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2014 Election Realities

By Dr. David Schein — A groundswell, also called a “wave” in the media, has swept the Republicans (“GOP”) into control of the US Senate and increased their lead in the US Congress. The implications for the next two years with Obama in the White House and beyond have lead to a number of quick prognostications from various sources. For the GOP, it is important to understand the opportunities and perils of the current situation. This could lead to a much improved environment for business in the United States. Or, it could lead to a continued moribund economy and GOP losses as big as their recent gains in the next national election.

  1. The GOP in most cases did not so much win as the Democrats lost by being saddled with a President with low overall approval ratings of about 40% favorable with a substantial unfavorable of just over 50%.
  2. The GOP has to face the fact that they are saddled with two uninspiring leaders in McConnell and Boehner.
  3. By a wide margin, the number one concern of voters was the economy. Yes, all other issues were half as important or less relative to the economy. Interestingly, the President has argued that the economy is not that bad. Well, statistics may tell one story, but the people know how much money they have in their pockets. This limp recovery claims to have reduced the unemployment rate below 6%, but this manufactured government statistic has reached a point of irrelevancy. The employment rate in the USA is below 63% and that is a much more relevant statistic. It is also hard to evaluate how many employed people feel locked in their jobs or are working part-time when they would prefer a real full-time position. The number of new business start-ups, an important statistic for job creation and economic growth, is also at a 30 year low.
  4. Due to the importance of the economy, if the GOP fails to make progress in real terms with jobs, increased income and job security, this could turn into a flash in the pan for the GOP rather than a real shift in public support.
  5. Obamacare continues unpopular with a significant margin of the public. However, it is unlikely the GOP can repeal it with the current President poised to veto any such proposal. The GOP has a majority, but is unlikely to garner enough Democrat support to override such a veto, which would require a 2/3 vote by both houses of Congress. Despite the campaign rhetoric, this issue was only a major factor for about a quarter of the voters. Real healthcare reform requires a lot more than being against this unworkable law.
  6. Immigration reform, again, was frequently mentioned in the recent campaigns, but the polling indicates that it was not a high priority for voters.
  7. A new potential GOP presidential candidate arrived on the scene with the reelection of Scott Walker in Wisconsin. How he will play in two years is of course anybody’s guess today. In turn, Maryland’s Democrat governor, another mentioned as a presidential contender, lost and in practical terms is now off the list.

So, here is a suggested path forward for the new majority in Washington:

  1. An unbridled wall-to-wall push to do everything possible to really encourage business expansion in the USA. It will not be enough for the GOP to say that the President will not sign bill X or bill Y. The GOP will have to compose bills that appeal to a broad range of the public and that will be difficult for the President to veto without political consequences. This blog is too short to delve into the possible bills, but there is no shortage of options.
  2. While McConnell and Boehner will initially lead their respective houses, both should be encouraged to transition to future leaders and bow out gracefully well before the end of 2015. In turn, the GOP must follow the 2008 Democrat lead and produce a legitimate primary that produces a candidate that the majority of both conservatives and independents can support. That may or may not be Scott Walker, but the list of those who will not meet that standard is unfortunately fairly long, (Chris Christie and Jeb Bush come to mind). If the GOP cannot avoid good men, but disastrous presidential candidates, like Bob Dole, John McCain or Mitt Romney, then their victories on November 4 will be meaningless in the long term.
  3. The fact is that medical care in the USA costs too much and while outcomes are reported to be very good, they are better for some than others. It is possible the reported quality of our health care is focused on success with extreme cases and not with the day-to-day and preventive care which would help the majority of Americans. Obamacare failed since it was clearly a political ploy and not based on the economics or science of medicine. Realistically, there are not enough hospital beds, doctors or other medical care providers to even touch the services promised by the law’s proponents. And, despite its misnomer, the “Affordable Care Act,” it has increased the cost of medical care for most. The real hit will come in 2015 and 2016 due to unauthorized delays in its implementation by the Obama Administration. As such, not only will the GOP need to come up with ways to strengthen the economy and expand employment, they will also need to do it while the true costs of Obamacare hit the same business community that needs to deliver the jobs.
  4. Immigration reform may indeed turn out to be the “red herring” of the most recent election cycle. Due to security concerns increased by the aggressive and inhumane actions of ISIS and other terrorist groups, now is an excellent time to come up with a safety-oriented program for US borders. The clear compromise path is secure the borders, deport the alien criminals once they serve their sentences in this country and make sure they do not return, and then develop a sensible procedure that processes all legal immigration applicants before processing persons here illegally.

David Schein,MBA, JD, Ph.D.

Visiting Assistant Professor-Cameron School of Business, University of St. Thomas

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