Do economic jitters mean Democratic votes?

WASHINGTON (Fortune) -- "Bring it on!"

That was what a market veteran and Democratic strategist blurted out last week when I asked about the prospects of housing and mortgage woes provoking a recession. His remark sounded cynical, and it was (he quickly added that he hoped the economy remained strong). But it was also revealing: If economic fears emerge as a central voter concern in 2008, Democrats right now are best positioned to reap the benefits.

In the last presidential election, Democratic candidates tried in vain to appeal to voters' feelings of economic insecurity. They were trumped by a Republican mantle of strong "moral" leadership at a time of terrorist peril. Two years later, in congressional elections, the Democrats did prevail. But when voters were asked in exit polls about their motives, they ranked the economy third, behind the Iraq war and Republican scandal. Now, as the subprime mortgage mess hammers the economy - the Labor Department released surprise news Friday that 4,000 jobs were lost in August - that equation could change, with the economy moving front and center.

The last time the economy topped voter concerns was in 1992, when the first president Bush seemed disconnected from recession concerns, while Bill Clinton operated under the mantra devised by strategist James Carville: "It's the economy, stupid." During one 1992 debate, George H. W. Bush answered a woman's question about how the recession personally affected him with a clipped policy response. By contrast, Bill Clinton answered: "In my state, when people lose their jobs there's a good chance I'll know them by their names. When a factory closes, I know the people who ran it. When the businesses go bankrupt, I know them."

This year, the leading Democratic presidential candidates are taking a page out of President Clinton's "feel your pain" handbook, whether talking about uninsured Americans or the widening gap between rich and poor (driven, it should be noted, by the very rich becoming super rich, not the poor getting poorer, as newly released census data reveals). Until now, the White House has responded by churning out its own numbers, focusing on low employment and inflation, strong economic growth and productivity.

That will be an increasingly difficult case to make if Wall Street predictions that the economy is stalling come true. After the Friday news of August job losses, Democratic presidential candidates pounced. Senator Hillary Clinton declared that "the Bush Administration's simplistic supply-side economic strategy is not working for working Americans." Senator Barack Obama said "the administration's failure to lead while thousands of Americans found themselves in danger of losing their homes is now affecting the broader economy." And John Edwards, the most populist-minded of all the candidates, said "it's time for Washington to look past the needs of the special interests and put working families and the middle class first on the agenda."

On Capitol Hill, Democrats argue that Bush's proposal to give the Federal Housing Administration broader authority to help homeowners facing foreclosure doesn't go far enough. The Democrats are forwarding their own prescriptions. But well before the summer market jitters started, Democrats were mining voter unease about a shifting global economy.

So far, though, the Democrats' populist-protectionist prescriptions to address this anxiety is unmatched by the leading Republican presidential candidates, who, when they talk about the economy, mostly dwell on taxes. The Republicans ignore economic fears at their own peril. Even if the economy, as the White House argues, is strong enough to absorb short-term shocks from the subprime mortgage meltdown and housing contraction, there is a deeper story going on here: A majority of Americans tell pollsters they worry about their economic futures.

I asked President Bush about public anxiety over the economy - as it happened, on the eve of the August market turbulence. At first, he dismissed the question with his usual swipe at public opinion polls, and (correctly) pointed to a strong consumer confidence index. But when pressed, it was clear this was something that had weighed on the President's mind: "I understand there's unsettlement... I do understand there's disquiet out there."

The Iraq war was only one reason for this disquiet, he added. The other was a rapidly changing global economy in which people must constantly switch jobs, and even careers, to keep moving ahead. "If you're an older person that kind of turnover is disconcerting," he said. "This is a new economy that's growing. And no longer is it where you go to work for one company for all your life, and there's a sound pension plan and a health care policy to take care of you. It's a changing world we're in."

That's an acknowledgement of voter anxiety that would make a good start for any Republican presidential candidate looking for a robust answer to Democrats itching to "bring it on."