Obama is currently facing grim-looking Consumer Confidence Index numbers, experts say. | REUTERS Experts: Debt fight hurting Obama

The prickly, political back-and-forth over raising the nation’s debt ceiling is demoralizing consumers, analysts suggest, and threatening President’s Barack Obama’s bid for a second term.

Negotiations have yet to produce an agreement to lift the $14.3 trillion debt ceiling and stave off default this August, which the president and his top aides have warned would devastate an already anemic economic recovery.


According to surveys and economists, this harsh reality feeds consumer anxiety, stunting the recovery and — in a boost to Republicans — undermining faith in Obama’s handling of the economy.

Voters have not returned an incumbent party to the Oval Office with the Consumer Confidence Index below 100. Released by the nonprofit Conference Board since 1967, the monthly index dropped 3.2 points to 58.5 in June.

“No doubt, charisma, a leader’s projection of presidential powers, rhetoric and the like will matter, but anyone with a reading much lower than 100 will have a hard time,” warned Lawrence Yun, who has explored the phenomenon as chief economist for the National Association of Realtors.

Michael Ettlinger, vice president for economic policy at the Center for American Progress, said disputes about the debt ceiling from both sides have already slowed the economy, though he acknowledged it’s tough to quantify by how much.

“When the country’s leaders act like the government is going to do something that could lead to catastrophe, consumers, investors and employers are going to err on the side of caution,” Ettlinger said. “And caution isn’t going to create jobs.”

Unlike the monthly jobless figure — now at a politically perilous high of 9.2 percent — often used to assess reelection chances, consumer sentiment can reflect where those with comparatively safe incomes see the economy heading.

High gasoline prices and other factors can also influence consumer confidence. But the index is among the few leading indicators in which Washington can have a direct and immediate impact.

Last week, senior White House adviser David Plouffe said at a breakfast hosted by Bloomberg News that voters looked at the economy through a “personal prism.” He did not specifically address the decline in consumer sentiment, although he said voters’ attitude to their own financial situations had improved.

Plouffe said: “Their decision next year will be based upon two things: How do I feel about things right now — and then, ultimately, campaigns are always much more about the future — and who do I think has got the best idea, the best vision for where to take the country?”

In the case of consumer confidence, political deal making can amplify an underlying economic trend causing “hyper” optimism or, in the current stalemate, hyper pessimism, said Texas A&M University professor Paul Kellstedt, who co-wrote a 2004 research paper on the issue.

According to his analysis, the public cares more about taking action than the posturing at news conferences; tangible results trump speaking with optimism and assurance.

“In today’s world, consumers are relatively savvy and understand that Republican and Democratic presidents try to talk up the economy,” Kellstedt said. “So people naturally discount what politicians say.”

People might not parse speeches or comb through the monthly jobs report to assess the president’s performance. But they do internalize feelings about whether there’s progress, said Democratic pollster Celinda Lake.

“This country needs to feel forward momentum,” she said, explaining the president could frame his economic message better, but “there is a reality that’s hard to contrast no matter what you say.”

Only Ronald Reagan managed to close a similarly sized gap in consumer confidence. He cruised to reelection in 1984 after the index swung from 59 in January 1983 to 104 in January 1984.

But it would appear seemingly impossible for Obama to duplicate the feat.

Employment increased by 4.1 percent during Reagan’s surge, according to the Bureau of Labor Statistics.

To match that, today’s economy would have to add 5.34 million jobs — almost 450,000 a month. Only a meager 18,000 jobs were created last month.

The disappointing jobs numbers feed into a vicious cycle for the president that the debt ceiling talks have complicated.

As discussions drag on to raise the debt ceiling and forge a long-term deficit-reduction plan with little signs of genuine progress, the GOP continues to chip away at Obama’s economic leadership. And as the economy sputters, Republicans continue to attack his policies.

Congressional Democrats and union leaders have also charged that Republicans are purposefully sabotaging the recovery, a claim the GOP has actively denied.

For instance, in a speech last month, Sen. Chuck Schumer (D-N.Y.) said the Republicans’ emphasis on slashing the budget has slowed the recovery while improving their own electoral prospects next year.

