If you play sports long enough, every now and then you wind up in a game where every break goes against you. When you are in such a situation, you eventually feel as if you’re going to lose no matter what happens.

Resident Scholar Kevin A. Hassett

It seems like Republicans have found themselves in that nightmare as we approach the November congressional elections. Every break you could possibly conceive of has gone against them. And things you couldn't conceive of have broken against them, too.

The news on Iraq provides a steady drone of negativity. Scandals such as the one surrounding Representative Mark Foley and Speaker Dennis Hastert’s handling of the mess are landing at a time that will maximize their negative political impact.

As the bad news piles up, the one thing Republicans could count on was a strong economy. Growth was high, unemployment low and tax revenue surging. Last week, however, it became clear the economy may well be turning against them as well.

The employment report showed the U.S. created only 51,000 jobs in September. That is certainly not a sign that a hard landing into a recession is around the corner. Rather, it’s more consistent with the view that we are entering a soft landing, with growth low enough to moderate inflation pressures, but not so low that we need fear recession. So the number is good news, reassuring those who believed that the Federal Reserve stopped raising interest rates at the correct time.

Mark Zandi of Moody's Economy.com called it a “perfect number.”

Hard on Republicans

But a soft landing for the economy may deliver a hard landing for Republicans. There is no question that individuals look at their own personal economic circumstances as the election approaches, and base their votes on how they feel the economy is doing. If the data turn sour, then voters will vote for change.

The seminal study in this area was performed by Yale University economist Ray Fair, who studied presidential elections back to 1916 and found that a model that used economic data to predict the outcome nailed every election except for Bill Clinton's victory of 1992. Fair’s model also had a fairly high margin of error in the 2004 election, yet he still accurately predicted President George W. Bush as the eventual winner. His model gets the most bang for the buck out of inflation and gross domestic product. When these are doing well, incumbent parties tend to win.

Bad Timing

It is likely that the same analysis extends directly to congressional elections. A stronger economy helps the incumbents because voters believe that economic success is an indication of fiscal policy success. While Bush's tax policies do appear to have been successful, the problem is that tax cuts have not been the only game in town. The Fed’s efforts to slow economic activity appear to be kicking in at exactly the time that is most relevant for the next election.

Let's look at Fair’s most important variable, GDP. The weak jobs number in September suggests there is significant slowing in economic activity. How much? In response to a question following a speech before the Washington Economic Club, Fed Chairman Ben Bernanke said the decline in the housing market could take a percentage point off of GDP growth during the next few quarters.

If that reduction began in the third quarter, which followed a mediocre second-quarter growth rate of 2.6 percent, then we might well be looking at third-quarter growth in the neighborhood of 1 percent to 1 1/2 percent. That isn't a recession, but it is a very disappointing number, well below the average growth over the past 20 years of about 3 percent.

“October Surprise”

Bernanke's growth expectations were echoed by the president's chief economic adviser, Al Hubbard. Hubbard said he expected GDP to range between 1 percent and 2 percent in the third quarter. And forecasters for Goldman Sachs Group Inc. and Alliance Bernstein Holdings pared their third-quarter growth projections to 2 percent or less.

And here is the kicker for Republicans: The data calendar indicates that GDP for the third quarter will be reported by the Bureau of Economic Analysis on Oct. 27, right before Americans enter the voting booths.

You might call it the “October surprise,” but in this case, economists will have seen it coming. Republicans, who have found themselves in the political equivalent of a nightmarish ballgame for some months now, will probably not be surprised that this break has gone against them as well.

Kevin A. Hassett is a resident scholar and the director of economic policy studies at AEI.