Monday, September 14, 2009

Questions of 2009: What does it mean for 2010?

The most consistent trend in American politics is that in economic terms, the bottom third of voters vote Democrat and the top third votes Republican. Despite all the recent rhetoric about the so-called, "liberal elite", the trend has only strenthened in the past decade or so as better information has moved allegiances away from family and region to ideology.

Consistent with this voting trend is the values of the underlying parties. Democrats tend to support government policies that help the middle class and those at the bottom. Republicans tend to support policies that minimize governments' role in the economy. Not surprisingly, Democratic values are more consistent with labor unions and Republicans with Business.

Given these facts, it should be no surprise in 2010 if the Democratic legislature moves to compensate for some of the "bad labor votes" that were taken in the 2009 session. Boeing has made it clear that state policy is no longer the issue in terms of their future plans and as the state emerges from the recession, unemployment not business climate could become the big issue.

The other boomerang issue is obviously going to be budget and taxes. With the shackles of Initiative 960 off, legislators are free to raise taxes without a vote of the people. There are good reasons to be believe that increases in sin taxes like alcohol or cigarettes would be popular and could go a long way towards reducing cuts to essential programs. However, anything beyond that will have to face up to the very tough election coming up in 2010.

Senate Democrats have at least four tough races coming up and House Democrats at least twice that many. While control is unlikely to be threatened, the current majorities may not be sustainable at today's levels. More importantly, off-Presidential year elections are tough for the party in the White House. In Washington state, in 23 of the last 29 elections, the party in power in White House has lost seats in the legislature. This is going to make it hard for legislators from tough districts to take risks.

Whether or not the ending fund balance from the 2009 session is going to hold up or require more cuts in truly an open question. The last revenue forecast indicated that even bigger cuts would be needed. More recently, revenue collections were down a bit. However, there are 3 more forecasts till the legislature leaves town and the economy is likely to be looking up. My guess is a wash.

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