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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