Jan. 26 (Bloomberg) -- President Barack Obama is testing his populist message on a trip through five electoral battleground states where he is trying to persuade voters to stick with him even as their economic prospects remain clouded.
From the rescue of the U.S. auto industry to the housing crisis, Iowa, Arizona, Nevada, Colorado and Michigan showcase the challenges on Obama’s path to re-election. He won all but Arizona in 2008, and his fortunes this year may ride on whether voters there agree with him on the outlook for the economy.
“Today, three years after the worst economic storm in three generations, we are making progress,” Obama said at a manufacturing plant yesterday in Cedar Rapids, Iowa, the first stop on his post-State of the Union tour. “Our economy is getting stronger.”
What progress there has been in the five states hasn’t been enough to recover all the losses from the recession. In Iowa, Arizona, Nevada and Colorado, the unemployment rate is higher than when Obama took office. Nevada’s jobless rate is the highest in the U.S. at 12.6 percent, well above the national rate of 8.5 percent in December. Michigan’s decline is largely due to the reduction in the state’s labor force.
Adding to Obama’s challenge, the economic health of the states, like the nation as a whole, is at least somewhat dependent on forces beyond the administration’s control, including the European debt crisis and swings in energy prices driven by geopolitical forces such as rising tension with Iran.
“Every one of these states’ future is contingent on the effectiveness of our political leaders both home and abroad,” said Diane Swonk, chief economist at Mesirow Financial Inc. in Chicago. “They represent the unevenness of the recovery.”
Obama is taking a populist approach to even things out. From Osawatomie, Kansas, where he invoked Republican Teddy Roosevelt in a Dec. 6 speech, to the House chamber, where he delivered his State of the Union address, Obama talked about “fair play” for middle-income Americans and getting the wealthy to pay a “fair share.”
“There’s a lot of economic insecurity, and there is some sense that there is unfairness in the system,” said George Edwards, author of “The Strategic President: Persuasion and Opportunity in Presidential Leadership.” “If you’re appealing to those who feel that way, populist rhetoric may resonate. Whether or not it does resonate at the moment is an open question.”
Modest Growth Forecast
Obama’s campaign isn’t counting on a dramatic acceleration of the economy. The Federal Reserve Open Market Committee yesterday said it expects “modest” growth over coming quarters and that “the unemployment rate will decline only gradually.”
Since World War II, only one U.S. president -- Ronald Reagan -- has been re-elected with a jobless rate above 6 percent. Reagan won a second term in 1984 with 7.2 percent unemployment on Election Day, having dropped almost 3 percentage points in the previous 18 months.
“Elections are always about the future,” said Thomas “Mack” McLarty, former chief of staff for President Bill Clinton. “So if the trend line is favorable, admittedly not as maybe strong as the president and others would like, that’s still a very strong talking point.”
That argument may leave an opening for Republicans.
“That’s a hell of a campaign slogan: ‘Things could have been worse and therefore re-elect me,’” said Ken Duberstein, former chief of staff under Reagan. “The Republican argument: ’We can do better’ flies.”
Obama has 10 months to make his pitch to voters.
The area that may take the most convincing is housing. While he announced an initiative in his State of the Union speech to make it easier for eligible homeowners to refinance their mortgages, over the last three years Obama has failed to halt the slide in home prices or the rise in foreclosures that began in 2007.
Obama was in Arizona yesterday and is in Nevada today, the two states that lead the nation in the percentage of residential homes that are worth less than the loans they secure -- 58 percent in Nevada and 47 percent in Arizona, according to data provider CoreLogic Inc.
Economic trends are most promising at the beginning and end of Obama’s trip: Iowa, where the unemployment rate is 5.6 percent, the lowest of the states he is visiting, and Michigan, home to the U.S.’s revived auto industry.
Iowa is buoyed by rising net income for corn, soybean and wheat growers and improved cattle, hog and milk earnings. Farmland values in the state were 31 percent in the third quarter of last year, according to the Federal Reserve Bank of Chicago.
Even so, Iowa relies on exporting its products domestically and internationally, according to David Swenson, an economist at Iowa State University in Ames.
“We are stuck in neutral right now waiting for the national economy to pick up steam,” he said. “If the EU goes into recession or if the nation continues to limp along, we will limp along as well.”
Obama’s fourth stop is Colorado, where the unemployment rate is 7.9 percent and the foreclosure rate is relatively low.
Obama highlights Michigan as a success story brought about by the government rescue of General Motors Co. and Chrysler Group LLC. The state’s economy is recovering from the recession at the second-fastest pace in the U.S., lifted by the auto industry revival and local manufacturers, according to the Bloomberg Economic Evaluation of States Index, which uses data on real estate, jobs, taxes and stock prices to gauge growth.
“GM is number one in the world again; Ford is investing in new plants; Chrysler is on the mend,” Obama said yesterday in Chandler, Arizona. “The American auto industry is back.”
In December, Michigan’s unemployment rate was 9.3 percent, down from 11.3 percent at the start of Obama’s presidency. The percentage of mortgages in foreclosure or seriously delinquent at the end of the third quarter also declined.
Some of Michigan’s improvement reflects the severity of its fall. Thirty-five percent of the state’s residential homes are underwater, according to CoreLogic, and Michigan has lost almost 300,000 manufacturing jobs over the last decade.
Even as GM, Chrysler and Ford Motor Co. are adding production shifts, the bailout of GM and Chrysler engineered by Obama isn’t universally celebrated.
“The state has not completely turned around and many people here harbor a deep resentment over the government intervention in the auto industry,” said Patrick Anderson, chief executive of Anderson Economic Group LLC in East Lansing, Michigan.
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