Political economics

A total of $2.03 billion was spent on the 2010 elections, according to the National Institute on Money in State Politics. This represents $22.51 per voter.

Republicans expended $9.8 million, or 48.1 percent of the total, compared to Democrats’ $7.9 million, representing 39 percent of the political campaign funds.

The Republicans increased to 239 House seats, compared to 187 Democrats with nine undecided as of now. The U.S. Senate final count reflects 46 Republicans with one race remaining undecided. State governors now comprise 29 Republicans and 17 Democrats, with three races undecided and one independent.

There is no question that a lot of money was spent, and perhaps the argument can be made that there was a correlation between the campaign expenditures and the election outcome. But there was much more that the tremendous saturation of campaign advertising could not change. These were economic issues.

Hebert Research’s public policy research theory was once again confirmed that voting decisions are based on emotion and justified by economic performance. Fear, anger, frustration and even desperation were implicit most of all in response to the slowing economic recovery: the last quarter’s GDP growth of only 1.7 percent, a 9.6 percent unemployment rate, and an anemic economic stimulus program.

Current national and local polls reported that 58 percent of the public felt the economy was going in the wrong direction, and 54 percent believed the stimulus bill had not worked.

Based on a research review of the past four decades, economic recessions and high unemployment clearly result in major political party charges. However, the statistical correlations are unclear regarding the declines in unemployment.

For example, in 1974, the president’s party at midterm lost over 50 seats in the House but the unemployment rate decreased from 6.6 percent to 5.9 percent. A total of 22 seats were lost in 1982 while the unemployment rate increased to 10.8 percent. Only a few House and Senate seats were changed, but the unemployment rate declined from 6.9 percent in 1986 to 6.2 percent in 1990 and 5.6 percent in 1994.

However, in 1994, the number of Senate and House seats changed by 60 combined and the unemployment rate declined further to 4.4 percent in 1996, according to the U.S. Bureau of Labor Statistics.

Improving the economy for the next two years and, especially, reducing the unemployment rate will be difficult. The next major unemployment rates will be derived from the massive public sector deficits at the federal, state and local government levels.

Currently, the percentage of federal spending in the GDP has risen to 24 percent from 19 percent just a few years ago. At all legislative levels there will be major debates and perhaps delays in decisions for all non-entitlement and mandated budgets.

Increasing consumption is problematic with consumer confidence remaining low at a 67 index, minimal increases in consumption, and high unemployment. The solution will most likely result in an increase in capital through increasing equity and debt financing to Main Street — the local markets such as Bellevue and Kirkland.

Fortunately, there are significant funds waiting on the investment sidelines. The constraints to releasing this capital into the private sector will be a function of reducing risk and regulation while retaining good financial controls.

Jim Hebert is the president and founder of Hebert Research, Inc., an international real estate, land use and statistical research firm in Bellevue.

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