Will Local Issues Dominate Midterm Elections?

Date: September 15, 2014

The still-struggling U.S. economy and other national political issues may play a larger role.

It’s election time and speculation is underway, not
just for 2014 but for 2016. The big question is how much the economy will
matter in the midterms, which typically are driven more by state and local
issues. The economy is not doing very well: The GDP posted one of the largest
quarterly declines ever in the first quarter, falling nearly 3 percent (annual
rate). Unemployment is 6.1 percent, lower than earlier years, but historically
high. There are 9.5 million officially unemployed people. How will they vote?

Another 6 million want a job but are not looking
and are not counted as unemployed. Eight million part-time workers want a
full-time job but can’t find one. Just what these people will do in the voting
booth is anyone’s guess. Many are concerned about the “disappearing middle
class.”

The economy could play a larger role in this
midterm
than it usually does because of the slow recovery, the high
unemployment rate and the large number of underemployed and discouraged
workers—in some cases highly concentrated in politically important states.
While the national average unemployment rate is 6.1 percent, California,
Michigan and Illinois are at 7 percent or higher. New Jersey and New York have
unemployment rates just below 7 percent. These states are typically Democratic
strongholds.

But for most voters, the economy has been less of
an issue. They have their jobs, and inflation is still low. However, there are
a host of other issues unrelated to the economy. The latest Reuters/University
of Michigan survey of consumers shows only one in 10 thinks government policy
is “good”; more than 50 percent say “bad.” Among small business owners, only a
few think now is a good time to expand. Of those who say it is a bad time to
expand, the second-most frequently cited reason is the political climate. Owner
optimism is still at recession levels. Washington, D.C., is a political mess. The list of
festering problems is long: the IRS, the National Security Agency, the Mexican
border crisis, Benghazi, Obamacare, the terrorist prisoner swap—all very
national in nature and all unusually intense.

Typically, the out-of-power party gains in midterm
elections, and this one will be no exception. Still, the president and his team
will hold the reins of power, able to veto any legislation passed by a
Republican Congress, should that even occur. Pres. Barack Obama will be able to
continue to make important appointments (including to the Supreme Court) for
the next two years. That suggests the next few years will probably still look pretty
much like this year.

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