many commentators predicted housing prices have bottomed and begun a sustained rise.

The luxury housing market, especially in cities like New York, Los Angeles, San Francisco and Miami, has fared even better, with many properties selling at headline-grabbing record prices. At the extreme upper end, several Manhattan condos have recently sold at prices close to $100 million. And a wide array of assets typically owned by the wealthy have surged in value, from jewelry to wine, antiques and art.

The combination of rising stock prices and a rebound in the real estate market may be a reason consumer confidence rose sharply this week to its highest level in seven months. The survey shows that the confidence is even stronger among people with higher income levels.