Many economists expect growth as house prices and the stock market rise. | REUTERS Economy shifts 2014 landscape

The 2014 midterm election is shaping up as something the United States has not seen in nearly a decade: a campaign run in a strengthening economy with deficits on the decline.

No one is popping champagne corks yet, and risks remain. But the altered terrain, if it holds, could benefit Democrats and challenge Republicans whose rise to power in the House in 2010 came via a tea party movement that blasted President Barack Obama and his party for ignoring a stagnant economy and piling up an endless run of trillion dollar deficits.


Times have changed since 2010. Barring a fresh crisis — and there are certainly a few that could arise — many economists expect growth to return to a fairly healthy level by next year as house prices and the stock market continue to rise and the jobless rate falls closer to its historic average of 5.8 percent.

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The federal deficit is around half the size it was when the tea party reached its apex, due to tax hikes, spending cuts and stronger growth.

Consumer confidence this week hit a level not seen since the financial crisis rocked the economy in 2008. And economists say there is enough time between now and when voters go to the polls next November for the improvements to actually be felt throughout the economy. Even conservative economists predict somewhat stronger growth next year, while left-leaning forecasters are borderline giddy.

“The fact is the economy is probably going to look and feel very good next year,” said Ian Shepherdson of Pantheon Macroeconomics. “The most likely outlook for Obama and the Democrats is pretty good growth and employment rising strongly. If you step back and look at it, it’s a hugely favorable scenario for them.”

Obama landed himself in trouble early in his term for appearing to spike the ball too soon on economic growth. So he’s hesitant to make that mistake again when growth remains fairly soft and joblessness is still at 7.5 percent. But he’s shown signs of campaigning for the midterms on a message of a renewed prosperity — threatened only by Republican demands for more cuts and threats of fiscal standoff.

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“If you read the headlines over the last couple of days, you’d actually see housing recovering; the economy stronger than expected; stock market hitting record highs,” Obama said at a fundraiser for the Democratic Congressional Campaign Committee in Chicago this week. “Our economy is doing better than just about every industrialized country in the world.”

At another recent fundraising event in New York at movie mogul Harvey Weinstein’s town house, Obama blamed GOP partisanship for blocking his efforts to improve the economy even more. “My thinking was after we beat them in 2012 that might break the fever,” he said to a group that included singer Justin Timberlake and actress Jessica Biel. “It’s not quite broken yet, but I am persistent and I am staying at it.”

Democrats down the line are echoing that message and taking credit for progress while arguing that Republicans are standing in the way of a stronger recovery.

“Home values are going up and debt is going down, and all we are telling Republicans is: ‘Don’t screw this up,’” said Rep. Steve Israel (D-N.Y.), chairman of the DCCC. “The 2014 campaign is going to be a referendum on whether we continue the progress that’s been made or whether we continue to allow House Republicans to obstruct everything and choose partisanship.”

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Republicans, who are on comfortable terrain hitting Obama for slow job growth, have had more trouble shifting their message from one focused almost exclusively on austerity-style budget cuts to one reflecting a growing economy and at least a slightly sunnier national mood. Efforts by some GOP leaders in the House to focus on family-friendly issues such education funding and time off at work have largely fallen flat.

And many tea party heroes are either retiring, in the case of Rep. Michele Bachmann (R-Minn.), or already out of Congress, in the case of former South Carolina Sen. Jim DeMint.

If Republicans are worried they need to reshape their message to do well in an election that by historical standards should heavily favor them, they aren’t saying so.

“We want the economy to improve, so if that’s happening, that’s a good thing and that’s what we are fighting for,” said Daniel Scarpinato, spokesman for the National Republican Congressional Committee, which is looking to add to the party’s current edge in the House. “But American families are still sitting around the kitchen table wondering how to pay for education and put gas in the tank. Things have not really improved that much for many Americans.”

Scarpinato added that the party’s candidates would in no way back off calls for even more spending cuts. “We passed a plan to balance the budget in 10 years and we are going to be running on that, and it’s going to be a big positive for us. We are still spending much more money than we should.”

Despite a strengthening economy, Israel and the Democrats are up against long odds in their quest to retake the House. Democrats need a net gain of 17 seats in an era when redistricting has sharply curtailed the number of competitive districts. And the incumbent president’s party tends to lose seats in the sixth year of an administration. In recent decades, only Bill Clinton bucked this trend when Democrats in 1998 gained a few seats aided by a booming economy. Improving moods could also wind up helping the GOP hold the House if voters decide no real change is needed and keep the status quo in Congress.

Still, if Democrats can’t retake the House, they at least hope the strengthening economy will help them hold the Senate, where Republicans need to net six seats to take full control of Capitol Hill. They have plenty of opportunities, including open seats in South Dakota, West Virginia and Montana. Democratic incumbents appear especially vulnerable in Arkansas, Louisiana and Alaska.

The GOP hopes a combination of those states’ Republican tendencies — coupled with voter anger over current Washington scandals and implementation of Obama’s health care reform law — will push them into the Senate majority.

Democrats counter that the national mood will likely sweeten to the point that a wave election reshaping the Senate is unlikely. In a new Quinnipiac College survey, 73 percent cited the economy as more important than investigating the IRS scandal or the administration’s handling of the terrorist attack in Benghazi, Libya, or its aggressive leak probes.

“I really don’t think the austerity message is going to resonate this time, given what we have seen in terms of deficit reduction,” said Roger Altman, founder of investment bank Evercore Partners and a deputy Treasury Secretary under President Clinton. “I’d rather have the Democratic side of that argument right now.”

Republicans generally concede that conditions are slightly better than when the party dominated in 2010. But they firmly reject the idea of any major improvement and suggest that a subtle shift in rhetoric is all that’s required, not an overhaul of their message.

“Yes things are better, but they are not good,” said Douglas Holtz-Eakin of the American Action Forum, a conservative economic policy group. “A fatigued business press corps has jumped on housing and the equity market as broader indicators than they merit. Income growth is still not good, and a lot of the 2.4 percent [gross domestic product] growth in the first quarter was due to a plunge in the savings rate.”

Holtz-Eakin said the tea party message was already fading in 2012 as the recession ended and Republicans failed to oust the president based on his economic and fiscal record. He added that Republicans should dial back some of the austerity budget cutting rhetoric in 2014 and focus more on how to boost incomes, in part through sweeping tax reform.

“Republicans sometimes miss the core distress,” he said. “People who vote mostly have jobs, but they are not getting what they want from them.”

And while economic data is clearly trending up at the moment, significant risks remain.

Global markets have been whipsawed in recent days as the U.S. Federal Reserve signals it will at some point soon stop buying up vast gobs of debt to keep interest rates low. The debt ceiling still looms this fall as a possible partisan catastrophe. And the jobless rate could still spike if enough workers who left the labor force during the downturn decide that times are good enough to start looking again.

So Democrats say they will try very hard not to celebrate too soon.

“Nobody is spiking the ball,” the DCCC’s Israel said. “The tune ‘Happy Days are Here Again’ will not be played in this election cycle.”