Republican Pitch on Robust Economy a Hard Sell in Regions Left Behind

(Bloomberg) -- Republican Claudia Tenney has a good news message about a robust U.S. economy for voters in her central New York congressional district. It’s a hard sell, though, in a region where jobs are disappearing and salary increases are small.

That’s created an opening for Democrats to target the first-term congresswoman -- an ardent supporter of President Donald Trump who voted for last year’s tax cuts and to repeal Obamacare -- in a key race that will help determine whether the GOP maintains control of the U.S. House.

"Gas is expensive, groceries are very expensive, any consumer good seems to be expensive," said Danielle Clemens, 47, who lives in Tenney’s district and edits a newspaper for seniors. Clemens said her family hasn’t seen benefits from the tax law and she’s backing Tenney’s challenger, Democratic state Assemblyman Anthony Brindisi.

The tale of two very different economies -- one national and one local -- goes to the core strategies of both political parties as they fight for control of Congress in the Nov. 6 elections, when every House seat and a third of those in the Senate will be on the ballot. An early skirmish in the battle for congressional control takes place Tuesday in central Ohio, where a special election is being held to fill an open seat in a longtime Republican stronghold. Four other states are holding primaries.

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From battered industrial towns in New York to farmlands in central California, Democrats are highlighting regions that were struggling before Trump took office and haven’t bounced back. Republicans are focusing on the national economy and highlighting parts of the country that are booming.

Republicans say their policies, including their tax cut and regulatory rollbacks, have helped create a prosperous economy. Democrats, hoping to win at least 23 seats to gain control of the House, say economic growth is mainly helping businesses and the wealthy while the middle class struggles under sluggish wage growth and rising costs.

The Republicans’ argument is boosted by elevated confidence thanks to individual and corporate tax cuts on top of a long run of steady hiring, unemployment rates near the lowest level since 1969, second-quarter economic growth that was the strongest since 2014, and rising household wealth since Trump became president. The S&P 500 Index is up about 6.6 percent this year and is close to overtaking the longest bull run ever.

"The good economic news is going to give Republicans a strong tailwind heading into the midterm elections," said Minnesota GOP Representative Erik Paulsen, chairman of Congress’s Joint Economic Committee and a five-term incumbent facing a competitive re-election bid. "People always ask, ‘Are we better off than we were two years ago?’ And the answer is yes."

But Democratic candidates across the country are taking on incumbents like Tenney by saying that residents of their districts aren’t seeing big benefits. For instance, in California’s Central Valley, unemployment is well above the national average and rising gas prices are eating into disposable income gains resulting from the tax cuts. In Nebraska and Michigan districts, where jobs and manufacturing growth data show a stronger economy, Democrats say rising health-care costs caused by Republican policies are eating into gains.

"When I talk to people, they say they are not feeling the economic prosperity," said Senator Martin Heinrich of New Mexico, the top Democrat on the Joint Economic Committee. “Americans are not seeing the wage growth that they were promised from the tax cuts."

The White House has said cutting the corporate tax rate would result in an immediate jump in wages and ultimately would increase incomes, on average, by $4,000 a year. But so far, even the strong labor market isn’t delivering bigger paychecks for American workers. Nominal hourly wages have grown an average 2.6 percent annually since Trump took office, while real earnings -- wages after adjusting for price gains -- stagnated.

There was zero or negative job growth between when Trump took office in January 2017 and June in metropolitan statistical areas associated with 14 House districts where the nonpartisan Cook Political Report says Democrats have a chance to flip a seat from Republican control.

Those districts include Tenney’s, which stretches from the Pennsylvania border to Lake Ontario and includes small Rust Belt cities like Utica and Binghamton, along with rural areas with dairy, corn and cattle farms. Health care and social assistance is the most dominant category of employment, according to Census Bureau estimates.

In a Democratic state, the congressional district has more registered GOP voters and backed Trump in 2016. The congressional race will test voters’ loyalty to the president, whose national approval rating stood at just 41 percent in Gallup’s most recent weekly tracking poll.

A Tenney television ad says she’s fighting for the president’s agenda, which will lead to "better jobs, higher wages, a growing economy, middle-class tax cuts."

Yet the Utica-Rome region and the Binghamton region have together lost more than 3,000 jobs since the president took office. Average weekly wages in Oneida County, which includes Utica, rose by $22 from 2016 to 2017 to $813 per week, well below the national average of $1,109 per week last year, according to the Bureau of Labor Statistics.

