Virginia's Good Economy Can't Help Republicans

Whoever thinks good economic stewardship is the key to winning elections should take a closer look at the governor's race in Virginia.

Whoever thinks good economic stewardship is the key to winning elections should take a closer look at this year's two gubernatorial races, where the truth is anything but.

In both Virginia and New Jersey, the Republican Party is trying to hold on to the governor's office. Here's the catch: In New Jersey, Chris Christie will almost certainly win despite bungling the economy; in Virginia, Republicans look set to lose despite a reasonable record on the same front.

Virginia term limits mean its governor, Bob McDonnell, can't run again -- probably a relief to his party, as McDonnell is caught in a scandal over taking money from a local businessman. Running instead is Attorney General Ken Cuccinelli, a social conservative and Tea Party favorite who made his name nationally by opposing Obamacare.

The latest polls show Cuccinelli is trailing his Democratic opponent Terry McAuliffe by 10 points. There are plenty of reasons for that, starting with a federal shutdown that's reminding voters about the drawbacks of the Republican policy agenda.

What makes Cuccinelli's struggling campaign all the more remarkable is the relatively good economic record of the McDonnell administration, as measured by the Bloomberg Economic Evaluation of States, or BEES. That index tracks a state's performance from a range of angles, including the housing market, employment, income, tax revenue and stock prices.

(For those who don't have access to the Bloomberg Terminal, you can see a version of that data here.)

By those measures, Virginia under the current Republican administration has done fairly well. From the time McDonnell became governor in January 2010 through the first half of this year, Virginia's economy placed 35th in the country on the Bloomberg index.

That may not sound great, but remember Virginia was hurt more than most by sequestration, which cut spending for most federal government programs. The only other state with a comparable level of federal workers is Maryland, which did even worse over the same period, rating 40th in the country.

It's hard to hang sequestration on the necks of Virginia Republicans, so a fairer way to look at the success of McDonnell's administration is to track the state's performance from the time he took office through the end of last year, just before the federal cuts took effect.

Here, Virginia comes out 29th overall, ranking near the middle of the pack for personal income, home prices, employment and tax revenue. It's in the best third of states for mortgage delinquencies, but near the bottom of the list for the performance of its publicly listed companies.

McDonnell credits his economic success with using tax credits to draw businesses to the state, along with limited regulation. Cuccinelli has been understandably reluctant to call his candidacy as an extension of McDonnell's term, but his proposals follow the same vein: low taxes, minimal regulation and capped government spending.

Obviously, "29th in the nation" isn't the stuff that campaign slogans are made of. But it beats Virginia's neighbors; over the same period, Maryland ranked 47th and North Carolina 44th. It also beats the state's performance under McDonnell's predecessor, Democrat Tim Kaine, during whose tenure Virginia ranked 34th.

Under normal circumstances, Virginia's modest economic success under a Republican administration would be cause for some partisan boasting. Instead, that success, coupled with McAuliffe's shortcomings, highlights how much damage the party has done to itself, first with McDonnell's implosion and then by choosing a candidate riding an anti-government wave that may be cresting, at least in the parts of Virginia that Republicans need to win.

That could mean Virginia, where McDonnell was once discussed as a presidential candidate for 2016, will still be the precursor of a national trend -- just not in the way Republicans hoped.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

    To contact the author on this story:
    Christopher Flavelle at

    Before it's here, it's on the Bloomberg Terminal.