The GOP’s Exurban Debt Ceiling Problem

By most any accounting the stakes in the debt ceiling fight are high. Should the federal government go into default, widespread and prolonged economic pain is the forecast. But on a purely political level, there are signs it could have an especially sharp impact on the Republican Party driving a wedge between key communities and constituencies that make up the GOP coalition.

If the 2011 debt ceiling fight is any guide, some of the most immediate and traumatic fallout from a U.S. government default would be felt in the financial industry and among those with money invested in the stock market. And that would leave the Republican-voting Exurban communities particularly exposed, according to an analysis from the American Communities Project, a community-based, data reporting effort based at American University that uses demographics and other data to break the country into 15 types of counties.

More than 51% of the residents in counties the ACP categorizes as Exurbs have some form of stock market investment, according to data from 2010 Cooperative Congressional Election Study, analyzed by the American Communities Project. That’s the highest number in the ACP. But at the other end of the stock ownership spectrum are a set of less wealthy communities that also vote heavily Republican and that may have very different attitudes on the debt ceiling fight.

While the spread of investment instruments like IRAs and 401(k)s has placed more people in the stock market, the investor class, even by its broadest definition, is still not as big as many believe. Nationally the number of people who had money in the stock market was only about 43% in 2010, according to the CCES, and in some places it was much lower according to a data analysis done by ACP partner Professor Antoine Yoshinaka, at American University.

stock6

In the 371 counties that make up the African American South, for instance, only about 3 in 10 U.S. citizens own stock in any form, the lowest of any of the ACP’s 15 county types. In the same low range for ownership are the Evangelical Hubs (in light purple on the map below) at 32% and Working Class Country (in dark blue) counties at 31%.

Those last two types are of special interest because their relatively low stock ownership numbers mean they may see the debt ceiling crisis quite differently from those in the Exurbs (in yellow).

In terms of their voting patterns all three types – the Evangelical Hubs, Working Class Country and Exurb counties – have long been reliably Republican. In 2012, the vote in all three broke heavily for Republican nominee Mitt Romney. He captured at least 58% of the vote in each.

 The 2012 Presidential Vote in the ACP

County Type

Obama D

Romney R

Exurbs

40%

58%

Graying America

43%

56%

African American South

52%

47%

Evangelical Hubs

30%

69%

Working Class Country

34%

64%

Military Posts

42%

56%

Urban Suburbs

57%

41%

Hispanic Centers

47%

51%

Native American Lands

51%

47%

Rural Middle America

43%

55%

College Towns

51%

46%

LDS Enclaves

24%

73%

Aging Farmlands

30%

68%

Big Cities

65%

34%

Middle Suburbs

48%

50%

The question now is what the debt ceiling fight means to these very different Republican communities and how they respond to the drawn out fight over the issue in Washington.

The Exurbs are one of the wealthiest county types in the ACP. Without question the counties are conservative, but almost 6% of the households earned $200,000 or more annually and the average median household income is roughly $63,000. Those numbers put it in the same income territory as the reliably Democratic voting Urban Suburb and Big City county types in the American Communities Project.

We wrote in the Wall Street Journal last week about how higher income Americans were the ones most concerned about the debt ceiling, in part because of their bigger stock portfolios.

The Evangelical Hubs and Working Class Country counties are very different. They vote more heavily Republican, but, more important in this case, they also live in a different world in terms of wealth and income. The average median household income for both is about $40,000 and there are far fewer big earners in the $200,000 annual range – only about 1% of the households each.

Granted the CCES poll numbers are calculating a pretty broad measure of stock ownership. It includes ownership at any level, including any money one might have invested through mutual funds – so some of these investors might just have a few thousand dollars in a 401(k). But regardless of how much money one has invested, the walk back from the mailbox can be pretty upsetting when one sees a big loss in his or her monthly statement.

Bearing all that in mind, it stands to reason that these counties might see the debt ceiling fight differently this fall – and during midterms next year and even after.

Remember at this point it’s not about what the impacts of a debt ceiling breach are, but rather what people believe they may be and those with money in the market remember what happened when the ceiling was almost breached in 2011. The Dow lost 2,000 points and the S&P 500 fell by 200. Stockowners have been primed with warnings about what may be coming this time around.

There’s been a lot of talk thus far in the debt ceiling and shutdown debate about a split within the GOP on Capitol Hill – moderates and establishment Republicans versus the loosely define Tea Party coalition. But these numbers suggest that the fight probably goes beyond the Hill to communities across the country where different kinds of Republicans in different kinds of places live in very different realities.

And while the stakes for the country and the economy in the debt ceiling fight are big, the stakes for the GOP may be large as well.

Big margins in those Exurban counties are key to the hopes Republicans have in senate races in 2014 and in the presidential campaign in 2016. They hold 32 million people and are scattered in key states – like Kentucky and Georgia, Pennsylvania and Colorado.

Mitt Romney won the Exurbs by 18 points and still lost the presidency in 2012. Republicans can’t afford to anger voters and lose strength there if the party hopes to have a chance in national and many statewide races.

 

 

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