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Georgia, Arizona and Pennsylvania tell the story of this election cycle: Fmr. Mitt Romney Policy Advisor

Lanhee Chen, Stanford University’s Hoover Institute Research Fellow joins the Yahoo Finance Live panel to discuss the stock market outlook amid election volatility.

Video Transcript

AKIKO FUJITA: Let's get right into some of the key states to be watching. We've got Lanhee Chen, who is a fellow at Stanford University's Hoover Institute. He's also a former policy advisor to Mitt Romney's 2012 presidential campaign. And Lonnie, it's good to talk to you. We've been naming a number of swing states to be watching, but you've really honed in on three specific ones-- Georgia, Arizona, and Pennsylvania.

LANHEE CHEN: Yeah, I think those three states, Akiko, tell the story of this election cycle. If you look at Arizona and Georgia, two states that have traditionally been Republican states for the presidential election-- look at Arizona. It has not voted for a Democrat but one time over the last 70 years.

Both of these states have had, though, growth in suburbs amongst populations that have not been trending toward the Republican Party over the last few years. And that's why Georgia and Arizona are both competitive.

Now, at the end of the day, Donald Trump still has a very good chance to win both of those states. But the fact that we're even having the conversation suggests this election is really unlike any previous election we've seen.

And of course, as you noted previously, Pennsylvania, a lot of this election is going to hinge on Pennsylvania. It is a state that previously, Democrats had had an advantage in at the presidential level. That turned in 2016. Can Trump hold on to Pennsylvania? If not, he's going to have a challenging time getting the 270 electoral votes tonight.

AKIKO FUJITA: Lanhee, when you look at a state like an Arizona or a Texas, you could certainly point to the demographic shifts that we've seen that could suggest or point to why we're seeing the state turn a little more blue, although not quite blue yet. What about a state like Georgia? I mean, what has been the shift? I mean, what is behind the shift?

LANHEE CHEN: Well, there's two factors. The first is, we are seeing growth in suburban areas, people who are moving into Georgia from other states that have more progressive views.

The other thing is turnout. I mean, that's really the big story, is if turnout is at a level this year that we have not seen previously in Georgia, and that turnout is coming from areas in particular as I noted, where we're seeing that population growth, areas that are not as friendly to Republicans, that's really what could shift the balance in Georgia.

The turnout story, by the way, Akiko, is one we need to be following nationally. If you look at turnout in places like Florida, a must win state for the president, turnout really is going to drive a lot of the outcome. So we'll have to see where that goes. But I certainly think the dynamic in Georgia is very similar to what we're seeing in other states. It is a turnout story. It is a suburban growth story.

ZACK GUZMAN: Yeah, and Lanhee, the turnout story is a big one for me, too. Because to Akiko's point there, the demographic trends in Georgia are very different than what we're seeing play out in Arizona. I assume if you did get more turnout relative to 2016, that would be a plus for Democrats winning that state.

In Georgia, though-- not to be overlooked-- when we think about turnout for Trump in 2016, a lot happened to be those less active voters, perhaps less educated, more white voters turning out for him. So it could be the opposite in the case of Georgia, if you do see those people coming out again for Trump, that it would actually give the Republicans the edge there. So on the fringe, what does voter turnout say in some of those key swing states? Specifically, Georgia is my question.

LANHEE CHEN: Well, right, so the thesis of the Trump campaign coming into today, the reason why they believe they are very well positioned is because there are a number of voters that they believe they are introducing into the voter base that have not voted previously. To your point, non-college-educated whites in the upper Midwest, that has been a target population. The Trump campaign's thesis has been, let's change the dynamic of the electorate and therefore change how this election will go.

And you're right. If the turnout does end up shifting toward populations that the Trump campaign has brought online, brought into the electorate, that would change the dynamic in places like Pennsylvania, potentially Georgia, although Georgia is really more about college-educated whites, college-educated minorities. That's a different kind of story in Georgia than we're seeing in Pennsylvania, potentially in Michigan and Wisconsin.

So we have to watch very carefully here to see who are the new voters. We know there could be record turnout this year. 100 million ballots are already in. If we have 40 or 50 million on Election Day, that would be a record turnout. It really is a question now of how many people and who voted early versus how many people and who vote on Election Day. The Trump campaign is counting on a big advantage today in Election Day that they believe will push them over the top.

AKIKO FUJITA: Lanhee, what about the congressional races that you're watching closely? You look at a state like Georgia. They've got two Senate seats up for grabs there. What are the particular races nationwide that you're watching that you could think-- you think that could lead to the Senate getting flipped?

LANHEE CHEN: Yeah, on the Senate side, we really are paying attention to Maine, Iowa, and the two Senate seats in Georgia. The two Senate seats in Georgia, they both look likely headed for a runoff. By Georgia law, if neither candidate reaches 50%, you've got to go to a runoff. That, by the way, doesn't happen until January. So we could have the Senate in limbo until January.

In Iowa, very good Senate contest there. It looks like the Republican Joni Ernst is closing very strong. A poll from the Des Moines Register, which is sort of the gold standard in Iowa, had Joni Ernst up with a significant margin over the weekend. So you know, the Republicans have a few opportunities here to hold the Senate.

It is going to depend, Akiko, I think on how President Trump does at the top of the ticket. If President Trump outperforms or overperforms the expectation in a place like Iowa, Joni Ernst wins. If he overperforms in North Carolina, it gives incumbent Senator Republican Thom Tillis a shot. So a lot of this is going to depend on Trump's performance and how he does in affecting the down ticket.

ZACK GUZMAN: Yeah, we had Frank Luntz earlier on the show kind of joking that who knows. Trying to figure out who won Pennsylvania could take until next year. And I mean, there are a lot of disaster scenarios out there for having to wait a long time. In your mind, how bad could it get if this does stretch a little bit farther into the future than people are expecting? And how do you see that shaking out, especially if President Trump really presses the envelope in terms of litigation front?

LANHEE CHEN: Well, Zack, we have to expect, first of all, Pennsylvania is going to take some time. We know that because Pennsylvania actually couldn't even begin processing early ballots until today. So a lot of that counting, a lot of that processing is going to take time. We had a similar situation in a few of the other upper Midwestern states where the ballots could not be counted until today.

So we know that this election and this process of finding out who's won is going to take potentially a few days. It's going to be incumbent upon people who are in positions of authority to demonstrate that they are-- you know, that they're waiting for the results. They want this election to be decided fairly.

Look, the president has a lot in his control here. If he decides to go out there and foment discord with some of his rhetoric, that does create a problem, potentially. So one would hope that cooler heads will prevail. We'll have to see. But one thing we know is that if it takes time to resolve this election, if it takes time to have these votes counted, that is a feature, not a bug. It's important for people to hear that and understand that the process is going to take potentially some time to play out.