Republicans face problems in 2006 elections

By Dr. Paul Freedenberg,
Vice President
Government Relations
AMT—The Association
For Manufacturing Technology

Republicans may find 2006 is a tough year. One reason is that parties in power traditionally lose congressional seats in the sixth year of a presidency. In addition, some of the economic indicators are worrisome.

Optimists, however, point to economic numbers favoring the incumbents. For example, the economic growth rate over the past two years has averaged a healthy 3.8 percent. In addition, that growth is likely to continue at a 3.5 percent clip during 2006 despite the slowdown to 1.1 percent that occurred in the last quarter of 2005. Job growth also has continued unabated for more than two years. This economic recovery was aided by historically low interest and inflation rates that persisted despite record increases in energy prices. In fact, while the Democrats preach gloom and doom, manufacturing output in the United States remains at an all-time high.

So why the gloomy mood among potential voters? One reason is that median real wages and median family incomes have actually stagnated for the last five years. Many Americans have even seen their incomes fall. The recovery in manufacturing has failed to translate into sufficient numbers of well-paying jobs. Often high-paying manufacturing jobs were replaced by lowpaying retail jobs. Moreover, although job growth is steady, it is at a historically low level compared to other periods of economic recovery.

Thus, despite apparent prosperity, many Americans feel uneasy.

The go-go days of the '90s are definitely over.

How will this mood affect politics? Despite the continuing good news about manufacturing output, polls indicate people are concerned about outsourcing. The troubles at major corporations such as United Airlines, General Motors and Ford create additional unease. When Americans look at their government, there is a growing concern that the current trade deficit of more than $700 billion and the domestic budget deficit of $400 billion are the result of fiscal irresponsibility. Moreover, Congress appears to be doing little to reverse these massive shortfalls.

Finally, the new Medicare drug benefit, which should have been welcomed as a boon to cash-strapped senior citizens, has been portrayed by the media as a colossal administrative mess giving the president and his party an image of incompetence, rather than compassion.

What can be done about these problems prior to the fall elections? Obviously, Republicans, with control of both houses of Congress, need to produce a budget that does something dramatic to gain control over spending and the rising deficit. Because 2006 will be the first full year of the Medicare drug benefit, it will be particularly tough to reduce outlays. But the trend line of the fiscal deficit has to begin to point downwards. The American people will not tolerate continued fiscal irresponsibility.

The manufacturing sector, as well as core Republicans, would respond well to tax reforms that enhanced growth and competitiveness. These reforms need not lead to further deficits if proper adjustments are made to other parts of the tax code. The last recession was caused by a reduction in investment. The key to future growth and prosperity depends on increasing investment in the U.S. economy. It is up to the President and his Republican colleagues in Congress to lead the way. The American people expect no less.