Can the Economy Save Mitt Romney?

By Michael Duffy and Karen Tumulty

Until he pulled into his home state of Michigan, Willard Mitt Romney was the Frankenstein monster of the 2008 Republican sweepstakes. The former Massachusetts governor at times seemed less like a real person than a strange, inauthentic collection of market research, body parts and DNA that had been borrowed from past G.O.P. campaigns and assembled in a lab by the party's mad scientists. Romney had the overpowering optimism of Ronald Reagan, the family values of Dan Quayle, the hair and handsome looks of Jack Kemp and the manners of George H.W. Bush. On paper, each piece of the Romney contraption was designed to appeal to a different part of the scattered G.O.P. coalition. But the overall formula wasn't working as expected. Romney placed second in Iowa and New Hampshire, despite pouring millions of his own fortune into the race. His rivals among the other candidates neither liked nor respected him, and that dynamic was beginning to show up in televised debates. Michigan would be where he regained his footing -- or just got buried.

Then, in just the latest in a string of unexpected developments in the G.O.P. race, Romney found himself -- after a fashion, anyway -- and began to talk more naturally, like a candidate who knew why he was running, after all. He crisscrossed the state telling its depressed electorate that the auto industry was not dead and could be revived with the help of government investment and eased federal standards for fleet fuel economy. He turned down the social-values music and amped up the optimism. Romney was aided in the gambit by rival John McCain, who was delivering a much grimmer message: the lost jobs were gone forever, and Michiganders needed to think harder about worker retraining. McCain -- who had joked in New Hampshire that "the issue of economics is not something I've understood as well as I should. I've got Greenspan's book" -- seemed to have little feel for Michigan's pain or the forces that were driving it.

Given that choice, Michigan primary voters, who picked McCain over Bush in 2000, abandoned their hero in droves. The result was a decisive victory for Romney, who took 39% of the vote to McCain's 30%. (Former Arkansas governor Mike Huckabee won 16%.) "Tonight," Romney declared in Southfield on election night, "marks a victory of optimism over Washington-style pessimism."

Romney, attuned to the state's love-hate relationship with Washington, promised to protect Detroit from higher government fuel-efficiency standards. But in a move that may not play so well with small-government Republicans outside the state, he also suggested that the feds could be Detroit's savior, by bringing in billions in new federal investment. At a rally in Grand Rapids, Romney demanded to know, "How in the world can the Federal Government sit back and watch a state suffer year after year after year?"

Romney 3.0 What happened in Michigan may be a signal of how the presidential race unfolds in the months to come, first as each party picks its nominee and then as the two winners square off in November. The pocketbook is back in a big way on the presidential campaign trail, rocketing past the Iraq war to the top of voter concerns. "For every candidate in either party, this is the supermarket-checkout moment: Do you get it? Do you understand what people are going through?" says Bruce Reed, who ran the policy shop for Bill Clinton's It's-the-economy-stupid campaign in 1992. "Candidates who feel voters' pain and have a plan to deal with it will do well in this environment. And those who don't, won't."

Romney, the Harvard M.B.A. and longtime venture capitalist, has always been more comfortable talking about economics and solutions than social issues or foreign policy. With its punishing 7.4% unemployment and its automobile industry in a tailspin, Michigan was as friendly an environment as he was likely to find. It is one of only two states in the country that lost population last year, as job seekers fled elsewhere, and the only one in the country with a shrinking gross domestic product. Macomb County, whose swing voters were the original "Reagan Democrats," once led the state in housing starts; it now sets the pace for foreclosures in Michigan.

And then there were the candidate's boyhood roots. Romney grew up in opulent Bloomfield Hills, outside Detroit, at a time when Michigan was one of the most prosperous states in the nation. His famously moderate Republican father George had been elected governor three times in the 1960s and had run against Richard Nixon for the G.O.P. presidential nomination in 1968. Even after 40 years, the family name retained some brand value. At every stop he made in his Mitt Mobile (a souped-up RV), Romney drew on his memories of those days and reminded voters that if elected President, he would not "need a compass to tell me where Michigan is."

But for the normally stately Republicans, Romney's rebirth plunges the G.O.P. race deeper into chaos. The party has now held three major contests in three weeks and each has produced a different winner. Though Romney leads in the delegate count, he is not well positioned in the next big primary, in South Carolina, where Huckabee and former Tennessee Senator Fred Thompson have grassroots support.

After that, the race moves on to Florida, where Rudy Giuliani, who largely skipped the first three states, has parked himself for several weeks, is spending heavily from a war chest thought to be at least $4 million and hopes to catapult ahead of his rivals with a win. Then comes the 21-state vote on Feb. 5, where some, but not all, of the states award their delegates on a proportional basis. Depending on who wins what, all that could prolong the search for a winner, raising the possibility that the party might enter its August convention with no candidate having captured a majority of the delegates.

