For once I sold a house at the right time:

New-home sales fell more steeply in July than economists forecast, and the number of unsold houses climbed to a record, deepening a slump in an industry that fueled economic growth for five years.

Purchases of new homes, which account for 15 percent of the market, dropped 4.3 percent to an annual pace of 1.072 million, the Commerce Department reported yesterday.

That followed a report the previous day showing that sales of previously owned dwellings had dropped to the lowest point in more than two years.

[...]

"Housing is coming off in a big way," said Martin Feldstein, a Harvard University economist and chief executive of the National Bureau of Economic Research. "That will be a drag on the economy."

Some people are talking about the possibility of a so-called "hard landing" from the housing bubble. In other words, a recession. I know next to nothing about economics, so I have no opinion on landings, hard or otherwise, but I know a little bit about politics.

If we go into a recession the conventional wisdom about 2008 being a foreign policy election may end up being wrong. Candidates need to make sure they have some economic policy positions worked out, and some strong pocketbook talk worked into their stump speeches well before the Iowa caucuses. You can't come late to the money issues and have any credibility.

It would hurt Joe Biden (assuming he has any support to hurt) and Bill Richardson and Russ Feingold. Could help John Edwards or Mark Warner, but could also help Hillary who can allude to the economic good old days of the Clinton years. It would make it tough on McCain or Giuliani who are almost exclusively about foreign policy and "good government," and would cast a pall over Republicans generally.

Two years from now if we're still in Iraq and things there still don't look good, and if gas prices are still high and the value of home equity is falling, a Republican ticket of Jesus and Moses won't be electable.

This entry was posted by Michael Reynolds, on Friday, August 25, 2006. You can leave your response.