America Votes - Three Months Out

America Votes - Three Months Out

I wonder if Bill Clinton’s master campaign strategist, James Carville, ever thought that his maxim “it’s the economy stupid” would be trotted out on news broadcast after another, 20 years after coining it. It may be a simplistic phrase to describe the trials and tribulations of election-year politics, but in this exceedingly close Presidential Election, it’s shaping up to be an apt summation.

We all know that the American economy has been in ordinary shape since the onset of the Global Financial Crisis, but certainly no one in President Obama’s Administration would have hazarded that it’d be this poor going into a re-election contest. GDP growth is only at 2.2% (as of the June 2012 quarter, annualised) and unemployment remains stubbornly above 8% (for the 42nd straight month) at 8.3%. With these figures alone, nearly 3 years on from when the National Bureau of Economic Research’s declaration that the recession ended in June 2009, one would imagine a voting public prepared to toss out the incumbent and opt for a new direction.

While the polls do give former Massachusetts Governor Mitt Romney an advantage on who would be a better steward of the economy, the general consensus is that the President still holds a small, but consistent lead in the popular vote.[1] So what could explain this disparity, in an election meant to be entirely about the economy? One thing that we must always remember about American Presidential Elections, is that they aren’t just 1 national election but rather 51 state-by-state (or by district for Washington, DC) elections all held on November 6th. When we look at the economies in some of the key swing states and the issues at play there, we can start to develop an understanding for why Obama holds his, albeit tenuous, lead.

Consider a state like Michigan, where Mitt Romney was born and raised and his father served as Governor; he should be competitive, right? Not necessarily the case as the President enjoys a mid single-digit lead in most polls conducted in the state. When looking at the Michigan economy over the course of the Obama Administration we observe that unemployment peaked in the state at 14.2% in August 2009, at the depths of the downturn in the automotive industry, but today sits at 8.5%, broadly in line with the national figure. Many economists and commentators commend Michigan’s solid recovery primarily due to the bailout of the major car manufacturers by the Obama Administration, a policy that Romney famously opposed in a New York Times op-ed. Another beneficiary of the auto bailout, Ohio (one of the main swing states), has showed in its polling a slight, but consistent lead for the President.

Other key swing states like Virginia and Iowa both enjoy impressive unemployment rates of 5.6% and 5.1% respectively. Moreover, each of these states has specific jobs-related issues at play on the campaign trail – Virginia, a state heavily reliant on federal defence spending could face significant job cuts if planned defence cuts are acted upon and Iowa, a state that heavily utilises alternative energy is facing an internal debate about tax credits for wind energy, a topic on which Romney and the Republican Governor, Terry Branstad, disagree, creating a vacuum in which Democratic supporters of the President can proclaim him as the candidate of alternative energy.

Then again, not every swing state has an economy that is performing solidly, or even remotely well. Nevada, an ethnically diverse state ravaged by the bursting of the housing bubble is still in the depths of significant economic stagnation: unemployment sits at 11.6%, down from a high of 14% in October 2010. Whilst one would reckon this would be set up perfectly for a Romney victory, polls again give Obama a slight advantage, due to strong support amongst the Latino community.

Ultimately though, there are some significant nationally-based issues that will play an integral role in deciding the fate of Obama and Romney on November 6th – some worthy of serious debate, others far less so.

For most casual observers of the election campaign to date, it would be a challenge to cite specific policies that either Obama or Romney are advocating, but it’d be far simpler to highlight the numerous critiques posed by each candidate of their opponent. Romney has seemed to hang most of his campaign on a critique of Obama’s belief in the principles of free enterprise, whilst Obama has spent most of his time hounding Romney for his tenure at Bain Capital and the lingering questions about his tax returns.

So whilst these debates take place on the airwaves of ordinary Americans’ TVs from night-to-night for the next three months, some critical issues for the American economy still remain unresolved. The budget deficit still remains the source of much political gridlock in a Congress that has increasingly gained the reputation of being highly ineffective and more interested in serving ideologies rather than finding solutions; primarily due to the impasse over who ought to be taxed (if anyone) to help raise revenues in concert with cutting spending. Place this alongside the needed debates about healthcare, energy independence and the sluggish housing market, and you have a wealth of economic issues not being properly discussed by the candidates.

The ultimate question that Americans must ask themselves on Election Day is, are they prepared to give the President 4 more years to finish the job he set out do in 2008? Or are they so dissatisfied with their country’s course, that they’re prepared to vote in a man with an impressive resume but is deeply unpopular and oft-lambasted for lacking basic political convictions? These are important questions for the American public to consider, because the answers will determine the fate of a country and its course in the years to come.

The electoral process in the United States, is a riveting roller-coaster ride of bitter debates and a litany of potential game-changing moments (could this election be decided by the fate of the Eurozone?). Although I for one am unceasingly fascinated by it and the intricate dynamics at play, the quality of debate between these two very capable politicians could be of such a higher calibre. Because ultimately, the course of the American economy still weighs heavily on many countries around the world.

[1] Nate Silver from FiveThirtyEight (The New York Times), gives the President a 50.7% to 48.3% advantage in his popular vote forecast. This has remained virtually static since he launched his forecasts in late May.