1. Cook’s Tour of American Politics and Economics Published February 13, 2013 Updated August 26, 2015 National Journal Presentation Credits Contributors: Charlie Cook, Cook Political Report Editor Producer: Katharine Conlon, Alexander Perry Director: 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.

2. When you think economics, think elections; When you think elections, think economics. - Edward Tufte, Political Control of the Economy (1978) 2

3. Roadmap for the Presentation 3 Economic Vital Signs American Politics

4. Economic Growth Just Now Returning to Normal Levels Real GDP Percent 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%

5. Pessimistic Forecast Consensus Forecast Optimistic Forecast Reported Figure Estimated Quarterly Change in GDP from Blue Chip Economic Indicators Nearly Average Growth Projected for Foreseeable Future Source: 5 Source: Bureau of Economic Analysis, 2015; Blue Chip Economic Indicators, July 10, 2015. 1972-2002 Average: 3.2%

6. 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%

7. past 4 years of data Ultimate Sign of Pessimism: Birth Rate Down People Deciding to Defer Starting or Expanding a Family Source: CDC, National Vital Statistics Report, June 17, 2015 7 Births per 1000 women aged 15-44 years 62.9 births U.S. General Fertility Rate (Births to Women Aged 15-44 Years)

8. Interest Rates at Historic Lows Savers Punished and Borrowers Rewarded with Low Returns Source: St. Louis Federal Reserve, August 25, 2015. 8 Interest Rate Quarterly Percent 3-Month Treasury Bills Interest Rate 10-Year Treasury Constant Maturity Rate Interest Rate Quarterly 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 Rate7.7% 3.0% 1976-2006 Average 2007-2015 Average

9. Higher Expectations for Interest Rates Reflect Improved Growth Expectations Source: Blue Chip Economic Indicators, July10, 2015. 9 Estimated Quarterly Interest of Three-Month Treasury Bills From Blue Chip Economic Indicators Pessimistic Forecast Consensus Forecast Optimistic Forecast Reported Figure 1972-2002 Average: 6.4%

10. Higher Expectations for Interest Rates Source: Blue Chip Economic Indicators, July 10, 2015. 10 Estimated10-Year Treasury Constant Maturity Rate From Blue Chip Economic Indicators Pessimistic Forecast Consensus Forecast Optimistic Forecast Reported Figure 1972-2002 Average: 8.1%

11. 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%

12. Inflation Projected to Stay Low No Signs of Reaching Higher Levels Source: Blue Chip Economic Indicators, July10, 2015. 12 Estimated Quarterly CPI for All Urban Consumers From Blue Chip Economic Indicators Pessimistic Forecast Consensus Forecast Optimistic Forecast Reported Figure 1972-2002 Average: 4.8%

13. 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+ weeks 14.6% Unemployed 15-26 weeks

14. past 5 years of data Unemployment Dropping Unemployment Direction is Positive Source: St. Louis Federal Reserve, August 7, 2015. 14 Actual Year-to-Date Unemployment Rates Current level: 5.3%

15. Forecasts Predict Continual Decrease in Unemployment Forecasted Quarterly Rate Nearing 5% Source: Blue Chip Economic Indicators, July 10, 2015. 15 Pessimistic Forecast Consensus Forecast Optimistic Forecast Reported Figure Estimated Quarterly Unemployment From Blue Chip Economic Indicators 1972-2002 Average: 4.8%

16. Deficit Problem Stems from Both Increased 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%

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 Inflation-Adjusted (Billions of Dollars) *Estimate * *

18. 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 headed in the right direction, or do you feel things are off on the wrong track?”

19. 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

20. 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 Index Conference Board’s Consumer Confidence Index ® Michigan/Reuters Consumer Sentiment Consumer Confidence Index ® and Consumer Sentiment Consumer Sentiment = 92.9

21. Roadmap for the Presentation 21 Economic Vital Signs American Politics

22. Congressional Partisanship Frames Fiscal Fights Source: Senate.gov, 2014; Office of the Clerk of the House of Representatives, 2014; CNN, 2014. 22

23. past 5 years Congressional Approval Hovers Near Three-Decade Low Source: Gallup.com, Aug 5-9, 2015. 23 Congressional Approval Rating 14% 82%

24. Public Opinion Split on Democratic Party Source: NBC/WSJ Poll, July 26-30, 2015. 24 NBC/WSJ Thermometer: Democratic Party 38%

25. Public Holds Negative Opinion of GOP Source: NBC/WSJ Poll, July 26-30, 2015. 25 NBC/WSJ Thermometer: Republican Party 28% 44%

26. Share of Self-Described Independents Grows at Expense of Both Parties Source: Gallup.com, 2015. 26 Gallup’s Party Affiliation Survey Responding to question: “In politics, as of today, do you consider yourself a Republican, a Democrat, or an independent?” 41% Independents 31% Democrats 27% Republicans

27. 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 Number of Seats

28. 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 ApprovalGallup’s Presidential Job Approval 51% 44%