Americans Even More Pessimistic Ahead of Midterm Elections by Gary D. Halbert
FORECASTS & TRENDS E-LETTER
October 28, 2014
IN THIS ISSUE:
1. New Poll Sheds Interesting Light on Midterm Elections
2. More Americans Support US Ground Forces to Fight ISIS
3. Disillusioned Voters Could Lead to Election Day Surprise
4. No, President Obama, the Economy is Still Not Healthy
5. Fed to Meet Tuesday & Wednesday – 3Q GDP on Thursday
6. The 911 Memorial & Museum in New York Are Fantastic!!
New Poll Sheds Interesting Light on Midterm Elections
Republicans remain in a favorable position heading into the midterm elections. A new Wall Street Journal/NBC News poll released on Sunday showed that the GOP now holds an 11-point lead among “likely voters.” That’s up from only a 5-point lead a week earlier. Some 52% of likely voters want a Republican-led Congress, while 41% favor Democratic control.
Yet the economic outlook is unsettled amid unusually low voter interest, high dissatisfaction with leaders in Washington and a reordering of issues on voters’ minds, a recent Wall Street Journal/NBC News poll found. With the election just a week away, I will summarize the poll results for you below – without making any specific predictions on my part.
Voters’ excitement about the campaign hasn’t increased as Election Day approaches, defying the trend in recent years. The share of voters who see the country on the “wrong track” has reached the highest level ever (65%) in a midterm election year. And an election that once was thought to hinge on healthcare and other domestic issues is increasingly shadowed by international crises that weren’t on the radar just a year ago, Ebola among them.
Pollsters for both parties who conducted the survey predict Republican gains in the House and Senate, as the poll found that registered voters prefer a GOP-controlled Congress over a Democratic one, 46% to 44%. But they also said the unusually volatile environment, combined with the large number of close races for control of the Senate and governors’ offices, raised the potential for unexpected results.
“Something weird will happen on election night,” predicted Bill McInturff, the Republican pollster who conducted the survey with Democrat Fred Yang. “When you are sitting on top of an unstable, ticked-off electorate, there is a joker in the deck that ought to give us a little bit of caution.”
The slight preference for a GOP Congress comes amid continued low job-approval ratings for President Obama including a record-low 31% approval for his handling of foreign policy among registered voters, with 61% disapproving. The chart below illustrates Obama’s overall job approval rating.
Yet the GOP advantage is narrower than the 50%-to-43% edge the Republicans enjoyed at this point before the 2010 wave that gave them a majority in the House. The latest poll found that half of all voters have negative impressions of the GOP – a level higher than in September and close to the record registered during last fall’s government shutdown.
One of the wild cards in the final weeks of the midterm campaign is the rise of foreign affairs as an issue on voters’ minds. The fight against the Islamic State militants in Iraq and Syria ranked third among issues that voters said would be important in their vote for Congress, beyond job creation and breaking the partisan gridlock in Washington.
More Americans Support US Ground Forces to Fight ISIS
The poll also found support rising for the use of US ground forces to fight the Islamic State terrorists. Some 35% in the new survey said military action against the group should be limited to air strikes, with 41% saying it should include combat troops, as well. A month earlier, some 40% called for airstrikes only, with 34% saying the US should use combat troops as well as air strikes.
The outbreak of Ebola also is making an impression on voters, as 98% have heard or read about the deadly virus, a record level of awareness of major news events tracked by the WSJ/NBC polling. The poll of 1,000 registered voters was taken October 8-12, including the period when news was just emerging that a Dallas nurse had contracted Ebola.
The emergence of ISIS and Ebola as attention-grabbing issues underscores the uncertainty surrounding which factors will shape the final week of the campaign. “With all that is happening internationally, there can easily be an event that will define or redefine this election,” Mr. Yang said. ”This is a cake that’s not quite baked yet.”
Disillusioned Voters Could Lead to Election Day Surprise
Another wild card, and a symptom of voter discontent, is the growing appeal of third-party candidates. The poll found that voters are more likely than four years ago to say they would vote for Libertarian and Green party candidates if given a chance, with Libertarians drawing support from 9% of likely voters. The poll indicated that the presence of third-party candidates was a greater drag on the GOP than on Democratic prospects.
The poll comes as many Republicans are bullish about the prospects of gaining the net of six seats they need for a majority in the Senate, and of expanding their majority in the House. 52% of Republicans said they were more enthusiastic about this election than past ones, compared with only 40% of Democrats.
Yet when asked to rate their interest in the midterms on a scale of 1-to-10, only half rated their interest level as 9 or 10 – about the same as in a June poll. In 2010, those showing a high level of interest rose sharply from 51% in June to 61% in October.
That is just one indicator of voter disillusionment. Approval of Congress matched its record low of only 12%. One in eight said they would vote for a third-party candidate if they had a chance. Amid Mr. Obama’s low approval ratings, one-third of registered voters said their vote for Congress was intended to send a signal of opposition to the president. One-quarter said it was to send a signal of support to Mr. Obama.
Some 30% of registered voters said their representative deserves to be re-elected, while 57% said it was time to give a new person a chance. But half of voters said their own representative was “part of the solution” to problems facing the country, while one-third said they were “part of the problem.”
That underscores the phenomenon of voters often disparaging Congress but liking their own representatives, and it suggests the 2014 election could produce less change than the anti-incumbent sentiment would indicate.
Peter Hart, a Democratic pollster who worked on the survey discussed above commented, “They have told us they would lash out against the system, but it sure looks like more of the same. The voters roar like lions, but they vote like lambs.” He sure hopes so anyway!
Several of the Senate races that appeared to favor the GOP have narrowed in the last few weeks. Next Tuesday night could be a nail-biter for politicos on both sides of the aisle.
