It’s the economy, stupid (but not as we thought)

The US midterms last week were exceptional: the party holding the White House hardly suffered any of the setback that almost always happens. In fact, the Democrats gained a seat in the Senate, so if they retain Georgia in the run-off, they will no longer depend on a vice-presidential casting vote or the caprice of Joe Manchin. The Republicans may have retaken the House of Representatives, but only by the thinnest of margins.

So what’s behind this? Not Joe Biden’s popularity, which is at rock bottom, worse even than his predecessor’s at the same time in the presidency.

The prevailing account of the surprise result is that Democrats benefited from the Republican party’s assault on settled democratic and legal norms. This is the first election after the coup attempt that was the assault on the US Capitol in January 2021, and it comes only months after the Supreme Court’s Dobbs decision removed the constitutional right to abortion. Sure enough, Trump-backed and election-denying candidates did poorly, and in states that held referendums on abortion, voters supported the pro-choice option.

And yet. While not all the vote tallies are complete, it seems clear that there is no obvious correlation between abortion and how voters shifted from 2020 to this year. In fact, it’s striking and too-little remarked upon how different those swings were in different states. A New York Times map of the Senate races shows that some states (red, blue and split down the middle) became more Republican while others became more Democratic. And these were not tiny swings. In many states the popular vote shifted by 5 to 7 percentage points; in some, the swings were in the double digits.

It’s true that two states that had both Senate races and ballots on reproductive rights legislation swung notably in a Democratic direction: Kentucky and Vermont. But the Cook Political Report shows a Republican swing at electoral district level in the House races for those states (and both show a tilt towards the GOP in California, where abortion was also on the ballot). Then look at states where Dobbs immediately entailed an abortion ban because of pre-existing inactive laws: South Dakota, Wisconsin, Arkansas and Alabama all swung deeper into red territory.

So it’s worth thinking about other factors, in particular economics. Normally the economy’s performance is a big determinant of support for the party in control; and before the election almost four out of five polled voters said the economy was “very important” in how they would vote. As Paul Krugman points out, however, voters aren’t as unhappy about Bidenomics as they were thought to be. The big focus on inflation has overshadowed the fact that there are also good economic views, in particular on the jobs front.

Arindrajit Dube highlights that young people, in particular, are changing jobs at much higher rates than before, presumably because they don’t need to put up with bad jobs when they can more easily find better ones. The youth vote held up well for Democrats, and there are some signs that young Democrats increased their turnout while young Republican voters stayed at home.

And listen to what the GOP is being told by commentators well outside of the Democratic camp. Here is Sohrab Ahmari in a column for the New York Times: “When it came down to it, the Republican Party offered ordinary American workers little that might have bolstered their power or leveled the economic playing field . . . What sort of national vision did the Republican Party offer working Americans in 2022? It’s hard to say, really. The best I can come up with is something like this: Hand us the keys to government, but don’t expect us to give you anything in return.”

Michael Strain, of the American Enterprise Institute, writes in a Twitter thread and article that “Trump’s economic policies weren’t a significant factor in the party’s poor performance. But they surely didn’t help, either . . . Enduring political success is built on a foundation of sound, effective policies that are understood by the public to have improved their economic outcomes. This does not mean reversing the party’s Trump-era focus on the working class. But it does mean attaching some actual policies to pro-worker rhetoric.”

We have to wait for detailed voter polling to get a good sense of how economic considerations made people vote one way or the other. But some lessons seem to be emerging already. One is that the right did not have a strong economic offer of its own. Another is that Biden’s record, inflation notwithstanding, is not, after all, such a political liability. That’s certainly the lesson he himself has drawn. And if, as some of us hope, a strong labour market where workers can easily move to better jobs, together with fast new business formation, herald a rise in productivity, then the political gains could keep coming.

If so, Biden will have defied conventional wisdom in two ways. First, on whether he could push through big legislative action with an evenly split Senate held hostage by the likes of Manchin. Second, whether the big legislative action he did push through would work politically. Barely two years in, Biden looks like the kind of politician who does not deplete their political capital but regenerates it by investing it productively and at scale.

Other readables

• Silvana Tenreyro, an independent member of the Bank of England’s rate-setting committee, has suggested the central bank’s policy may already be tighter than needed to bring inflation down to target. Her speech is one of the clearest I have seen from any central banker on how to think about the current inflation shock.

• Many Germans misremember the economic history of the Weimar Republic, a survey finds, and wrongly think that the years right before Hitler’s coming to power were marked by high inflation (it was a period of deflation). And the misconception is worse among better-educated, richer and more politically interested Germans.

• More ketchup-bottle economics: semiconductor manufacturers are smarting from overfull inventories that have to be cleared out just as sales are falling. And in the US, falling used-car prices help bring inflation down.

• The Economist nicely sets out the evidence that economic growth is perfectly compatible with decarbonisation — a key reason for why I am a techno-optimist who thinks net zero carbon does not require a big change in our lifestyles.

Numbers news