07/23/2012 03:03 pm ET Updated Dec 06, 2017

Election Monitor: 106 Days to Go in This Prizefight and Romney Still Standing

If this election were a prize fight, we are four rounds in and team Obama has delivered haymaker-like blows to the head and body of Governor Romney for 3 months, but the presumptive nominee is still standing. In fact, the only thing that has changed in 90 days is that this election may actually be closer than it was in April. The President is running about 2 points ahead of Romney at this time. With 106 days to go, the race for the Presidency is a slug fest that is only going to get tougher and tighter.

In almost every respect, it has been an awful three weeks for the Romney campaign. The Governor is on the defensive regarding his tax returns. While the campaign is sticking to a strategy on this, the communications effort has been haphazard. Additionally, the Obama campaign's ads on outsourcing jobs and offshore bank accounts are taking a toll. They suggest to viewers that Romney does not "care about people like me." Last week, Romney surrogate John Sununu finally suggested that Obama needed to "learn how to be an American." Clearly, he misspoke the message of the day, but it was part of a pattern of strategic and tactical miscues.

All of this comes when the Obama campaign is firing on all cylinders. They made an early and smart strategic decision in the spring to assume the worst on the economy and make Romney an unacceptable alternative. You have to give credit to Axelrod and the campaign team. They have been nearly flawless in executing a plan to demonize Romney. They also set out to define Romney before he had a chance to do so himself. Of course, as Charlie Cook smartly pointed out, the Romney team aided their cause by never spending on biography spots to establish a positive narrative for the Governor. Team Obama spent heavily in the spring on television advertising, outspending the Romney effort 2 to 1 from April through June. The Obama campaign had no choice but to go negative and they did so with the most aggressive attack from a sitting President in modern history. Then why are they not 5-7 points ahead? Because the macro-environment is killing them.

Here is our up-to-the-minute assessment of the political and economic environment:

  • Spain is in a potential economic free fall and it will impact the U.S. As of 2:00 pm EST, the Dow Jones industrial average fell 120 points as European debt crisis flares. The euro hit record lows last week as economists speculate that the Spanish government will ask for a bailout. The problem is debt and borrowing costs (sound familiar?). Spain's stock index fell nearly 6 percent. The unemployment rate in Spain is 24 percent. This is a political powder keg and the effect will be felt in America.
  • The biggest driver of the 2012 election, the economy, is still stuck in Park. The unemployment rate remains at 8.2 percent, essentially unchanged from the 8.1 percent rate in January. And the latest WSJ survey of economists has an aggregate forecast that the rate will still be at 8 percent next December. The latest GDP growth predictions for the remainder of this year are also grim: 1.7 percent growth in Q2 and 2.1 percent in Q3, well short of the level needed to get back on track to pre-recession levels. By comparison, even during the tepid mini-recovery from Q4 2009 - Q2 2010, we averaged 3.8 percent GDP growth.
  • The trend to the Presidential trial heat is flat. Romney had momentum briefly after wrapping up the GOP primary but the balance has been more or less locked in place since early to mid-May. As we said earlier given how much Obama has outspent Romney these last couple of months, however, it's significant that Romney's deficit has not increased. This tells you that the above macro-environment is trumping Obama's tactical victories. Below is our trend based on all publicly available polling data.
  • That doesn't diminish the strides President Obama has taken forward in terms of improving his job approval. For the first time since Bin Laden was killed, Obama's has reached a break-even approval rating. This is significant. He is moving toward the re-elect zone when his approval is in the 48-50 percent level. The question is whether it can continue an upward trajectory.
  • The tax return issue is probably a lot more important than the Bain tenure controversy. The problem for team Romney is that the failure to release his returns suggests that the Governor is not willing to be transparent. This feeds into some pre-existing beliefs that he is an elitist and this is exactly what team Obama is trying to push. On the other hand, the Bain tenure issue is more nebulous and perhaps problematic for the President because the campaign went too far with campaign spokesperson Stephanie Cutter calling it "a felony". They may come to regret that attack.
  • The Romney camp continues to say there will be no pick for VP anytime soon and we are inclined to believe them. While Romney was attending a fundraiser with one potential running mate, Bobby Jindal, his adviser Eric Fehrnstrom was quick to point out that "no decision has been made," fueling speculation even further, although the WSJ's anonymous sources are saying the same thing. Following the example set by Reagan with his pick of Bush in 1980, all modern candidates have waited until the media build-up in the weeks leading into the national party conventions--or even after the convention--to announce their VP. This strategy also works to provide a funding boost right at the end of the summer, before the fall spending blitz begins in earnest.
  • Romney is winning the headline money-raising race, but a deeper look shows an uncertain picture. As the Center for Responsive Politics data shows, Romney has now raised more than Obama for two months in a row. In June, Romney and his party committee raised106 million,35 million more than Obama and the DNC, who took in71 million. In May, Romney and the RNC raised17 million more than Obama and the DNC. But at the end of May (the most recent available data), the Obama campaign had about110 million in cash on hand, compared with just17 million for Romney after spending heavily in the GOP primaries. Romney is also spending more on fundraising expenses: through May, 25 percent of his outlays are going to fundraising expenses, while Obama's online, grassroots focus means his fundraising costs are just 5 percent. Our take is that Obama is currently in the stronger financial position--as also evidenced by his recent uptick in spending. However, if Romney is able to continue to take in more money - while keeping his expense ratio reasonable - he could be in a much stronger position than Obama by the end of the summer.
  • Obama's decision to suspend deportation of young illegal immigrants who came to the U.S. as children is a winner for 2012 and beyond. While Obama clearly said "this is not amnesty" and not a path to citizenship for illegal immigrants, this is a calculated move driven by the recognition that senate Republicans would continue to block the DREAM Act, which would implemented these changes and others as law. This is a sharp reversal from the previous policies of the White House, which had actually stepped up deportations over the past three years. With 91 percent of Latinos supporting the DREAM Act and the broader American electorate also supporting these provisions, we think Team Obama saw this as a clear winner with voters and decided to act independently. While the disregard for Congress's mandate will not win Obama many friends on the Hill, even among Congressional Democrats, this is a solid tactical move for his reelection. It also has the broader impact of bolstering a key component of Obama's brand in these "wrong track" times: he is able to portray himself as a champion of the people against an intransigent Congress. And with their approval rating still in the teens, running against Congress is definitely a winner. Looking further ahead, the changing demographics of the United States and the likelihood of an eventual path to citizenship for the millions of Hispanics currently here illegally make this a potential watershed win for Democrats in future elections.
  • Race will again be important in 2012 but perhaps not in the way you think. For Romney to win, he must hold the line with minority voters but the key will be to outperform McCain among whites. As John Ellis observes, Obama is only supported by 35 percent of white voters, an eight point drop from 2008 where he received 43 percent of the white vote. Who are these eight percent of voters Obama has lost? They are primarily female, married and living in the suburbs--yes, it looks like the "soccer moms" who were critical to Clinton's reelection have returned. The fact that these voters backed Obama four years ago means they could still very easily return to the fold. But if Obama is still at 35 percent with whites in September, he's on the path to defeat.