“What I have been hearing from voters on the campaign trail, as I do town hall meetings across the district, is wage increases have not been as robust as promised," Brindisi said. "People are seeing their wages remain flat at a time when costs are going up from everything from gas prices to cable bills to prescription drugs."

Tenney’s campaign manager, Raychel Renna, said in a statement that Brindisi backed “failed economic development schemes that grossly underperformed job creation and rubber stamped reckless tax hikes” while the GOP tax cuts have created jobs.

Rich Bucci, 63, a former mayor of Binghamton and a retired school administrator, said the region is struggling, but that the president’s agenda needs more time. "If the tax cuts stay in place and the economy continues to grow as it is, you are gonna start to see that start to impact upstate New York," said Bucci, who supports Tenney.

While Republicans like Tenney have touted the tax cut as an economic boon, Brindisi and his supporters say that most of the benefits are going to companies, not workers.

A June 27 Politico/Morning Consult poll found that 37 percent of registered voters nationally support the tax law, and only 25 percent of registered voters have noticed an increase in their paychecks.

Another district with a weak economy that Republicans are struggling to defend is in Northern California, where five-term incumbent Republican Jeff Denham is facing Democrat Josh Harder.

The district includes a rural area dependent on agricultural exports and the urban Modesto metro area, where unemployment was 6.1 percent in May, compared with 3.8 percent nationwide.

Harder is arguing that Republican-backed policies are costing residents -- including weakening the Affordable Care Act, the tax law’s cap on deductions for state and local taxes and property taxes, and Trump’s trade war with U.S. allies and China.

"All of the recovery statistics that you see, a lot of that is driven by the success in urban America, which is great," Harder said. "But places in the country have been significantly left behind, and those places are places like us."

Denham said "there’s room for improvement," and called for the passage of the second phase of the Republican tax bill, which would make individual tax cuts permanent. He said that though unemployment is high, it has improved under Republican policies.

“We’re still in one of those areas of the country that has higher unemployment than the rest of the country, but we are at 8 percent instead of 18 percent," he said in an interview. "We are bringing new people into the job market."

Denham’s district, like the rest of the country, is getting hit with higher gas prices. In the Modesto metro area the average price for a gallon of regular gas is $3.43, up from $2.80 one year ago.

Higher oil prices will cost the average family $440 this year, diminishing potential benefits from the tax measure, a June 29 report from S&P Global said.

“It’s certainly eating into some of the gains," Denham said. "Gas prices affect people in their pocketbook.”

Of all the costs potentially dragging down gains from the economy, Democrats in many districts have focused on rising health-care costs. They’re blaming Republican policies -- like the tax law’s repeal of Obamacare’s individual mandate penalty -- for contributing to rising prices.

In February, the federal government projected U.S. health-care prices this year will outpace economy-wide inflation for the first time since 2010, with personal health expenditures rising 2.2 percent.

A debate on the issue is unfolding in a tossup district outside Detroit where candidates are vying for a seat being vacated by Republican David Trott.

Haley Stevens, a Democrat, said gains from a boom in manufacturing are being overtaken by health-care costs. "What I’m hearing from everyone is that our health-care costs are through the roof," said Stevens, who served on President Barack Obama’s U.S. auto rescue team.

In a Nebraska congressional district covering the Omaha metro area, Democratic nominee Kara Eastman has made rising health-care costs a centerpiece of her campaign to unseat incumbent Don Bacon.

Bacon has pointed to the region’s 2.9 percent unemployment rate, below the national average. Eastman, who backs a single-payer health-care system, has said health costs are eating into gains seen by residents. The race is competitive but the Cook Political Report says Bacon has the advantage.

"I’ve talked to many people in our community who say that while they got a small boost from the tax cut, that was outweighed by increases in health-care premiums," Eastman said in an interview. "So many people are working two to three jobs to make ends meet and are struggling with child care."

Bacon said health-care costs have gone up, though Republican health legislation passed by the House last year, but not the Senate, would have lowered costs. He said that Democrats as a whole are "distorting" the economic landscape.

"The numbers are good out there and if the Democrats acknowledge it they feel they’re going to lose," Bacon said.

--With assistance from Shobhana Chandra.

To contact the reporters on this story: Arit John in Washington at ajohn34@bloomberg.net;Erik Wasson in Washington at ewasson@bloomberg.net;Alex Tanzi in Washington at atanzi@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Justin Blum, Laurie Asséo

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