No, President Obama, the Economy is Not Healthy
I sometimes worry that I write too much about what is wrong with the current state of our economy. I make extra effort to write about positive developments that I see in the many economic reports I monitor on a regular basis, but they are often few and far between.
Yet every time I worry that I might be too negative, President Obama makes a flowery speech highlighting how the economy is so great, and certainly much better than when he took office. Well, duh, we were in the depths of the Great Recession when he took office – it doesn’t get much worse than that.
So when I hear President Obama claim that the economy is healthy, I can’t help but be reminded of a number of economic facts that don’t lie, like he does so often. At the top of the list is the fact that this is the slowest economic recovery in post-war history. Next, the labor force participation rate is at a 36 year low, and the overall rate of homeownership is the lowest it has been in nearly 20 years. At this point, almost half (49%) of all Americans are financially dependent on the government to some degree.
Let’s look at some other economic factoids (hat tip to ZeroHedge):
#1 After accounting for inflation, median household income in the United States is 8% lower than it was when the last recession started in 2007.
#2 The number of part-time workers in America has increased by 54% since the last recession began in December 2007. Meanwhile, the number of full-time jobs has dropped by more than a million over that same time period.
#3 More than 7 million Americans that are currently working part-time jobs would actually like to have full-time jobs.
#4 The jobs gained during this “recovery” pay an average of 23% less than the jobs that were lost during the last recession.
#5 The number of unemployed workers that have completely given up looking for work is twice as high now as it was when the last recession began in 2007.
#6 When the last recession began, about 17% of all unemployed workers had been out of work for six months or longer. Today, that number sits at just above 34%.
#7 Due to a lack of decent jobs, half of all college graduates are still relying on their parents financially after two years out of school.
#8 Based on a new method of calculating poverty devised by the US Census Bureau, the state of California currently has a poverty rate of 23.4%, the highest ever.
#9 According to the New York Times, the “typical American household” is now worth 36% less than it was worth a decade ago.
And there are more. Let’s continue:
#10 In an absolutely stunning development, the rate of growth in small business ownership in the United States has plunged to an all-time low. More small businesses are closing than are opening for the first time in American history.
#11 Subprime loans now make up 31% of all auto loans in America. Didn’t that end up really badly when the housing industry tried the same thing?
#12 The average cost of producing a barrel of shale oil in the United States is approximately $85 per barrel. Now that the price of oil is below that number, the “shale boom” in America could turn into a bust.
#13 On a purchasing power basis, China now actually has a larger economy than the United States does. But on other metrics, it does not.
#14 It is hard to believe, but there are 47 million people in the US that receive food stamps today.
#15 There are six banks in the United States that pretty much everyone agrees fit into the “too big to fail” category. Five of them have more than $40 trillion of exposure to global derivatives.
#16 The 113 top earning employees at the Federal Reserve headquarters in Washington D.C. make an average of $246,506 a year. It turns out that running a $4.5 trillion QE program that largely didn’t work is a very lucrative profession.
#17 We are told that the federal deficit is under control, but the truth is that the US national debt increased by more than a trillion dollars during fiscal year 2014, according to the Treasury Department.
#18 Finally, an astounding $40 million dollars has been spent just on vacations for Barack Obama and his family in the last six years, according to Judicial Watch. Perhaps he figures that if we are going down as a nation anyway, he might as well enjoy the ride.
Despite what President Obama claims, this five year-old recovery is still struggling. If our economy truly was recovering, there would be lots of good paying middle class jobs available. But that is not the case.
Fed to Meet Tuesday/Wednesday – 3Q GDP on Thursday
The Fed Open Market Committee meets today and tomorrow. There has been talk that in light of the recent stock market meltdown, the Fed might decide to continue its QE bond buying program a little longer. The St. Louis Fed president James Bullard, normally considered a hawk, recently suggested as much. So a lot of attention will be on the policy statement tomorrow at 1:00 eastern time.
In previous meetings, the FOMC has voted to end QE by the end of this month. Given the rebound in the stock markets last week, I expect the Fed to make good on its plan to halt QE when they vote tomorrow. Assuming that is correct, it could be another disappointment for the equity markets.
FYI, there will be no press conference by Fed Chair Janet Yellen following this meeting. The final FOMC meeting of the year will be on December 16-17, which will be followed by a press conference and remarks by Janet Yellen.
On Thursday, we get the first look at 3Q Gross Domestic Product. The pre-report consensus for the advance GDP report is 3% (annual rate). GDP rose by 4.6% in the 2Q. Most forecasters believe the solid gain in the 2Q was a rebound from the severe winter weather that slowed the economy in the 1Q. I would not be surprised if Thursday’s GDP report falls a little short of 3%.
In other economic news, sales of new and existing homes rose slightly better than expectations in September. Orders for durable goods rose 0.3% in September, slightly less than the pre-report consensus of 0.5%. The Consumer Confidence Index soared higher to 94.5 in October, up from 89.0 in September and well above expectations.
The 911 Memorial & Museum in New York Are Fantastic!!
On a personal note, Debi and I traveled to New York City on Thursday, October 16 for a long weekend. I have wanted to visit the 911 Memorial & Museum ever since they opened. We toured both on Friday, October 17. The 911 Memorial was simply awesome, and the 911 Museum was breathtaking. We spent over three hours in the Museum and could have spent even more.
I wish every American could see and treasure them as we did. Everything was so tastefully, artfully and respectfully done – from the stunning building itself, to the displays and to the various video presentations. Go see it if you possibly can!
We rounded-out our Big Apple trip by meeting up with my long-time mentor and his wife later that day for dinner, a Broadway show and then hung out together on Saturday in the city. It was a great getaway for us!
Very best regards,
Gary D. Halbert