Anxiety Attack The question Romney faces now is whether to stick to his new economic message as the race heads south -- and whether it has any purchase outside of Michigan.

Knowing what to say to voters about the economy used to be an easy enough proposition for Republicans. "In the 1970s, it was inflation, and other than that, it's been jobs," says former Congressman Vin Weber, the Romney campaign's policy chairman. "Everybody learned their lines about the economy from a pretty simple script." So long as economic growth was somewhere north of 3%, unemployment under 5% and inflation contained at 3% or lower, Weber says, "we'd all look at them and say, 'That's all you need to know.'"

It's not that straightforward anymore. Voters see the larger forces at work. More and more economists are declaring the country to be on the verge of a recession, if not in one already, thanks to the collapse of the housing industry. There are trouble signs in just about every economic indicator: tapped-out consumers spending less and unemployment and inflation creeping up. All this is layered on top of worries over rising health-care costs, oil prices that have the typical household spending $1,300 more on gasoline a year than it did five years ago. Then there is the growing realization that globalization has given China and India some control over America's economic destiny, which means the future might feel uncertain even to voters who are doing just fine now.

But the precise nature of the economic anxiety that is keeping Americans awake at night can be very different, depending on who they are and where they live. Job losses are dragging down real estate prices in industrial-belt states like Michigan, Ohio and Wisconsin. But the reverse is true in states like California, Florida and Nevada, where the collapse of a speculative real estate market is threatening jobs. In the Northeast, voters are more concerned about the impact of soaring energy prices on the cost of their home heating oil. That makes it harder for presidential candidates to wrap their arms around the issue, even as voters are demanding that they do. "It is one of those periods where there is a lot of unevenness," says former Congressional Budget Office director Douglas Holtz-Eakin, who is an adviser to the McCain campaign.

Democrats have always had an advantage when it comes to connecting with anxious and angry voters during bad economic times. The leading Democratic candidates have rushed forward in recent weeks with proposals for stimulus packages: one-time jolts designed to put government money quickly into the pockets of consumers. But they are largely academic exercises, given the fact that by the time the next President is inaugurated, it would probably be too late for any of them to do any good. What they are designed to do is signal to voters what kind of reflexes these candidates would have if they were facing this set of circumstances from the Oval Office.

Each candidate's proposal reflects the overall thrust of his or her campaign: John Edwards, who was first to release an economic-stimulus plan, has the most populist approach, focusing on such measures as assistance to unemployed workers and weatherizing homes. Hillary Clinton unveiled a detailed proposal shortly after her New Hampshire primary victory that showed off her economic expertise by putting more emphasis on the mortgage-lending crisis. And Barack Obama's solution was the most broad-based of the three, relying heavily on tax cuts and rebates to try to jump-start the economy.

That Republicans are even talking about the economy's woes at all is a relatively new development. As recently as October, in their debate in Dearborn, Mich., the candidates were content to point to positive job-growth numbers and downplay any problems as being the effect of local conditions that could be solved with the standard-issue G.O.P. economic prescriptions of tax cuts and less regulation.

Even now, most of them still haven't figured out how to address the economic concerns of voters. Says Romney adviser Weber: "Republicans are having a harder time finding their voice in this changed economic environment." When McCain was asked at the most recent Fox News debate in Myrtle Beach, S.C., what he might offer as a short-term, immediate fix to stave off a recession, he replied, "The first thing we need to do is stop the out-of-control spending." While curbing government spending is a good idea as a matter of policy, and a sure-fire applause line with Republicans, it is precisely the opposite of what many economists would prescribe for giving the economy an immediate boost.

One Republican abandoning the usual G.O.P. talking points has been Huckabee, who has sounded a more populist tone. "One thing a presidential candidate ought to be doing is acknowledging the 800-lb. gorilla that's in the room with us," he says. "It's astonishing to me when I hear the people in our party just act as if the economy is doing superb, and there's no issue to worry about. Too many Americans potentially could go into foreclosure on their homes. That has a rippling effect on the economy." Huckabee's prescriptions for giving the economy a quick boost, however, are hardly detailed or groundbreaking. The most he has done is issue a set of five principles that he calls "family, fed, fight, fuel, fair" and that sum up positions he had previously taken.

That sounds more like a bumper sticker than a platform, and it's not likely to be enough as the primary season heads forward into more states where voters are looking for real answers. It's still the economy, and no one can afford to be stupid.

With reporting by Ana Marie Cox/Michigan, Rani Molla/Washington, Michael Scherer/South Carolina and Jyoti Thottam/New York