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Democrats' Loss May Be Obama's Re-Election Gain

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With the interim Congressional elections and the attendant enormous media attention over, the political pundits will now turn their focus to the Presidential elections two years from now. Republicans have captured around 58 seats in the House, giving them majority control and about six seats in the Senate, leaving the Democrats with a very small majority. The natural tendency will be to think of how this large-scale loss by his party weakens President Obama's chances in the next presidential election. The Republicans will call it a referendum on Obama's presidency and see it as a message from the electorate to replace the President. Indeed, Senate Minority Leader Mitch McConnell has publicly stated that the main focus of the Republicans in the next two years will be to defeat Obama for President.

Dispassionate analysis of the voters' choice shows three important elements in their decision. First and foremost, the vote was a reflection of broad based unhappiness with the state of the economy. Whatever argument can be made that without Obama's economic program the situation would have been worse, the fact is that the unemployment rate of around 9.6 percent which does not reflect the large numbers of people who are not working but have opted out of seeking jobs, coupled with the underemployment of many others is just not acceptable to the American electorate. The second factor is the pain of millions of people who have lost their homes in foreclosure, are in default on their mortgages or, at the least, have seen a sharp decline in the value of their homes which for many represent their major asset. Here, again, it matters not that the situation would be even worse without the Obama government's programs. In absolute terms it is unacceptable. The third factor is the anger and concern about the enormous deficits that the Federal, State and local governments are experiencing on top of an ever expanding debt that will burden generations to come. The voters don't care that the Obama Administration inherited a very large part of that debt from the Republican party of President Bush who helped create it by fighting an expensive war while reducing taxes. They also don't care that part of that debt was incurred to halt the hemorrhaging by the financial sector, to slow the plunging unemployment rate and to help the housing sector. The debt is piled up on us and that's that.

One would think and certainly hope that the incoming victorious party would have programs at the ready for solving each of the three pervasive problems that won them the vote. The voters are in for a shocking disappointment. Whatever the merits of the Republican candidates may be, the one clear fact is that not one of them has a solution to the three issues that got them elected. There is no Republican solution for raising employment significantly, for improving the value of homes or for reducing the debt. And, unfortunately for our nation, there is none. As I pointed out previously, our country started to lose the jobs years ago for a combination of reasons, including manufacturing activities going offshore and our inability to compete with lower cost countries as well as technological innovations that increased productivity requiring fewer employees. Our home values were inflated by an uneconomic bubble that has burst and will not return. Our debt was incurred by wars that did not advance our cause or safety, combined with reduced revenues because incomes dropped and taxes were lowered. In short, the incoming Republican legislators, like their fellow Democrats have no way to solve the problems. The truth is that there can be no solutions without sharp changes in the four controlling budget items: the social security system, Medicare, military expenditures and taxes. This will require painful readjustments of our way of life and our standard of living. So far, no party is prepared to tell the American people that truth.

What does this mean for Obama's reelection chances two years from now? The electorate will be even angrier and more disappointed in the failure of their newly chosen Republican representatives to ameliorate their problems. If Obama is able to turn that anger to advantage and run against the Republicans as Harry Truman did in 1948, painting them as a "do-nothing Congress," he will improve his chances for reelection. He will end up in a better position than if the Congress had continued to be controlled by the Democrats and failed to solve the three unsolvable problems facing the American people.

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