“The result is that Republicans aren‘t just opposing the president anymore,” Schumer said. “They are opposing the economic recovery itself.”

Polling indicates that consumers have responded to the partisan turmoil by cutting back on daily purchases.

Americans spent $69 a day last month, practically the same amount they averaged a year ago, according to survey data released last week by Gallup.

And there are even more alarming signs from the spending by upper-income consumers — those who actually have the disposable income to help spur the recovery. Their average daily expenditure was $124 in June. Top earners were spending $145 a day in May 2010.

Gallup’s chief economist, Dennis Jacobe, said the survey is more attuned to the consequences of political battling because it’s conducted daily.

“We’ve had such a long recession that the overall psychological level for the consumer is very fragile,” Jacobe said. “A lot of this battling that goes on creates uncertainty and has an economic effect.”

Ending the political bickering over the debt ceiling would be a positive step toward improving consumer confidence and, in turn, the prospects for Obama’s reelection, analysts suggest.

Kellstedt, for one, estimates that merely reaching a compromise could produce a two- to three-month bump in consumer sentiment.

The mere existence of an agreement matters more than its substance at this point, analysts say, because it would give the public enough certainty to start spending again.

“Economists can argue about whether it’s right or wrong,” Jacobe said. “Just having a definite direction would help a lot.”

People might not parse speeches or comb through the monthly jobs report to assess the president’s performance. But they do internalize feelings about whether there’s progress, said Democratic pollster Celinda Lake.

“This country needs to feel forward momentum,” she said, explaining the president could frame his economic message better, but “there is a reality that’s hard to contrast no matter what you say.”

Only Ronald Reagan managed to close a similarly sized gap in consumer confidence. He cruised to reelection in 1984 after the index swung from 59 in January 1983 to 104 in January 1984.

But it would appear seemingly impossible for Obama to duplicate the feat.

Employment increased by 4.1 percent during Reagan’s surge, according to the Bureau of Labor Statistics.

To match that, today’s economy would have to add 5.34 million jobs — almost 450,000 a month. Only a meager 18,000 jobs were created last month.

The disappointing jobs numbers feed into a vicious cycle for the president that the debt ceiling talks have complicated.

As discussions drag on to raise the debt ceiling and forge a long-term deficit-reduction plan with little signs of genuine progress, the GOP continues to chip away at Obama’s economic leadership. And as the economy sputters, Republicans continue to attack his policies.

Congressional Democrats and union leaders have also charged that Republicans are purposefully sabotaging the recovery, a claim the GOP has actively denied.

For instance, in a speech last month, Sen. Chuck Schumer (D-N.Y.) said the Republicans’ emphasis on slashing the budget has slowed the recovery while improving their own electoral prospects next year.

“The result is that Republicans aren‘t just opposing the president anymore,” Schumer said. “They are opposing the economic recovery itself.”

Polling indicates that consumers have responded to the partisan turmoil by cutting back on daily purchases.

Americans spent $69 a day last month, practically the same amount they averaged a year ago, according to survey data released last week by Gallup.

And there are even more alarming signs from the spending by upper-income consumers — those who actually have the disposable income to help spur the recovery. Their average daily expenditure was $124 in June. Top earners were spending $145 a day in May 2010.

Gallup’s chief economist, Dennis Jacobe, said the survey is more attuned to the consequences of political battling because it’s conducted daily.

“We’ve had such a long recession that the overall psychological level for the consumer is very fragile,” Jacobe said. “A lot of this battling that goes on creates uncertainty and has an economic effect.”

Ending the political bickering over the debt ceiling would be a positive step toward improving consumer confidence and, in turn, the prospects for Obama’s reelection, analysts suggest.

Kellstedt, for one, estimates that merely reaching a compromise could produce a two- to three-month bump in consumer sentiment.

The mere existence of an agreement matters more than its substance at this point, analysts say, because it would give the public enough certainty to start spending again.

“Economists can argue about whether it’s right or wrong,” Jacobe said. “Just having a definite direction would help a lot.”