There are currently 11 states in the toss-up category that we consider to be up for grabs. We'll be highlighting one in each Election Monitor over the coming weeks. To start, here are somethoughts on North Carolina:

  • Obama won North Carolina by just 14,000 votes (half a percentage point) in 2008, the first time a Democrat had carried the state since Jimmy Carter in 1976. Obama took a risk by investing substantial time and money in a state that had been considered hopeless for Democrats in 2000 and 2004 and may have caught Republicans off-guard.
  • With North Carolina one of the easiest pickups for Romney to improve on McCain's map, you can count on the Tar Heel state being fiercely contested. This is magnified by the state's demographics: despite swinging to Democrats, it is not brimming with persuadable voters. Both candidates will work hard to mobilize their supporters, which should result in some bruising ads and other tactics.
  • While 2008 was a stunning victory for Obama, the past four years have not gone quite so well for Democrats in the state. Governor Bev Perdue, who rode Obama's coattails to victory in 2008, has chosen not to seek reelection in the face of her dim prospects. The top two operatives in the state party have been disgraced following a sexual harassment scandal.
  • One bright spot for Democrats in North Carolina is that Charlotte will host the national convention in September. The DNC will use this as not only political theater but also a major opportunity to engage with local voters--they recruited 25,000 volunteers in Colorado at their 2008 convention in Denver.
  • Horserace polling shows Obama and Romney have been locked in a statistical tie for months.
  • Romney's favorability rating indicates Tar Heel voters may not be enthusiastic about his candidacy. Now at 41 percent, it is not abysmal, but still six points lower than Obama's job approval rating. While this is up from 29 percent in April, this post-Santorum bounce indicates voters may be accepting him only grudgingly. This is probably related to Romney's woes with evangelicals; they make up 71 percent of Republican and independent voters in the state.
  • The vote last month to explicitly ban gay marriage in North Carolina has set up a stark contrast for voters. While largely symbolic, this legislation came on the heels of Obama's announcement that he supported equal marriage rights for gay Americans, setting up a clear contrast on this issue. And while most voters are concerned about the economy almost to the exclusion of all else, this could be a particularly important factor with the evangelicals who are so numerous in the state.

We will be back in two weeks. Thanks again to John Zirinsky and Allison Quigley for their contributions to this analysis. Follow us on Twitter: @Steve_Lombardo.

Please note that the author was an advisor to the Romney for President campaign in 2008, but is not affiliated with any campaign in 2012.