All too often, emotion and political expediency replaces rational economic sense and fiscally responsible actions. The political gridlock pits Republicans (ruling the House of Representatives) against Democrats (ruling the Senate and, of course, the Presidency). However, it is at state level that the most revealing battles are being fought – in a tough 5 month slog between President Obama and challenger Mitt Romney – to hit 270 electoral votes and get handed the keys to the most powerful office in the world. These battles have intriguing localised economic roots.
In a small, Midwestern state with just over 5.5m inhabitants, Republicans got an early chance to test their deficit busting ‘small government’, pro-private sector economic arguments to a restless electorate who, although demographically pro-Obama could be drifting toward Romney thanks to his economic message. The proxy battle waged recently in the $60m gubernatorial recall election in Wisconsin was an early warning shot at the Obama juggernaut – a recall initiated by over confident Democrats seeking to prematurely end the tenure of Governor Scott Walker (Republican), 18 months into his 4 year term. Walker won the June 5 election by 7% (53-46%) a wider than expected margin.
The whole recall, like the state itself, was a small but pivotal set piece in what is typically American economic theatre. Wisconsin is all about the power of unions or as the Americans say ‘Organised Labour’. In attempt to slash the states $3.8bn budget deficit, Walker and the state Republicans controlling the state legislature, voted in favour of Walkers first budget – restricting the collective bargaining rights of unions and sought to keep pay aligned with inflation among other things such as removing automatic union contributions from employee pay checks and making public workers pay for insurance. Bargaining power of unions, in challenging economic times, is always reduced – so goes the theory – as unions can’t hope to seek pay increases etc for union members in a state with 6.7% unemployment (the term ‘blood from a stone’ springs to mind). Unions as a result, as in other states, are suffering from waning power which in turn undermines traditional support for Democrats – something which President Obama’s team clearly acknowledges by his deliberate absence from campaigning in the state. The reason is simple – this race turned national – and when it comes to ‘economic policy’ at national level, Romney has the advantage.
In a rather open admission of weakness, challenger Tom Barrett (Democrat) continuously tried to make the recall about everything BUT the union issue. In essence, although a Republican activist group has declared “this battle is not about Wisconsin, its about America” – the same phrase could be used by Democrats. Walkers own message was succinct – effectively ‘states cannot continue to spend money they don’t have.’ This is the Republican ‘fiscal responsibility’ argument of 2012 consisting of promoting tax breaks and slashing spending to balance the books and spur private sector driven economic growth.
The Wisconsin result offers an insight into how economics is now impacting the US political math, rather than other way around as is usually the way. Walker’s win was a stunning Democratic own goal and has at least in some way undermined the Obama-Biden re-election campaign while vindicating Romney’s economic message at deep blue state level (in a state Obama won over McCain by 13%). It now means that grassroots conservativism (driven by increasingly maturing and pragmatic tea party-ism) can be energised, controlled and moderated such that the Republicans can clobber together a pluralist electoral coalition. Emboldened by this success, they will now undoubtedly ride a fundraising surge in blue states which will fund political infrastructure and start to hone state by state economic messages suited to each political climate. Walkers 22 offices in the state which were the launch pad for his success will now, with a slap of paint and some new signs, be quickly transformed into Romney HQs, putting Wisconsin’s 10 electoral votes firmly in play with Democrats on the back-foot.
Of course, this might not last. It does however reveal that the economic messages of both parties are polarising electorates across the country and, despite conventional political wisdom, it means a rightward shift at state level might just be bubbling under the surface buoyed by an economic ‘deficit busting’ message rather than a purely political one (support Obama, etc). Its also true to say that the divisive process of political ‘divide and conquer’ this time is a far cry from the hope and change of inspirational candidate Obama in 2008. Advantage – Romney. Why – A winning economic message.