Bad economy? Good for the Tea Party.

Kentucky Tea Party hero Rand Paul scores a knockout victory over Republican Trey Grayson. Before that, Utah Senator Robert Bennett loses to a Tea Party-fueled Republican insurgent. Is the lesson here the rise once again of the Republican right?

Not so fast. Arkansas Democrat Blanche Lincoln is also in a tough fight – threatened from the left by Lt. Governor Bill Halter. In Pennsylvania, newly-minted Democrat Arlen Specter is in a heated battle with an opponent on his left. Meanwhile, thirteen-term Democratic representative Paul Kanjorski is challenged by 36-year-old Corey O’Brien – who’s waged a spirited campaign from his RV, accusing Kanjorski of being too tied to Wall Street.

Okay, so maybe all this signals increasing strength on both political extremes?

Not really. To the extent these races represent anything at all (and it’s easy to read too much into early races), it’s a swing against the establishment.

Kentucky’s Trey Grayson was handpicked by Mitch McConnell, who campaigned vigorously for him, as did Dick Cheney. The President and other Democratic notables came to the aid of Blanche Lincoln’s and Arlen Specter.

It’s the economy, stupid. American politics is turning anti-establishment because so many Americans feel screwed by the economy and they blame the establishment. If there’s a trend here, it’s not left-wing Democrats versus right-wing Republicans. It’s the “Mad-As-Hell” Party against both.

Unemployment continues to haunt the middle class – the anxious class of America. There are still more than five jobless workers for every job opening.

But it’s also low wages. The much-vaulted first quarter of this year produced zilch in terms of wage growth. Private-sector hourly earnings rose at a .4 annual rate while prices climbed at about a 1 percent – leaving most workers with less purchasing power than they had when the quarter began. The only reason weekly earnings showed any growth at all is because some workers put in more hours.

What does all this portend for November’s midterm election? Unless the economy moves into high gear, and unless America’s anxious class feels substantially better, incumbents are in trouble.

But the probability of the economy moving into high gear between now and then is not great. Consider that almost eighty percent of the increase in GDP in the first quarter was due to the growth of consumer spending. Where did consumers get the money if their real hourly wage dropped? From drawing down their savings. Obviously, they can’t continue to do this. Had consumers not spent their savings, the GDP would hardly have grown at all

In fact, if you exclude temporary boosts like the government stimulus and the restocking of company inventories, the U.S. economy would not have grown in the first quarter. As these temporary boosts fade later this year, consumer spending is the only thing that will keep the economy going. But consumers won’t be able to spend what they don’t have.

Some economic cheerleaders predict employers will increase wages as their profits grow. That’s nonsense. With five jobless workers for every job opening, employers are under no pressure to raise wages.

Other cheerleaders say the stock market’s rise will boost consumer spending and confidence. That’s nonsense, too. How many consumers feel richer because the Dow is up from what it was at the start of the year? They may see a bit of a rise in their 401(k)s, but their biggest asset is their homes, and housing prices are going nowhere. One out of four Americans with a mortgages now owes more than their house is worth.

The real lesson from today’s political races is the economy still stinks for most people. And the real lesson from the economy’s first quarter is the recovery is so weak that the anxious class is likely to remain anxious through November. Incumbents beware.

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