Associated Press 10-16-06 Democrats favored when economy uncertain By JEANNINE AVERSA, AP Economics Writer 5 minutes ago WASHINGTON - The nation‘s economy has encountered its shares of bumps this year, and voters are uneasy. They‘ve seen the value of their homes drop and surging prices for energy and other goods take a big cut out of their paychecks. Never mind that gasoline prices have started dropping, that the value of their 401(k)s rises with each new Dow Jones industrial average record, and that the interest rates on their credit cards and adjustable mortgages have leveled off for now. "They watched gas prices come down but watched them go up just as precipitously not too long ago. The stock market is doing well but that doesn‘t mean it can‘t come crashing down in days. Voters are reluctant to be overly confident about economic trends," he said. America‘s voters care deeply about pocketbook issues. Eighty-eight percent of likely voters say the economy is an important issue — on par with the percentage of people who view the situation in Iraq and terrorism as crucial matters, according to an Associated Press-Ipsos poll. "One of the more remarkable things about the economy and politics, the party in power is punished when the economy is bad, but not necessarily rewarded when economic conditions are good," said Ross Baker, a political science professor at Rutgers University. Just 9 percent viewed economic matters as the top problem, the AP-Ipsos poll says. That‘s down considerably from a year ago when 24 percent said the economy was the biggest problem as the country was still reeling from the blows of the Gulf Coast hurricanes. Around 60 percent of likely voters say their local economies and their own personal finances are strong, according to an Ipsos poll conducted for RBC Financial Group. Some parts of the country are struggling, though. Unemployment in Ohio, Michigan and Mississippi, for instance, is much higher than the national figure, which dipped to 4.6 percent in September. The economy in the first three months of this year grew at a 5.6 percent pace, the strongest spurt in 2 1/2 years. Growth slowed to less than half that pace in the April-to-June quarter and is expected to be somewhat sluggish through the rest of this year. The slowing reflects the slump in the housing market, the toll of once skyrocketing energy prices and the impact of a two-year long string of interest rate increases by the Fed. The Federal Reserve ‘s goal is to cool the economy sufficiently to thwart inflation but not so much as to tip into a recession The federal budget deficit dropped to $247.7 billion for the 2006 fiscal year which ended Sept. 30. It marked the smallest amount of red ink in four years. President Bush pointed to the sm, , )‘s sexually explicit computer messages to male pages. "In this sea of bad news, they need some extraordinarily good news to turn the tide. If the election were held today, the Republicans would be beaten very badly," says Ken Sherrill, political science professor at Hunter College. Says Steffen Schmidt, political science professor at Iowa State University: "Good economic news is occurring and people aren‘t hearing it ....because it is being drowned out really by the noise of these other stories that are breaking so quickly." Associated Press manager of news surveys Trevor Tompson contributed to this story.