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Bellwethers: Key Issues in the Battle for Congress

Key Issue » The economy

Race Republican Leans Democrat
Mich. Senate Michael Bouchard     » Sen. Deborah Stabenow (i)
Ind. 2nd district Rep. Chris Chocola (i)     » Joe Donnelly
Wisc. 8th district John Gard   ?   Steve Kagen
Iowa 1st district Mike Whalen     » Bruce Braley

KEY: (i) Incumbent | « Leans Republican | » Leans Democratic | ? Tossup

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'Mortgage Moms' May Star in Midterm Vote

Estelle Nunn, who has operated the Little Place Restaurant in Burlington, Ky., for 36 years, says her dollars are not going as far as they once did. She says she will vote Democratic in November. Many of her customers shared her discomfort about the economy, though not all shared her political views.
Estelle Nunn, who has operated the Little Place Restaurant in Burlington, Ky., for 36 years, says her dollars are not going as far as they once did. She says she will vote Democratic in November. Many of her customers shared her discomfort about the economy, though not all shared her political views. (Photos By Tony Tribble For The Washington Post)

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And a recent poll conducted for the AFL-CIO by the Democratic Garin-Hart-Yang Research Group found that 55 percent of voters said their income was not keeping up with inflation, and that the economy was a more effective campaign theme against Republicans than either the war or corruption. This rings true to many Republican strategists and their allies: Despite the unpopularity of the president's Iraq policies, Bush's approval rating is higher among voters who see the war and national security as the top issues in November than it is among voters who rate the economy as their top issue, according to one veteran GOP pollster worried about his party's prospects this fall.

Republicans have approached the problem partly as a matter of perception. Eager to frame the issue for the fall, Bush recently met with economic advisers at Camp David and later announced that the economy is "solid and strong" and "creating real benefits for American workers and families and entrepreneurs." The gross domestic product, the sum of all goods and services produced, has slowed a bit since the beginning of the year but is still growing at a respectable annual rate of 2.9 percent. And the unemployment rate is near its five-year low.

But the sour mood is not simply a matter of psychology. Since 2003, the inflation-adjusted median hourly wage of most workers has fallen by 2 percent, according to the Labor Department. And this summer marked the first time since 1991 that the annual inflation rate exceeded 4 percent for three consecutive months, driven partly by $3-per-gallon gasoline.

Then there is debt. According to a study by the Federal Reserve Board, the ratio of financial obligations -- primarily mortgage and consumer debt -- to disposable personal income rose to a modern record of 18.7 percent earlier this year. The amount of mortgage debt alone has more than doubled since 2000, to nearly $9 trillion. And in July, for the 16th consecutive month, consumers in the aggregate spent all of their disposable income and dipped into savings or borrowed to finance the things they bought.

Among the most exposed are those who bought into one of the great fads in mortgage lending in recent years -- adjustable rates. Next year, $1 trillion worth of adjustable-rate mortgages -- about 11 percent of all outstanding mortgage debt -- is scheduled to readjust to a higher interest rate for the first time, according to LoanPerformance, a research company. This will come after more than $400 billion of readjustments this year. That means millions of homeowners will either have to refinance or shoulder an increase of perhaps 25 percent in their monthly payments.

The political implications of these trends are obvious. "A large number of voters have a definite foreboding about the economy, and that isn't good news for incumbents," said Gregory S. Casey, chief executive of the Business Industry Political Action Committee, a nonpartisan electoral analysis organization. "They feel disappointed in government institutions that they think have let them down."

"Republicans are worried," added R. Bruce Josten, an executive vice president of the U.S. Chamber of Commerce, a significant backer of pro-business -- and therefore predominantly Republican -- congressional candidates. "You have a portion of the middle class that doesn't believe it's benefiting from good economic news, and, in fact, it's not. . . . All the blame doesn't go to Congress, but voters are going to take it out on Congress anyway."

Republicans in Congress have tried to show sympathy for hard-pressed workers by pushing to pass an increase in the minimum wage. That effort foundered in the Senate because it was tied to a cut in the estate tax, which would have benefited wealthy individuals. But GOP leaders say they want to take another stab at raising the minimum wage this month, before Congress adjourns.

Democrats want to prevent Republicans from claiming that success and are advancing ballot initiatives in half a dozen states -- including key Senate battlegrounds such as Missouri, Montana and Ohio -- that would mandate boosts in the minimum amount that employers pay their workers. They also intend to talk about the need to cut taxes for the middle class, roll back tax cuts for upper-income people and extend a soon-to-expire provision that permits some middle-income families to write off college tuition payments.

Among the key places the debate is playing out is New York, where Republican Reps. John E. Sweeney, James T. Walsh and John R. "Randy" Kuhl Jr. are facing tougher-than-expected challenges because of the state's economy.

In the Upstate district of retiring Rep. Sherwood L. Boehlert (R), the House Democratic Campaign Committee is running a TV ad that lashes the Republican nominee, state Sen. Ray Meier, for opposing a minimum-wage increase in the New York legislature while his own pay went up by $22,000. The ad promises that Democratic nominee Michael Arcuri will not vote to increase his own salary in Congress until a minimum wage boost is passed.

Even Rep. Thomas M. Reynolds (N.Y.), who chairs the House Republicans' campaign arm, is being challenged -- by Jack Davis, who runs the Save American Jobs Association, an organization contending that free trade is causing U.S. job losses.

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